A Closer Look at Growth in the Worldwide Hotel Industry 2012
The storm has passed but there are still a few occasional showers in the forecast. Mostly sunny skies ahead with clouds and overcast skies expected in some areas. No, we are not talking about the weather. We are looking at the current and future prospects of growth in the worldwide hotel industry. As a whole, the industry is looking pretty bright in many parts of the world. There are some areas of the globe that are expected to do very well, while other places will struggle to achieve positive growth.
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A Better Economy Means Greater Demand for Lodging
Growth rates depend on both current economic conditions and how well or poorly the economy is expected to perform in the future. While it is quite clear that Europe will be dealing with deeply troubling economic issues for years and years, some countries will fare better than others. China is emerging as a more important player in both domestic and international travel and tourism. The United States, the most important market for hotels, has bounced back from 2010 lows and is experiencing solid growth.
What Do Hotel Managers and Hotel Owners Think?
Trip Advisor, the world’s largest travel site, conducted a global survey of 9,441 hotel and lodging facility owners and managers from December 21, 2011-January 4, 2012. The data gathered from these insiders gave some valuable insight into the growth prospects of the hotel and hospitality industry. The respondents gave answers comparing the year 2011 to what they expected for 2012.
- On the economy, 38% thought it would improve, 32% said it would remain unchanged and 30% believed it would get worse.
- On their hotel’s performance, 58% thought 2012 would be more profitable, 30% thought profits would be about the same and 12% believed it would decline.
- On direct bookings, 62% were looking for an increase, 32% expected no change and only 7% believed that bookings would drop.
- Adding room inventory was not likely according to 83% of the respondents. Building new properties or acquiring existing ones was not part of their 2012 plans.
Global Performance by Region – May 2011 to May 2012 Comparison
STR Global, a leading provider of key performance statistics for the hotel industry, defines four key regions of the world as Asia Pacific, Americas, Europe and Middle East/Africa. Following are the occupancy percentage, ADR and RevPAR statistics by region.
All dollar amounts are expressed in US dollars.
Occupancy Percentage – Rooms sold divided by rooms available
ADR – Room revenue divided by rooms sold
RevPAR – Room revenue divided by rooms available
Asia Pacific
Occupancy Percentage: 64% (2011) —– 65.5% (2012)
ADR: $134.56 (2011) —– $135.85 (2012)
RevPAR: $86.12 (2011) —– $88.94 (2012)
The region, which includes Asia, Australia and Oceania, added very little new supply of hotels and guest rooms over this period. Growth came from higher demand by the traveling public. In basic economic terms, a limited supply and a greater demand resulted in a higher occupancy rate and a higher average daily room rate which led to higher revenue per available room. According to the Global Business Travel Association, Chinese Business Travel spending is predicted to increase 17% ($202 billion) in 2012 and another 25% ($245 billion) more in 2013. IHG has launched a new brand called Hualuxe Hotels which will add some 170 hotel and 55,000 additional guest rooms to China by the year 2014.
Americas
Occupancy Percentage: 61.4% (2011) —– 63.4% (2012)
ADR: $104.38 (2011) —– $107.64 (2012)
RevPAR: $64.04 (2011) —– $68.30 (2012)
The region includes North America, the Caribbean, Central and South America. Boston and Los Angeles did particularly well with the City of Angels occupancy rate up 5.8% to 75% and a 10.8% increase in RevPAR to $94.53. Beantown had an ADR of $171.87 and an 11.6% increase in RevPAR. On the downside, Panama City, Panama occupancy rates dropped 11.6% to 48.1% and their RevPAR rate dropped 19.4% to $59.33. Sao Paulo, Brazil was occupancy rates declined 11.5% to 63.9% and their RevPAR also fell by 16.7% to $90.88.
Europe
Occupancy Percentage: 71.2% (2011) —– 70.5% (2012)
ADR: $149.19 (2011) —– $134.93 (2012)
RevPAR: $106.27 (2011) —– $95.11 (2012)
Europe as a whole has not done as well in May year-over-year performance. There is a lower occupancy rate, a lower room rate and less revenue per available room. The primary reason is the terrible economy in much of Europe. While Russia has bucked the trend and is actually showing good growth, Greece saw their hotel occupancy rate drop 25.7% to 56.1%
Middle East/Africa
Occupancy Percentage: 53.3% (2011) —– 60.4% (2012)
ADR: $148.68 (2011) —– $146.32 (2012)
RevPAR: $79.30 (2011) —– $88.39 (2012)
Both occupancy rates and RevPAR increased by more than 10%, while the average daily room rate declined slightly. This was due in large part to the increase in tourism to areas that had been in political turmoil in 2011. While the Arab Spring movement is still going on, danger for tourist travel has declined and key regions are returning to their pre-revolution popularity as desirable tourist destinations. Egypt has increased their occupancy rates by more than 40% and their RevPAR by almost 35%. South Africa the United Arab Emirates (Dubai) and Saudi Arabia are also doing nicely. The average daily room rate has skewed a bit lower. This can be attributed to concentrated efforts by area tourist spots negatively impacted by the recent political protests to entice travelers to come back and take another look at their new and improved country.
What are the Future Expansion Plans of Three Major Hotel Groups?
By taking a look at the number of new properties and guest rooms that are scheduled to be built or acquired by some of the world’s biggest hoteliers, it shows the expected increase in demand and growth of the hotel industry. Following are the current inventory of hotels and rooms and those under development (in the pipeline) for the near future.
- IHG (Intercontinental Hotel Group) currently has 4506 worldwide hotels and 661,159 rooms with 1098 more hotels in the pipeline.
- Hilton Worldwide has 3,866 hotels and 636,931 rooms with another 906 hotels and 156,659 rooms in the pipeline.
- Accor Hotels have 530,000 rooms and 4,426 hotels in current inventory and plans to develop 609 hotels which will add 104,000 more guest rooms. By the end of 2012, they expect 40,000 of those rooms will be open.
In Conclusion
The hotel industry is doing very well in some areas of the world and not as well in others. The economy and political climate play are key elements in determining future growth rates. Overall, industry insiders and major hotel groups have a positive and optimistic outlook for the future growth of the worldwide hotel industry.
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