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Leveraging the Global Hotel Market

Here is where experts attending BITAC® Global think the best development opportunities are worldwide.

Tuesday, June 10, 2014
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The global hotel market is chock full of opportunity. Even in Asia where the market has been slagging a bit. That’s because tourism and business travel are exploding globally as a new rising worldwide middle class is earning more than ever before. And they want to explore the world. Best part is these travelers need places to stay when on the road away from home.

But not all markets are created equal. Each region of the world has its own strengths, weaknesses and peculiarities that define each area. However all markets are subject to the immutable law of hospitality: The market is cyclical and at some point in each region over development will squelch success for a while until enough new demand starts the upward swing all over again.

That’s what’s happening in India right now, says Ajay Bakaya, Executive Director with Sarovar Hotels Pvt Ltd, with more than 60 hotels throughout India and several more in other regions.

“We see the next five years as huge opportunity in India. After 30 years we have a single party government majority and we believe infrastructure development followed by hotel development will be a big thing,” said Bakaya during a panel discussion yesterday afternoon during BITAC® Global. “There have been close to 100,000 rooms in the last five years [opened] so at this moment the balance is more on oversupply than demand, but we see that changing in next two years.”

BITAC® of course is the industry leading one-on-one meetings and relationship building event in the United States and now we’re taking on the world at this week’s BITAC® Global, which is being held seaside in the Mediterranean in Monte Carlo, Monaco. BITAC® Global attendees represent the crème de la crème of the international lodging community. It’s the ultimate group of global insiders and decision makers all gathered in one place. And they’re all here to come together for the most exciting BITAC® to date to problem solve, network, sign deals and swap their thoughts they believe will move forward the quality of experiences for hotel guests while adding profits to the bottom line.

In Europe, Philippe Attia, CEO of GRL Hotels & Resorts, whose company is based in Switzerland, said there are about 15 major projects in various stages of development happening but he sees the Swiss market as having the demand to absorb the new rooms.

Elsewhere in Europe Attia says, “Business is fine, especially considering the economic conditions in Europe. There is recovery in Spain¬¬¬ and Portugal and cities such as London and Paris are booming with some of the highest ADRs in the world. For the next few years it is not about construction and new projects it is about conversion and repositioning.”

Which again makes perfect sense as land is exceedingly scare in Europe, prompting the conversion trend. Expect the big brands to try to capture more hotels being repositioned as the overall market is 65% unbranded. In Italy just 15% of hotels are brand affiliated, he says.

In the Gulf region, Firas Sawalha, CEO of Jordan based Grand Palace Hotels Co., said there is rising demand in Jordan and many Middle East destinations have a healthy hotel economy. “There is an upmarket surge in demand. We are seeing a lot of conferences that would have taken place in Syria and Egypt going to Jordan. Regional tourism is going up tremendously and there is a lot of traffic generated by country governments such as Libya. We are benefitting from that new demand,” says Sawalha.

Sawalha also believe Gulf stability coupled with increasing airline flight schedules is growing demand and capacity and infrastructure increases are making this area a hub for the East to go to all parts of the world. But he warns hotel rooms need to be built in concert with increases in air travel infrastructure or else it spells disaster. “That is what has happened in India,” he says.

Bassam Talhouni, VP Technical Services with Saraya Bandar Jissah, whose company is building a luxury boutique hotel for Jumeirah Hotels & Resorts as part of a $600 million resort development in Oman, agrees with Sawalha.

He cites Kuwait and Dubai as two additional strong hotel markets and cites Oman as having a bevy of opportunity. “The Gulf is a growing tourism region and Oman is benefitting. The government is opening the country for tourism and a new airport is being built and will be finished by the end of next year for planes such as the A380,” says Talhouni who adds that successful hotels will need to have a unique design to match the region’s excellence.

In South America, Tyler Jones, International Sales Manager with DECOLAV says he is seeing lots of projects within Mexico and Caribbean especially. “The Mexican economy is doing very well and South America is coming into its own and has become a safe place to go. The brands are following the trend here and are actively developing. He said places such as Colombia are doing very well when it comes to focused service midscale hotels but warns developers to stay away from luxury resorts as the region is already oversaturated for that type of product.

We also polled the attendees in our audience utilizing cutting edge technology and taking the industry’s pulse with a real time voting system. It gives us the ability to uncover from our worldwide BITAC® Global audience what’s really happening when it comes to critical industry trends at the property and regional levels on a macro basis. Here is how they responded to some questions focused on development.

Which region do you feel has the most opportunity for new hotel development?
Asia - 38.5%
Middle East - 42.3%
South America - 6.4%
Europe - 1.3%
Africa - 5.1%
North America - 2.6%
South America - 3.8%

When developing a new hotel you think the best ROI will come from:
Luxury hotel - 18.6%
Upscale groups focused hotel - 21.4%
Midscale select service hotel - 30.0%
Resort - 14.3%
Economy hotel - 15.7%

How will branded hotels influence the industry in the future?
They will prompt extreme change - 26.2%
Moderate change - 60.7%
Less change - 9.8%
Nothing will change - 3.3%

When you are developing a hotel, the business you expect will be of what mix?
Domestic travelers mainly - 3.5%
International travelers mainly - 26.3%
An even mix of domestic and international travelers - 70.2%

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