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November 4, 2014 / BSP Marketing

A Closer Look at Growth in the Worldwide Hotel Industry 2014

Fall is the time to reflect on the events of the year and to look ahead toward what may occur in the coming year. For many companies, their business year ends as the last quarter of the calendar year begins. As we leave September behind and head into October, let’s take a closer look at the 2014 growth of the worldwide hotel industry and what that growth might look like in 2015.

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Growth and performance in the worldwide hotel industry is highly correlated to the health of the economy. When parts of the world are in turmoil (war and political unrest), the industry suffers. During the first nine months of 2014, the world witnessed wars in the Middle East, an outbreak of the Ebola virus in Africa, two Malaysian passenger jet flight tragedies, and many countries reporting weak economies. Despite all of this bleak news, the standard of living is rising in China and India — two of the most populous countries in the world.

In 2014, as the rich got richer and corporate profits were strong, both business and leisure travel grew. Tourism and travel contributed to the growth of GDP in the United States and other countries around the globe. According to the World Travel & Tourism Council, in 2014 tourism and travel accounted for 9.6 percent of world GDP. By 2024, it is forecasted that this figure will rise to 10.3 percent.

A Few Words about Business Travel

The World Travel & Tourism Council (WTTC) has noted that worldwide leisure travel spending generated about 75 percent of global direct travel and tourism GDP, while the remaining 25 percent was attributed to business travel and tourism. According to the Global Business Travel Association, China and the Asia-Pacific region will lead global business spending to an all-time record high in 2014. The forecast is for global business spending to increase by nearly 7 percent over 2013 figures to $1.18 trillion.

Growth Rates: Jan-Aug 2013 vs. Jan-Aug 2014

STR Global provides some of the most current information about the worldwide hotel industry. In their August 2014 Global Performance Report, occupancy, ADR and RevPAR are broken down into four main regions of the world – Asia Pacific, Americas, Europe, and Middle East/Africa. In year-over-year comparisons between the first 8 months of 2013 and the first 8 months of 2014, here are the results:

Asia Pacific

This region includes Central and South Asia, Northeastern Asia, Southeastern Asia, Australia and Oceania. It represents 45 countries and among the group of countries are India, China, Japan, Indonesia, Malaysia and the Philippines. RevPAR was down 1.6 percent, ADR was down 2.4 percent, and occupancy rates managed to post a small gain of 0.8 percent. Pricing pressure was the primary reason for the weaker 2014 y-t-d statistics.

Americas 

This region includes North America, Central America, South America, and the Caribbean. Boosted by a stronger U.S. economy and an infusion of visitors to Brazil for the World Cup, the numbers were strong for the first 8 months of 2014. Compared to the same period in 2013, RevPAR in 2014 grew by 7.5 percent, ADR grew by 4.1 percent, and occupancy grew by 3.4 percent.

Europe

This region includes all of the European countries ranging from the Ukraine in Eastern Europe and the United Kingdom in Northern Europe to Italy in Southern Europe and France in Western Europe. Aside from Eastern Europe, which posted negative growth numbers in all three metrics, the rest of Europe did quite well. Even after averaging in struggling Eastern Europe, Europe as a whole reported positive growth in RevPAR of 9.0 percent; a 7.0 percent increase in ADR; and a 1.9 percent increase in occupancy.

Middle East/Africa

This region includes oil-rich countries such as Iraq, Iran, and Saudi Arabia as well as African nations such as Egypt, Libya, Kenya, Nigeria, and South Africa. RevPAR increased by 4.9 percent; ADR was up 2.2 percent; and occupancy was up 2.7 percent.

In looking at all of the regions, RevPAR was highest in the Middle East/Africa region ($102.46) followed by Europe ($97.41), Asia Pacific ($79.31), and the Americas ($77.39). ADR ($163.80) was also highest in the Middle East/Africa region, but occupancy was highest in Europe (68.2 percent).

In the Pipeline

STR Global August 2014 pipeline reports show hotel development projects in various stages of completion. They categorize some of the world’s regions slightly differently than they do RevPAR, ADR and occupancy. Here is a brief summary:

• Caribbean/Mexico – Adding 164 hotels totaling 27,621 rooms
• Central/South America – Adding 429 hotels totaling 70,560 rooms
• United States – 3,246 hotels (new construction & expansion) will be adding 391,402 rooms to inventory
• Asia/Pacific – 2,352 hotels are under contract to provide 528,109 rooms
• Europe – Adding 894 hotels for 142,704 new rooms
• Middle East/Africa – 628 new hotels under contract totaling 147,454 rooms

Growth by Hotel Group

Most of the growth in the worldwide hotel industry in 2014 and beyond will come from major hotel groups. According to MKG Hospitality’s 2014 Global Hotel Rankings, branded hotels grew by 3.2 percent in 2013 while non-branded hotel growth contracted, netting a 1.2 percent overall increase in the global supply of rooms (+200,000). In 2014, most major hotel groups are expected to grow between one and three percent. However, Chinese hotel group Home Inns is projecting growth of close to 20 percent as it capitalizes on the growing wealth of the population and its desire to travel.

• IHG, based in Great Britain, added 95 new hotels in 2014 and has 4,697 properties around the world
• Hilton Worldwide, based in the US grew by 2.8 percent, y-o-y, to have 4,115 properties in 2014
• Marriott International now has 3,783 hotels and 653,719 rooms after growing its inventory by 2.3 percent

Stabilization in Growth Trends Allows for More Environmental Conservation

While hotels have enjoyed strong growth over the past several years, it appears that growth is starting to stabilize. Instead of double-digit growth rates, many of the large hotel groups are now looking at lower single-digit growth in the near future. Growth remains positive and it should be remembered that the worldwide hotel industry is cyclical – some years are better than others. With the growing urgency of environmental protection based on the alarming report that in 40 years over 50% of our world’s wildlife has disappeared, it makes sense for the hospitality industry to protect the properties it owns already and take measures to keep grounds and buildings in harmony with their natural surroundings. Success in the hospitality industry can be measured by ADR and occupancy rates, but also — especially in 2014 — by the extent to which a property improves and preserves the natural communities in which it exists.
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