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.
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:
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.
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.
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.
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
- Top Trends For 2015: Will Your Hotel Be Ready To Welcome The Savvy Traveler?
- 2014 Outlook on Travel, Hospitality and Leisure
Articles/Photos/Graphics Copyright ©2015 All Rights Reserved Worldwide.
The hospitality industry is thriving, but with that success comes responsibility. Hotel and restaurant owners need good management practices in order to remain relevant and realize sustained profits. Effective management includes overseeing employee satisfaction. Research has shown that there is a direct connection between employee contentment and customer loyalty. This is why it is important to take an interest in each staff member’s happiness.
In an accommodation industry, the key to customer satisfaction is high-quality service. However, employees who are unhappy often lack the motivation to provide such service, which results in disgruntled customers. This trickle-down effect can adversely affect a company’s revenue. Studies have proven that the attitude of an employee is directly related to a customer’s spending. Essentially, happy employees create happy customers.
Online review sites and social networks have made it possible for travelers to instantly research hotels, resorts, restaurants and vacation hot spots. This on-the-spot reviewing can make or break a business. Find enough people ranting about slow, unfriendly or inexperienced staff members, and you will find a company struggling to prosper. The best weapon anyone in the travel industry has is employee engagement.
Encouraging employees to be connected to the process is the first step toward creating a long-lasting relationship between a business and its clientele. Customers seek authenticity, so employees should show genuine concern regarding customer satisfaction. Each team member should also understand the brand and its value. This will make it easier to represent the company on a day-to-day basis.
How can a business owner persuade employees to become engaged and authentic? The trick is to open communications so that team members can candidly discuss their gripes or praises. Managers should make the necessary adjustments to improve employee behavior. This may translate into a better understanding and delivery of the brand value, which can result in overall customer satisfaction.
The employee is the face of the business. With the ultimate goal being financial growth using responsible environmental practices, managers within this industry should focus on the employee-patron relationship. There is no denying that employee attitude, brand knowledge and productivity impact client satisfaction. A happy customer base is the gateway to security and longevity.
Customers often base their spending behaviors solely on their perception of the service. This is particularly true in the travel industry. Quick and efficient check-ins, a welcoming and accommodating staff, honesty and brand reliability are essential. When combined, these ingredients create the ultimate recipe for profitability.
Tourism is booming because it meets a need in society. As long as there is a hunger and need for travel, the hospitality industry will flourish. This does not mean that businesses can rest on their laurels. Competition is tough, and meeting the expectations of the customers is becoming more and more difficult. Hoteliers and other business owners must rely on personnel to provide superior service. The best way to support this goal is to keep staff members motivated, engaged and content.
When you hire a general manager to run your hotel, you expect them to do everything within their power to make your operation successful. In their role as supervisor, they are responsible for everything that goes on in your hotel. While they may not be the one who failed to fix the air-conditioner in room 201, they need to be aware that there is a problem and resolve it expeditiously. Ultimately, the general manager is held responsible for making sure that every problem, no matter how small or large, is resolved. Here are 10 constructive coaching tips for your new general manager:
1. Be Prepared – GMs should regularly prepare for meetings and be familiar with their clientele, employees and property.
2. Communicate Effectively with Employees – It is imperative that every employee clearly understands what they should be doing. A GM should not hide behind a desk, but instead be visible and available to all employees. It is a good idea to publicly praise an employee for doing a good job and a GM should never criticize an employee in front of others or on a group email thread.
3. Listen to Employees – There is no better feedback about what is really going on in your hotel than what can be heard from the women and men who do the hard work that keeps a hotel running. If a GM discourages employees from bringing up complaints from guests, or from making suggestions on how the hotel can do things better, it makes it harder for a hotel to shine. Employees are a hotel’s greatest asset. Encourage GMs to listen carefully to employees and hotel guests so that every hotel stay is optimized for greatest satisfaction.
4. Management Through Encouragement – Stressing out employees by placing unrealistic demands on them is a sure way to decrease morale and can lead to a high employee turnover rate. When training general managers, be sure to recommend a management style that includes regular positive reinforcement for all employees. Compliments may be delivered in person, on the phone or in a supportive email.
5. Delegate Work – No one can do it all and there are always people who can do a job as well or better than you. Make sure that the GM empowers the entire hospitality team by letting each member shine according to their professional talents.
6. Blaming Weak Top-Line Revenues for Not Making a Profit – A GM who does not take some responsibility for improving sales (top-line revenue), and instead blames the marketing or other departments for not attracting more paying customers, is shirking responsibility. A well-trained GM should regularly consult with the sales team and the sales team should coordinate efforts with the marketing team. Revenue generation cannot be separated from the role of the GM. When RevPAR and occupancy go up, your GM will take credit. The GM should also accept responsibility when revenues are down and take prompt professional steps to improve sales.
7. Be Decisive – Work with a GM who has no trouble running a team whose principles are transparent, whose operations are consistent, whose communications are positive and prompt, and whose motives are the good of the company where the customer comes first.
8. Always Have the Best Interest of the Hotel in Mind – Work with GMs who believe in the company they work for and who take pride in being a team player for that company at all times.
9. Motivate Employees – Employees can be motivated by kind and supportive words, an increase in pay, a company picnic, emplyee-of-the-month recognition or numerous other rewards that make them feel valued and an important asset to the team.
10. Projecting the Right Image for the Hotel – A friendly and personable GM who regularly walks through the lobby and talks to guests can do wonders for business. In the hospitality industry, friendly smiles and fabulous customer service are everything.
If your GM is excelling at their job and responsibly handles the work that comes with hotel management, then reward them generously with praise and let them know that they are leading by example, making your hotel a success. A confident GM will in turn encourage their own employees and create a hospitality culture of kindness that is contagious and rewarding for all.
Reports from a number of well-respected companies that gather and analyze data for the hotel industry all seem to have come to the same conclusion: hotels all across the United States have been doing well in 2014 and they will do even better in 2015. There is unanimous consent in the most recent reports issued by Smith Travel Reports (STR), PricewaterhouseCoopers (PWC) and TravelClick’s North American Hospitality Review (NAHR) that RevPAR, Average Daily Rates and Occupancy, will all show improvement in 2015.
According to the latest statistics reported by STR and STR Global, all three of the key data-points that are used to assess hotel performance were up in year-over-year comparisons. The July of 2014 occupancy rate was 73.6%, an increase of 3.9% over the July of 2013 occupancy rate. The ADR in July of 2014 was $117.81, bettering the prior year’s ADR by 4.8%. RevPAR showed the biggest year-over-year gains, surging by 8.8% in July of 2014.
PricewaterhouseCoopers concluded in an August 2014 report that U.S. hotel occupancy rates will reach their highest levels in 20 years, during calendar year 2015.They noted that companies are increasing their travel spending budgets which leads to more group reservations. With the supply of hotel rooms remaining almost unchanged, added demand allows hotel managers the flexibility to raise rates without hurting occupancy rates. The PwC report predicts that continued strong group travel, as well as a strong summer travel season, will push hotel occupancy rates up about 2 percentage points, to 64.1% for the year ending December 31, 2014. For 2015, the momentum is expected to continue with occupancy rates rising to a 20-year high of 64.8%. PwC also predicts that RevPAR for 2014 will increase by 7.6% over 2013 RevPAR, and in 2015, RevPAR will be up 6.9% over the 2014 figure.
The August 2014 TravelClick North American Hospitality Review was quite optimistic about the immediate future prospects for the hotel industry. John Hach, Senior Vice President for Global Product Management at TravelClick said “While summer may be coming to an end, the hotel market has a hot outlook for the winter months.” Traditionally, summer is always a good time to be in the hotel business as the kids are home from school and families use the time to take vacations. In 2014, business travel has done surprisingly well and is expected to stay strong through 2015. Over the next 12 months (August 2014 through July 2015), committed occupancy is up 3.7% over the same 12-month period a year ago. Committed occupancy includes both group commitments and individual room reservations. The NAHP data also showed that in year-over-year comparisons, bookings for the transient leisure segment are up 4% and bookings for the transient business segment are up is up 5%.
The hotel industry is one of the most economically sensitive sectors of our economy. A strong hotel market is a solid indicator of the strength of the overall economy. When times are good, there is more economic activity and business executives travel for meetings, conferences and trade shows. When people have more money in their pockets, they go on vacations, book more hotel rooms, and inject money into the economy.
There are few industries that rely more on compiling and analyzing data than the hotel industry. RevPAR, occupancy, ADR and other metrics are used to measure a hotel’s performance. Once numbers and the latest economic data (GDP, unemployment rates, disposable income etc.) are analyzed, they can be used to guide managers to deploy the best pricing, marketing, and other strategies to maximize a hotel’s future revenues.
Running a successful hotel in an industry where profit margins have been historically thin is a challenge. It takes competent management to control costs while still offering the amenities and true value that attract paying guests.
Adapting to the New Way of Marketing Hotel Rooms
In previous generations, before the digital age, traditional travel agents, brochures and hotel travel guides were used by travelers to find and book hotel rooms. Most often, travelers chose their accommodations based on the brand and not on reviews posted on social media sites. Having a strong brand is still very important because it tells guests what to expect when they visit a branded hotel in any city around the country or around the world. The way people are booking their travels today however – researching hotels online, reading reviews and reserving rooms through their smartphones – is forcing hoteliers to step up their digital marketing strategies.
Hoteliers Now Have to Work Harder and Smarter
It is no longer enough to simply have a website for your hotel. Your website must be robust and allow visitors to interact with the site when they arrive. Since the depths of the recession five-rears ago, the hotel industry has bounced back and is now posting positive numbers. Broadly speaking, Revenue per Available Room (RevPAR), occupancy, and the average daily rate are all up from 2009. While the country was digging its way out of the recession, hotels have been steadily prospering. Currently however, many hotels are finding it difficult to continue to beat the previous year’s key numbers.
Margins are Being Squeezed by Online Travel Agencies
Customers love the transparency afforded them by the various online travel agencies, hotel booking sites, and array of ways they can find out more about hotels before they actually book a room. As evidenced by the enormous growth of companies like Priceline and Expedia, people want low prices and value when they search for accommodations. While great for customers, the competition is squeezing the profit margin for hotel operators.
- Google gets five percent of its total revenue from Priceline and Expedia and only financial services and retail generate more sales than the travel sector.
- TripAdvisor ($13.9 billion) and Airbnb ($10 billion) both have higher market values than industry stalwarts Hyatt Hotels ($9.55 billion) and the InterContinental Hotel Group ($9.97 billion).
- • In the first quarter of 2014, hotel brand sites accounted for 27.1 percent of all bookings while OTA sites booked 13.2 percent of all hotel rooms. At first sight, this sounds like good news for the major hotels, but looking more closely, the OTA share has grown by 9.2 percent from year-to-year as compared to a growth rate of only 6.1 percent for branded sites.
- Use of metasearch engines (search tools that aggregate information from several search engines at once) to decide on which hotel room to book is becoming more prevalent in the industry. In 2013, millennial travelers in the key 18-36 age group used search engines 39 percent of the time when booking hotel rooms.
The Savvy Hotelier
Industry analysts and experts in digital marketing almost unanimously agree that hotel owners and managers must incorporate enhanced websites, a strong social media strategy, as well as innovative apps that make booking rooms from a smartphone, or other digital device, a snap. Although it may be difficult for traditional operators to change from what has worked well in the past, in today’s hotel industry, hoteliers must either adapt to the current environment or watch the competition steadily pull ahead.
Remember when we were 10 years old and our parents sent us to summer camp in the mountains. At first we may have objected to the notion of spending two weeks away from home. Once we arrived and saw the sparkling lake and got involved in camp activities, we had a great time. That youthful exuberance for experiencing new things does not always disappear as we age. Many adults still have that spirit of adventure and want to pursue culturally rewarding activities when they travel or go on vacation.
Recently, hotels have been paying closer attention to the growing number of guests who want to participate in creative tourism. The term “creative tourism” was coined back in 2000 by Crispin Raymond. Raymond defined the term as “Tourism which offers visitors the opportunity to develop their creative potential through active participation in courses and learning experiences which are characteristic of the holiday destination where they are undertaken.”
Crispin Raymond’s daughter was the inspiration for his book entitled “Creative Tourism.” While his daughter was traveling through Southeast Asia and Australia, she related stories of her experiences back to her parents. Among the activities she participated in was a week of learning and experiencing massage techniques in Thailand, a day spent learning vegetarian cooking in Bali, Indonesia, and taking a course in the Australian Outback that taught her how to become a “Jillaroo” (Cowgirl).
Around the world there are countless ways to take part in a creative tourism trip. Hoteliers regularly partner with local companies and skilled tradesmen to create unique and culturally enriching experiences for their guests. For example:
• In the French village of Biot, tourists can take a 5-day course in glass-making from a master craftsman. Each student learns the techniques and gets to make their own creation.
• In Guatemala tourists are offered weaving classes and learn how to dye fabrics in the vibrant colors favored by the native population.
• Hotel guests can take dance lessons in Brazil and then Samba the night away at a club in Rio.
Closely related to creative tourism is the implementation of destination experiences. Tourists are looking for more unique experiences than just dining at a fine restaurant or visiting an amusement park. They want to feel like they are part of a new culture by getting involved in local activities. Whether it is taking sailing lessons in San Diego or spending a day riding a mule along the South Rim of the Grand Canyon, active participation adds to the travel experience. A three hour ride on a mule in the Grand Canyon is an unforgettable experience.
Rewards Points Can Buy Memorable Cultural and Destination Experiences
Earning miles and rewards points through loyalty programs has been possible for decades, but only recently have the rewards focused on creating truly memorable travel experiences. Originally, airlines rewarded loyal customers with travel miles that could be converted to upgraded seating or complimentary plane tickets. Hotels exchanged free rooms and other perks for their customers who participated in their loyalty programs. Eventually, companies of all types started loyalty programs of their own (from the CVS card to your local grocery store, casinos and the NFL) and offered all types of merchandise. For many frequent travelers with large point balances, getting a new TV or set of golf clubs is no longer what they want. Loyal customers are looking for one-of-a-kind experiences for their loyalty points. Some colorful examples include:
• Diners Club points were used to send a 13 year old boy to a 5-day NASA space camp for his birthday.
• 500,000 Diners Club points were used by one couple to go on a 180 mile professionally-guided dogsled trek through the Alaskan wilderness.
• American Express allows its members to exchange points for cooking school in Tuscany and for backstage passes to concerts.
• Hilton Hotels offers a yoga retreat in Bali and helicopter tours over London.
• Marriott Rewards feature a hot-air balloon ride over wine country in the Napa Valley or a guided kayak tour down the Russian River in Northern California.
Culturally Diverse Neighborhoods
One does not have to travel overseas to get one’s share of exciting cultural experiences here in the United States. Almost every major city in America has ethnic sections or neighborhoods where it is possible to absorb different cultures and traditions. For instance, in San Francisco, it is easy to walk around Chinatown, shop, eat, and interact with someone who was born in Shanghai. In New York, a melting pot of dozens of nationalities, one can go from Little Italy to Chinatown in Manhattan and over to Brooklyn to interact with Russian immigrants and the Hasidic Jewish community. Head south to Miami and there is a vibrant little Haiti neighborhood that sells Jerk chicken. Along SW 8th Street in Little Havana, order a cup of Cuban coffee and ask the old-timers in Domino Park to demonstrate the finer points of this dot-matching tile game.
Dedicating Resources to Give Hotel Guests the Best Possible Experience
The hotel industry is proceeding along the same path as the most successful leaders in the cruise ship industry. Most cruise lines offer interesting daily excursions in the ports of call where they dock for a day or two. For instance, Holland Lines offers a cruise of the Western Caribbean, making stops in the Cayman Islands, Mexico and Guatemala. Passengers can schedule a combination bus and river tour through a banana plantation and watch the native population fish, canoe, and wash clothes along the river banks. The excursion also includes a beautiful fruit-filled luncheon under a thatched roof restaurant. Cruise lines charge extra and share in the profits of these local excursions. For hotels, facilitating cultural and destination excursions can help improve narrow profit margins.
While smaller hotels may not have the resources to hire a full-time employee to coordinate the various activities, they can still develop relationships within their local community by simply reaching out and making contact. When tourists have a memorable experience while staying at your hotel, they will tell their friends and probably come back for a future visit.
Hotels strive to please guests. To keep visitors coming back, hotel managers must continually offer the newest and cleanest options available. Because of this, hotels run the risk of being a strain on the environment. With so much laundry, daily cleaning supplies and regular small repairs, hotels consume a great deal of resources to maintain peak performance levels.
Fortunately more hotels are becoming aware of the advantages of being environmentally conscious. Many hotels have adopted more conservation techniques, including giving guests the option to not have their towels washed every day. While these changes may seem small, they can have a real impact on the environment over the longterm. Another excellent way to reduce waste is through hotel surplus organizations.
All hotels generate surplus as an inevitable part of their life cycle. Surplus is created when hotels upgrade their facilities, which generally happens every few years. Upgrades are often considered necessary in order to preserve customer appeal. Because guest rooms necessarily experience wear and tear, hotel furniture will often show signs of damage. If too much damage is visible, guests begin to notice. Guests do not want to pay for an unpleasant experience, and damaged, outdated furniture is disappointing for many.
It makes good business sense to upgrade furniture and decor regularly. When hotels bring in new furniture, something must be done with the furniture that is being replaced. Fortunately, thanks to environmentally conscious initiatives, there are a number of organizations available that can help deal with surplus and turn waste into earnings for everyone.
When considering these organizations, it is important to know that there are two major types of organizations available. First, there are for profit businesses that help place used hotel furniture. These surplus businesses operate all across the country, with some options that are regionally based. When considering a for profit company, it is important to look at where the business is located and how it handles the transfer of goods.
In many cases, hotels can liquidate their unwanted items quickly and interested third parties can find great deals on this furniture for their own personal or business use. This means that furniture and goods are being reused, which keeps them out of landfills. Businesses specializing in surplus will also provide some form of compensation to the hotel. Although the price will not come close to covering the cost of new furnishings, it can help offset the overall cost, which can be a great incentive to go green. There are many companies that offer this service, including Hotel Surplus, Hotel Liquidation and Alibaba.
Another alternative is working with a nonprofit organization. Some nonprofit organizations perform similar services, but with a minimum of funds exchanged. Instead of selling used items, nonprofit organizations can repurpose items and funnel them back into the community as needs arise. These donations can end up in schools, universities, charities and other places. While this does not provide as much economic gain to the hotel, it is a great way to give back to the community and ensure that nothing goes to waste. One example of an effective and creative nonprofit organization that works with hotels is San Diego based Sustainable Surplus Exchange.
Another way to minimize waste during periods of renovation is to work with existing furniture. In many cases, hotels may be able to successfully repurpose their own items and avoid buying new goods altogether. This approach is very environmentally friendly since it dramatically reduces the amount of waste generated overall. It is also cost effective since buying new is generally expensive. Many hotel owners are surprised by how good most items can look after being refurbished or repurposed. Property-wide reupholstery using eco-friendly fabrics can achieve wonders.
Hotels can choose an option that works best for their current inventory of furniture and their overall goals. Any of these options will help minimize the environmental impact of necessary upgrades. By maintaining zero waste as an objective and repurposing furniture, fixtures and equipment (known as FFEs in the hospitality industry), hotels can continue to provide top tier accommodations for their customers and simultaneously create a sustainable future.