International Hotels Bet on Emerging Markets for Growth

The growth of emerging markets means more visitors – both to and from – and that means an opportunity for the travel and tourism industry.

All top 5 US-based Hotel CEOs expect to see their future growth come from China and other emerging markets, including: Hilton, Starwood, Four Seasons, Intercontinental & Loews. During a panel on Monday at the New York University International Hospitality Industry Investment Conference, the CEOs of these respective companies all agreed that emerging markets represent the largest potential.

Building New Hotels Where the Opportunity Is
More than 180,000 rooms are being built in Asia, or nearly three times as many as are under development in North America, said Mark Lommano, CEO of Smith Travel Research this week. Marriott said Monday that approximately 34 of the 50 new hotels and resorts it plans to open over the next four years will be based outside of US and Europe (they have about 500 properties today). Of the 34, about 25 will be in APAC (including China, Thailand and India), 9 in the Middle East or Africa (including Rwanda, Saudi Arabia and the United Arab Emirates). Separately, Starwood announced that it would open 90 new hotels in China alone, by approximately the end of 2011 – or the opening of one hotel every two weeks.

Booking Visitors, To and From: Priceline Sees Emerging Growing Market Opportunities
Priceline, the US-based online travel company which pioneered the “name your price” approach is travel bookings is following this trend, planning increased expansion into Thailand, Singapore, Malaysia and Brazil; and possibly China. Today they operate with a Thailand-based site, Agoda.com, and also a British based one, Booking.com, both of which saw a combined 71% increase in international gross bookings – to USD 3.5 billion – vs just 15% growth in US booking to USD 1.3 billion. These numbers reflect two sides of a trend: online booking growth in certain markets is growing, as well as the desirability of certain travel destinations – and Priceline is able to take advantage of both, as they did by recently adjusting their featured travel destinations to Asia, and promoting it their own site in the UK.

Limits Exist
Despite the aggressive growth aspirations, and the obvious interest from travelers as their curiosity outpaces the sense of caution they might have once previously had, limits likely exist in individual markets as the infrastructure to support this growth in tourism must grow at a pace equal to the demand. “It’s time we understood that the challenge of building world-class infrastructure to match the world-class destinations extends way beyond any single stakeholder,” said Jonathan Tisch, CEO of Loews Hotels at the event on Monday. As an example, in anecdotal evidence, it remains extremely difficult to reserve hotel rooms across Brazil today – and especially in Sao Paulo – as today’s infrastructure simply does not match the demand of being a “world-class destination.”

Personal Prediction: People & Planning Matter Most
Two key factors will determine how and which companies capture the growth opportunities in the emerging market hotel space: people and planning. Will management teams leading these large international hotels develop the “global fluency” necessary to be successful, and will they be able to hire and train the right local talent to maintain the high standards their brands demand? Secondly, will local governments develop the right policies and build sufficient infrastructure to encourage hotel development at the right pace? Without proper planning on behalf of government and business, a potential risk appears that some markets will end up with oversupply, while others have more demand than they can handle – or equally bad – limit their growth potential by not having either.

As Starwood’s CEO, Frits van Paasschen, this week set off on a 1-month trip to China with his entire Senior Leadership Team (and is blogging about it), there is reason to believe that at least some companies understand what matters most.

GlobeSt: Hotel CEOs Check In, Like the View
PR-Inside: Hospitality Opportunities In The Emerging Markets
Investors: Priceline Stepping Up In Emerging Markets
Hotel News Now: NYU: Data shows recovery takes hold in all metrics
AP: Marriott plans 50 new hotels, with focus on China
Travel Daily News: Starwood Hotels relocates global headquarters to China
Huffington Post: Frits van Paasschen, Shanghai or Bust
Image: Starwood’s First Hotel in China, 1985, Sheraton Great Wall Beijing

This entry was posted on Wednesday, June 8th, 2011 at 8:50 am. It is filed under China, Economic Trends, Infrastructure, Management, Multinationals, Tourism and tagged with APAC, Brazil, China, Hotels, India, Rwanda, Saudi Arabia, Starwood, Thailand, Tourism, Travel, UAE. You can follow any responses to this entry through the RSS 2.0 feed.