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Breaking Records, But Massive Consumer Change Ahead

Yes the industry is going great. But those that do not make some critical change could be in trouble in the long run.

Monday, July 21, 2014
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The hotel industry is in the best shape it’s ever been. Records are shattering and we expect this summer to see more hotel room nights sold than ever before. It’s a good time to be an hotelier.

But hoteliers mustn’t rest on their laurels. There’s a seminal shift occurring that’s set to transform everything you think you know about the hospitality industry. It’s not easy to see because massive change doesn’t typically reveal itself all at once; a continuous slow creep that after a long while suddenly reveals itself to be all around you.

We’re talking about the rise of Millennials and the generations coming behind them who interact and experience the world in incredibly different ways than older generations. We’re not kidding. Those of the Millennium generation are already interacting with the world differently than their Gen X or Baby Boomer brethren, and as they get older, their generations and the ones behind them will utilize technology in ways that established generations haven’t even dreamed of yet, but will also probably not want to.

So sharp hoteliers must understand the serious shift that’s occurring and reinvent hotel design. It’s essential that new designs appeal to these younger generations and how they want to use hotels. This is not a case of old vs. young like in the past. There’s an expanding chasm between digital immigrants – us older folks –and the emerging digital natives who have grown up in a post internet world and relate to life in a very different way. And as the younger generations age into their 40s and 50s they will take their way of life along with them.

So understanding how design must change was a major topic point discussed this morning during BITAC® Purchasing & Design East 2014 being held at the Fairmont Southhampton in amazing Bermuda.

BITAC® is of course the industry leading one-on-one meetings and relationship building event. This week marks our golden 50th BITAC® meeting. Yup, we’ve been at it for 10 years and these events consistently attract the lodging executive elite representing leading and forward thinking companies. They’re all here to come together not just to celebrate this momentous 50th BITAC® but to problem solve, network, sign deals and exchange ideas that move forward the quality of experiences for hotel guests, while adding profits to the bottom line. There’s even time to cut loose, be social and network in a luxurious and relaxed environment like last night when the sold out crowd hit the beach for some seaside dining and a bonfire.

Since we had such a preeminent group with us we thought this to be a great opportunity to get a deeper understanding of how the hotel industry may respond to future trends as well as how these executives are feeling about the current record breaking conditions in the hotel industry. To accomplish this feat we utilized our real time polling system to poll attendees as to their opinions on these major sea changing issues. Here’s what they had to say:

Things are the most amazing they’ve ever been. How are you feeling about the long term health of the hotel industry?
Bullish - 31.5%
It’s good - 50.8%
Neutral - 10.5%
A little worried - 6.9%
Freaked out - 0.4%

Owners are getting better about raising rates for the most part. How much do you expect to see ADR rise in 2014?
1-2% - 18.0%
3-5% - 60.5%
5-10% - 15.1%
10% or more - 3.5%
None - 1.7%
ADR will decrease - 1.2%

How much do you expect to see focused service sector RevPar increase in 2014?
1-2% - 17.6%
3-5% - 39.6%
5-10% - 26.9%
10% or more - 6.0%
Flat - 1.6%
RevPAR will decrease - 8.2%

Are you seeing an uptick in new construction?
A significant uptick - 31.6%
A moderate uptick - 55.1%
Very few hotels are being built - 13.4%

In what year will the hotel industry peak?
2014 - 4.8%
2015 - 12.0%
2016 - 39.2%
2017 - 22.0%
2018 and beyond - 22.0%

Are you seeing an influx of Millennial generation travelers coming to your hotels?
Yes - 75.0%
No - 25.0%

If you are seeing that Millennial traveler arriving in your market, what type of traveler are they mostly?
Business - 13.6%
Leisure - 20.7%
Business traveler who adds time for leisure - 48.5%
Group - 17.2%

What kind of mix are you seeing of digital natives compared to digital immigrants?
Hardly any digital natives, mostly digital immigrants - 10.9%
Equal split between natives and immigrants - 80.6%
We appeal mostly to digital natives - 8.5%

How do you expect this equation to change in 10 years’ time?
Hardly any digital natives, mostly digital immigrants - 10.8%
Equal split between natives and immigrants - 22.8%
We’ll be focused mostly on digital natives - 66.5%

What kind of effect do you believe plane disasters have on the state of tourism?
Zero - 18.9%
Minimal - 56.8%
Business will go down for a short bit and quickly return - 17.4%
It will keep people from traveling on planes permanently - 6.8%

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