In 2014 the hotel industry experienced steady growth worldwide as companies sought to expand their services and amenities while aggressively implementing new technologies aimed at the growing tech-savvy market. According to the UNWTO World Tourism Barometer, International tourism was set to hit a new record by the end of 2014 with over 1.1 billion international tourists travelling the world in one single year.
During the first ten months of 2014, the number of international tourists grew by 5%, rising above an expected 4.5% growth. In the past year, more than 1,470 top hotels with 309,000 rooms opened worldwide. This positive upturn is expected to continue in 2015 with projections estimating there will be 2,400 new luxury properties opened around the world. So, with a record breaking 2014 behind us, let’s take a look at some key areas of the hotel industry to watch for in 2015.
1. Supply Aims to Meet Demand
Forbes has this to say about the hotel industry in 2015 and beyond: “Travel and tourism make up 9% of global GDP, and the industry is the world’s largest employer, responsible for one in 11 jobs. However, as big as the industry is, it has the potential to be a lot bigger. Within the next decade, it is anticipated that this industry will create an additional 75 million jobs. Look at the numbers and you’ll see why: the tourist population has doubled in the past 20 years and is expected to double again over the next 20 (reflecting the same increases in the middle-class population).”
2. Human Capital
Are we investing too much in technology and automation while neglecting the importance of people in the hospitality industry? After all, high employee engagement is correlated to customer satisfaction, customer retention, and overall corporate performance. Fortunately, many hotel companies realize this and are investing heavily in talent development. Deloitte’s 2015 Hotel Industry report offers this insight about the investment that is to come in talent development and retention: “Hoteliers are likely to face a ‘resume tsunami’ as new job opportunities abound. Companies with robust talent management programs will be well-positioned to benefit from global economic recovery over the next five years., particularly as global companies begin to expand into new markets and face new consumer demands.”
Sheldon Adison, Chairman and CEO of Las Vegas’ Sands Corporation, said, “It is easy to copy the hardware but not so easy to copy the software, which is our talent and our experience in this field; knowing what the customer wants.”
As hotel companies continue to face changing market conditions and strategic choices over the next five years, they will need to proactively evaluate their talent management programs and consider how talent management fits into their overall business strategy. As the global economy recovers, companies are likely to face an increase in employee turnover and a risk of losing top talent. (Hospitality 2015: Game changers or spectators?)
3. Technology Reigns
Last year was undoubtedly the year of the mobile. Advancements in technology, both on the consumer side as well as the business side, will continue to play an important role in the industry’s future success. Everything from smart rooms and consolidated “end to end” travel platforms being developed by Apple and Google to revenue management enhancements and cloud based operations will be given plenty of attention as innovative startups continue to offer exciting new services that benefit both the consumer and businesses. More than ever, technology and mobile are here to stay.
4. Boutique Hotels
As clients continue to demand more personalized services and amenities, the rise in popularity of boutique hotels has caught the attention of the international hotel chains. Travelpulse.com had this to say about the boutique sector: “Las Vegas recently introduced several new boutique hotels, including The Cromwell, Delano Las Vegas and Downtown Project offering Oasis at Gold Spike. That’s significant, considering Vegas has traditionally offered large-scale hotels. InterContinental Hotels Group (IHG) recently bought U.S. boutique company Kimpton Hotels & Restaurants for $430 million, with hopes of expanding the Kimpton Hotels brand to Europe and Asia.”
5. Hotel Groups Go Public
In a recent report in Forbes the author highlighted the growing trend of IPOs among hotel groups, stating that “Several years of steady revenue growth and limited additions to supply have enhanced investor confidence, particularly where a dynamic growth story exists for the future. Other large, private owners have clearly taken notice, and this hotel IPO and venture capital trend will likely continue for large portfolio owners with the right economics and growth stories.”
The Forbes report continues on with an interview with Chris Nassetta, President and CEO of Hilton Worldwide, which in 2007 agreed to an all-cash buyout by the Blackstone Group, said that, “Hilton is a great example of the benefit of leveraging private equity funding. We have become the fastest-growing lodging company in the world with growth in rooms at 37%. We have the largest pipeline in our history, with nearly 200,000, and more new rooms under construction than anyone else in the industry. Most importantly, we’ve received a great reception upon our return to the public markets and are feeling very positive.”
6. Sustainability & Green Consumerism
In a report published by Deloitte Touche Tohmatsu on the hospitality industry, they concluded that “sustainability will become a defining issue for the industry in 2015 and beyond. Rising populations and increasingly scarce resources will provide a challenging business environment in which sustainability will need to be embedded within all facets of the industry, rather than regarded as a standalone issue.”
The report goes on to highlight the fact that “sustainability is a social issue that impacts us all collectively. In 2015, consumer and voter attitudes will continue to force business and government to address the socio-economic landscape and ‘real’ market in which businesses operate. We believe that the convergence of consumer, political, and business interests around sustainability will be a major historical landmark in the development of our society.”
While the hotel industry may not be able to directly control the availability of natural resources and energy costs, they are in a position to acknowledge their dependence on them and adapt business models that minimize the environmental and economic impact these issues contain.
7. Health & Wellness Grows
Consumers are interested in their health and the hotel industry has taken notice. There are currently a number of recognized brands that are focusing on the health & wellness sector, including Element by Westin, Le Meridien, EVEN Hotels, Fairmont Hotels & Resorts, Swissotel, Omni Hotels, Trump Hotels, Sheraton and Days Inn. Health & Wellness tourism expenditures in 2013 approached $US500 billion worldwide. The global spa industry alone has grown by 58 per cent since 2007 and is now valued at US$94bn (€73bn, £57bn), according to research released the 2014 Global Spa & Wellness Summit in Marrakech, Morocco. “the number of spa facilities worldwide has increased by 47 per cent – from 71,762 facilities in 2007 to 105,591 facilities in 2013.
8. Hotels Continue Focus on China and India
Although both India and China could soon see an oversupply of luxury hotel rooms, India, for example, estimates there to be a current shortage of 150,000 rooms designed for the increasing numbers of middle class tourists who travel on a budget. Look for hotel groups to begin to cater to this fast growing market. The Deloitte report states, “Most international hotel groups have launched expansion programs in the key emerging markets of China and India, not only to cater to western tourists and business travellers, but also to build brand recognition and loyalty among the local populace, who are expected to be the largest groups of outbound tourists in the world.”
9. Chinese Travellers Lead The Way
A report issued by Attract China, Inc. predicts that in 2015, 140 million Chinese tourists will go abroad, spending more than $188 billion. According to the research, Chinese tourists are becoming more independent and are interested in authentic local experiences. As the growth in Chinese tourism impacts the hospitality and travel industry, it’s more important than ever for hotels, restaurants, retailers and destinations to understand the wants and needs of the independent Chinese traveler.