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June 18, 2012 / BSP Marketing

Are Emerging Markets the Key to Growth for the Hotel Industry?

As oil and gas prices continue to climb in the midst of an already slow economy almost every sector is being affected. This means that people who were frequent travelers in the past may not be traveling as much, or even at all currently, due to travel related costs.

Effects on the Travel and Hospitality Industries

Increased costs and the stalled economy have begun to be noticed in the travel industry. Many have begun to indulge in “staycations” or spending vacation time relaxing at home rather than traveling elsewhere. People with hectic jobs often realize that they have never had time to explore their own area and set up schedules for their staycation. Should the popularity of this trend increase, the travel and hospitality industries will undoubtedly be impacted.

Is the Stalled Economy Truly Affecting the Hospitality Industry?

Many feel that the travel industry is showing a great deal of resiliency since the financial crises several years ago. In the U.S., the tourism, travel & hospitality industries have shown a 3% increase in jobs.

Likewise, in Europe the hospitality industry appears to be stable. In Greece, in particular, most hotels remain full due to meetings and inspections by CEO’s from IMF and European Central Bank. This underscores the importance of using hotel management firms who can aid establishments in maintaining a consistent online presence that’s regularly updated. In addition they should be able to analyze trends, and other regional and global data such that even in a crisis, your hotel will be among the first filled.

When hotel owners experience a few rough years with decreased revenue, they may decide that it’s not worth it to pay a management company for full-time oversight and other services. They rationalize laying-off their management consultants through the perceived inability to justify the expense at a time when there is perhaps low but stable business.

However, these are the establishments that will suffer when the unexpected happens and people are suddenly attempting to quickly identify and book hotel rooms online. The hotels that will profit from such sudden explosive events are those that have been consistently aided by management companies in predicting the likelihood of such occurrences and who have prepared appropriately for the expected visitors.

Emerging Markets: The Wave of the Future for the Hotel Industry

Many leaders in new hotel development, are focusing their attention on emerging markets as opposed to established and often over saturated locations. For example, while discussing the company’s growth, the CEO of Carlson Hotels, Hubert Joly, (2012), stated that 70% of Carlson Hotels currently in development are in emerging countries.

A number of other large hotel companies are also investing heavily in emerging markets around the globe. It is believed that the key to benefitting from development in emerging countries is to focus on those with the greatest economic growth as well as a need for infrastructure.

There are large numbers of new visitors who are enthusiastic about visiting emerging countries such as Russia, Brazil, China, and Egypt that are triggering the need to create new styles of advertising campaigns focusing on drawing visitors with a variety of hospitality options.

Overall, the most popular and lucrative emerging markets for new hotel development currently include India, Brazil, China, Russia and Africa.

Upper scale hotels and mid-scale hotels seem to be the most successful in emerging markets. For the executive business traveler and affluent leisure travels curious about areas of the world they’ve never visited, upper scale hotels are the most popular.

Yet for other travelers who might not be able to afford this level of luxury, such as traveling sales staff, mid-scale hotels are more within their budget. Some of the most popular types of lodgings being developed in emerging countries include more home-like types of establishments such as country inns and bed and breakfasts.

Important Areas of Focus When Considering Locating a Business in an Emerging Market

There are a number of things to consider when looking to locate your business in an emerging market. The most important aspects to focus on include:

• Investment in product/brand development and revenue generation capabilities
• For brands with several different hotels focus on a tiered approach to reach all segments of the population
• Research the countries in which you intend to develop hotels, paying close attention to cultural differences that will affect management styles and advertising campaigns
• While developing a brand image ensure it is received as you intend; conduct focus groups in the target country, other locations you expect will generate most of the clientele and include the type of traveler you want to attract (e.g. upscale leisure, mid-scale, economy etc.)
• Investigate possible methods to address the expectation of free Wi-Fi in rooms along with other technology; learn what are the possibilities for including Wi-Fi that can be accessed by a wide variety of devices; determine the location of cell phone towers as travelers also expect excellent mobile phone reception.

What to Look for in an International Management Firm Specializing in Emerging Markets

For International Hotel Management Firms to be successful in emerging markets it is critical they display a number of skills and have important connections including:

• Long lasting strong relationships with major world-wide brands
• Local support and skilled consultants
• Ability to develop a list of investment priorities for all size hotel businesses that is appropriate for each owner’s goals
• Verifiable results and success in the region/s in which you intend to establish your business
• Ability to provide you with real-time performance information and trend analyses
• Employee hiring and ongoing training
• Technical services or the ability to work with local vendors to provide technical services
• Pre-opening support, organization and setup
• The ability to develop a world-wide online advertising campaign that can be easily altered to fit specific nations or cultures

While the hospitality business is far from being considered over saturated in developed countries, with globalization and outsourcing becoming the way of the world, the greatest opportunities for establishing hotels with less competition and the chance for greater revenue lies in emerging markets. However, if you are considering moving in that direction, it is critical to utilize the services, recommendations and feedback of a reliable and respected international management firm. Don’t settle for a management firm that provides global services as this may amount to a small percentage of their business and likewise their experience in emerging markets. Be sure to select a management team that can provide multiple examples of services they’ve provided, especially in the region where you intend to establish your hotel/s.

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