|Worldwide hotel construction boom carries on.|
Wednesday, 8th August 2012
Source : Rolf W. Schmidt, Ceo of TOPHOTELPROJECTS
Searching for future sectors with increasing growth rate biotechnology, pharmacy and renewable energy are often named.
The hotel industry as segment of tourism is mentioned less. Nevertheless this sector is one of the most increasing markets worldwide. The UNWTO forecasts a worldwide growth of 4-6% p.a. for the tourism industry. Due to this development hotels are mushrooming everywhere.
About 5,000 top hotels with approximately 1.2 million rooms are currently under construction.
Did you expect or estimate this number?
Where should the guests come from?
In view of this construction volume the question remains, who is going to need, besides the already existing rooms, this huge quantity of rooms and what are the terms?
The answer to this question varies individually according to region or destination.
In established European destinations like Zurich or Berlin new hotel capacities are sure to encourage the cut-throat competition and subsequently support the price war. Parallel the pressure on existing hotels in terms of renovation will increase in the hospitality markets.
Ultimately, it is always a question of the right positioning and marketing of a hotel as well as its quality in hardware and software - i.e. / equipment and service. And it is a question of the general location marketing for individuals, business and MICE travel - in a competition that is becoming more international.
Fundamentally can be said, more and more guests will travel and stay overnight - driven by the emerging markets especially in Asia and South America.
Highlighted by this example: If only 1% of the Indian and Chinese people, as a result of economic development, come into the position to be able to travel nationally or internationally, and stay five nights we are talking about 120 million additional nights per year. In comparison: According to “HESTA” appr. 35 million overnight stays where counted in Switzerland in 2011.
Reasons for investing in hotel properties
There is more than enough capital investment available worldwide – in view of shaky stock markets, over-indebted countries and fear of inflation, real estate properties are -if concept, location and operator -right interesting investment opportunities. In addition hotels stimulate an almost magic appeal, especially for individual investors – hotels are just “sexy”.
Professional investors and funds also still focus on the hotel industry, as in all investment areas, experiences of past years give cause to consider hotel investments more cautiously and critically.
What interests do hotel operators have, especially international hotel chain operators, in new hotels? In many cases the strength of a hotel brand is expressed by presence – meaning number of hotels or locations. Operators need to show presence in as many locations as possible otherwise they will lose their guests to competitor brands and operators. New objects are constantly offering new opportunities to reach new guests circles – also for other houses in this brand.
With every new hotel an operator has the opportunity to revitalize his portfolio- by using new concepts, attractive design, modern technology or green conscience. New concepts also include niche products e.g., in the wellness & spa area as well as boutique hotels.
In most cases hotel operators are no longer investors in the property but just the operator.
In addition to the traditional contract lease, management or franchise contracts, numerous new contract models up to the “hybrid-contracts” have been developed. Thus, the volume of investment and risk to the hotel companies reduced considerably and opens up huge potential, to add many new hotels within a short period of time to the brand.
And if a capital boost comes along, as seen by the example of the successful initial public offering of the “Hyatt Hotels”, it is no surprise that Hyatt is realizing 150 new hotel projects.
To find and qualify suitable staff and managers will probably be the biggest challenge.
Blessed are those who completed a successful training in the hospitality industry or attended a prestigious hotel school, such as the "Ecole Hoteliere Lausanne".
Chances and Risks for the supply industry
A hotel whether it is in the planning or construction stage as well as in operation, has a very complex structure. Many a builder, architect or general contractor had to pay a high price for lack of experience. Yet, this complexity also reveals opportunities for numerous suppliers. Starting from the parking gate and parking garage, to outdoor furniture on the roof terrace a hotel not only hosts numerous guests but also thousands of various products.
"Welcome to the Bermuda Triangle"
Frequently suppliers of hotel construction projects move in the so called “Bermuda-Triangle” consisting of investor, general contractor and operator.
While the interest of the investor focuses on the safe investment and the long-term return based on a successful operator, the interest of the general contractor is the maximum cost minimization in the framework of the joint venture contract. The hotel operator is eager to see that, besides the marketing guest related expenses, all his operating costs are considered and taken care of.
With this background in view it is of particular importance for the supplier to show and demonstrate the benefit and advantage of their products not only based on invitation of tenders but direct contact to the hotel operator and eventually the investor. This approach, logically, does not cause much enthusiasm on the contractor’s side. But companies who extensively deal with the hospitality industry and develop real benefits for the operators have a good chance to place their products successfully, and can hope of multiplier effects in other projects.
In this context, particular attention should be paid to the marketing factor by the industry.
Not only do beautiful or luxurious hotels represent more attractive project reference to a manufacturer. For all suppliers of products that the guest comes into contact with, such as TV and Bathroom equipment, it offers the almost unique opportunity to present their products live and close to the affluent decision makers.
Thus, in a hotel with 300 rooms, every year 60-80 thousand people experience the product in person - hopefully the product also bears the respective brand names or brand!
A hotel always benefits from a positive image transfer of well-known products.
There is much potential for both parties increasing cross-marketing activities- not only in the F&B segment but also in the equipment and technology segment.
Rolf W. Schmidt, Jahrgang 1961
Managing Director of TOPHOTELPROJECTS GmbH a globally operating company in the field of information research regarding hotel construction projects, hotel chains as well as hotel markets in more than 200 countries