Hotel Yearbook 2013

HOTEL
2013
Puneet Chhatwal, Steigenbergers new CEO,
shares his thoughts on the challenges in the year ahead
Dorchester Collection CEO Chris Cowdray on leadership
How will 2013 shape up for the key hotel markets worldwide ?
30 exclusive country reports from Horwath HTL
Special section : Spa 2020
Leading experts explore the next decade in the spa industry
How is your company visualizing its future business landscape ?
Woody Wade on scenario planning in the hotel industry
Sce na r i os f or t he ye a r ahe ad
11CHANGES.COM
!"#$ &' "($)$*+,
-./* )*&'0 "1 )"++$*
23&' -./ 23"'#4
5/12 6&#$ "2 +*.74
!!!"#$%!&'$()*+)#",%-
A word from the publisher
J A N U A R Y 2 0 1 3
Dear readers,
Welcome to the 2013 edition of The Hotel Yearbook, the 7th in
this series of forward-looking annuals. I hope you will nd its
extensive content interesting, valuable and even fun to read.
Over the last seven years I have invited more than 200 hotel
industry insiders CEOs and other group executives, senior
managers in individual hotels, consultants, experts, and
academics, all from around 30 countries to write a piece
for the publication. My brief is always the same : From your
perspective, I ask them, what are your expectations for the
year ahead ? What trends are you watching that you think will
affect the business next year ?
The result is The Hotel Yearbook : not so much an analytical
report as a compendium of high-level opinions about how the
industry might be different next year written by people who
know what they are talking about.
This year is no exception. Among many other highlights,
it includes the wise words of Chris Cowdray, CEO of the
Dorchester Collection ; and Puneet Chhatwal, CEO of
Steigenberger Hotels ; thoughts on the future of such
factors as OTAs, branding, and crowdsourcing ; and a series of
exclusive reports on the 2013 business outlook in two dozen
key countries, prepared especially for you by Horwath HTL,
It also includes a special section called Spa 2020 the rst time
we look further ahead than just one year. For this publication-
within-a-publication, I asked some of the spa industrys global
leaders to share their thoughts on how the spa business could
unfold within the hotel industry over the long term.
So its another wide-ranging edition this year, and Id like to
thank our excellent contributors for their many insights and
ideas. And I would also like to thank the Ecole htelire de
Lausanne, the publications patron during its rst six years, for
their support. Our partnership agreement came to an end this
year, so sadly we will no longer be working hand in glove like
before. But their help was instrumental in getting The Hotel
Yearbook off the ground in the rst place, and for that I thank
them very warmly.
Wishing you a good read,
Woody Wade
Publisher and Editor in Chief
PS. As The Hotel Yearbook is all about the future, I shamelessly allowed
myself to contribute an article of my own this year, on a technique I use
to help hotel companies visualize how their future business landscape
could change over time. My article on scenario planning is on page 128.
A word from the publisher
CEO's outlook
Leadership PUNEET CHHATWAL
Leadership CHRIS COWDRAY, DR. GENE FERENCE
The environment in 2013
Hotel chains NICOLAS GRAF
Financing MICHELLE WEISS, CHRISTOF WINKELMANN
Design and development RICHARD GARLAND
Hotel market overview : Europe
The Netherlands RACHL LARDENOYE
Russia MICHAEL OHARE
France PHILIPPE DOIZELET
Spain MARIA ROSA BARCIA
Ireland NAOISE COSGROVE
Balkans MIROSLAV DRAGICEVIC
Scandinavia BJRN KJLSTAD
Germany RDIGER KNOSPE
Poland JANUSZ MITULSKI
Hungary MARIUS GOMOLA
United Kingdom ALEXANDRA VAN PELT
Italy ZORAN BACIC
Belgium MARCO VAN BRUGGEN
UK trends HEATHER GIBSON
Hotel market overview : Asia-Pacic
China DAMIEN LITTLE
Singapore JEROME SIY
Japan KOJI TAKABAYASHI AND SACHIKO MATSUDA
Malaysia SEN SOON MUN
Indonesia RIO KONDO
Thailand CLARE FU
Sri Lanka CLARE FU
United Arab Emirates HANNES SCHIED
03
06-12
06
10
14-21
14
16
18
22-47
22
24
25
27
28
30
32
33
35
36
38
42
43
46
48-71
48
49
50
52
54
58
59
62
H O T E L Y E A R B O O K 2 0 1 3
Table of contents
Vietnam VAN PHAN
Philippines JEROME SIY
Hotel market overview : The Americas
USA MARK S. BEADLE, CHA AND JOEL W. HISER
Brazil MARIANO CARRIZO
The Caribbean SOTERO PERALTA
Hotel markets
China GIOVANNI ANGELINI
South Africa MICHELE DE WITT
Africa TREVOR WARD
Spa 2020
Hotel spas in 2020 ANDREW GIBSON
The future of spa SUSIE ELLIS
The spa consumer ALISON HOWLAND
Spas in North Amercia in 2020 RALPH NEWMAN
The link to Asia in 2020 INGO SCHWEDER
Managing hotels in 2013
Crowdsourcing SONJA HOLVERSON
Distribution PETER OCONNOR
Branding YOURI SAWERSCHEL
Marketing ALEX BATCHELOR
Leadership STEVE LAWLER
Strategy and planning WOODY WADE
Wellness SARA STEWART
Marketing on the web CIARA CROSSAN
EP Business in Hospitality CHRIS SHEPPARDSON, HEATHER GIBSON
Ethics
Ethics CHRISTOPHER H. CORDEY
Impressum
67
70
72-78
72
73
77
80-87
80
84
86
89-110
90
94
100
104
108
112-136
112
116
118
122
126
128
130
132
134
138-141
138
142
HOTELyearbook2013
We have to meet the demands
of future generations
FOLLOWING A METEORIC CAREER IN DEVELOPMENT AT REZIDOR, PUNEET CHHATWAL WAS NAMED THE NEW CEO
OF GERMANYS RENOWNED STEIGENBERGER HOTELS AG IN SEPTEMBER 2012. THE HOTEL YEARBOOK CONTACTED
PUNEET JUST AFTER HIS APPOINTMENT WAS ANNOUNCED AND ASKED HIM TO SHARE HIS THOUGHTS ON THE OUTLOOK
FOR THE HOTEL BUSINESS AND HIS PLANS FOR THE COMPANY, IN BOTH THE SHORT AND LONG TERM.
L E A D E R S H I P
THE HOTEL YEARBOOK : Puneet, tell us a little about your
background rst, and how your new appointment came about.
PUNEET CHHATWAL : I was born in 1964 in New Delhi, India.
I was fortunate to get a great high school education, and later
hotel school and university training as well, plus instruction in
languages like German and French in the respective cultural
institutes. That was a solid foundation for my transition to
Europe, which happened on a scholarship to IMHI in 1989.
After getting my MBA in Hospitality at IMHI, I started working
for the Feuring Group in hotel consulting and development,
based out of Mainz, Germany. In 1998, I transitioned to Carlson
Hotels as their Director of Development for EMEA to help
propel the growth of Carlsons brands in the region. This was a
good innings, as it exposed me to the American way of doing
things : German discipline and quality coupled with American
packaging and marketing is a great combination to learn from !
After September 11th, Carlson decided to consolidate its
business, so in 2002 I transitioned to Rezidor as Director of
Business Development. I was subsequently promoted to Vice
Puneet Chhatwal
C
E
O
S

O
U
T
L
O
O
K
President Business Development in 2004, then to Senior Vice
President and Chief Development Ofcer in August 2007 (also
becoming a member of Rezidors Executive Committee at the
same time), and then to Executive Vice President and CDO in
April 2011.
Without undue modesty, I can say that the Rezidor portfolio
grew to over 74,000 rooms in operation with a further 20,000
under development during my years. In 2008, 2009 and 2010,
Rezidor had three consecutive years of record growth in terms
of rooms opened. During this period, Rezidor became the
fastest growing hotel company in the world.
HYB : Which leads us up to 2012 truly a banner year for you.
CHHATWAL : Thats right. In August 2012, I was awarded the
prestigious Carlson Fellowship Award and was also selected as
the Honorary President of the Alumni Association of IMHI.
But I also went back to being a full-time student in 2012 !
I attended the Advanced Management Program (AMP)
at INSEAD outside Paris. I think these were the best four
weeks I spent in the last few decades ! Not only did I have an
opportunity to spend the time, intellectually and personally, with
people of more than 50 nationalities, but I also had the chance
to spend quality time with myself no work and no family to
distract me. This experience helped me regain the drive to do
something new.
And the next challenge followed. In September 2012, the
opportunity came to become the CEO of Steigenberger Hotels
AG. I accepted and started working in this capacity on the
rst of November. That makes me the rst immigrant to head a
European hotel company on the continent.
HYB : Something to be very proud of
CHHATWAL : Thanks, but I dont see this point as a
destination ; I see it, instead, as a milestone on my journey,
both on a personal and a professional level. This fascinating
company has been enjoying its success story for more than
80 years, with two excellent brands, Steigenberger Hotels and
Resorts and InterCityHotel. Steigenberger is synonymous with
German hospitality and excellence, and the group is well poised
to extend its inuence beyond Europe mainly in the emerging
markets of the world.
HYB : Looking at Steigenbergers segment of the hotel
industry, what are your key expectations for 2013 ?
CHHATWAL : The company is present in two segments.
Steigenberger has its roots in the luxury hotel business, and
for more than 80 years, the name has stood for individual top
hotels. In the meantime, the Steigenberger Hotel Group has
grown to include more than 80 hotels in six countries under two
brands. Steigenberger Hotels and Resorts currently comprises
48 luxury, deluxe and grand hotels. InterCityHotel is the Groups
other brand, with 33 hotels in the upper mid-scale segment.
As for my expectations, I believe the rst half of 2013 will be
challenging for the industry. However, Im optimistic about the
second half of the year.
InterCityHotel is an established brand, and will continue to
do well due to its low xed cost structure. Steigenberger
Hotels and Resorts, on the other hand, should perform better
than prior years, as some of the key assets that were under
renovation are now coming back on the market with a very nice
and competitive product. This should help drive revenues and
customer loyalty, as a lot of our peers have cut investments
during the downturn. However, our companys presence is
mainly in the German-speaking countries, and in those markets,
the extent of the downturn in RevPAR was not as severe as it
was for some of our competitors, with their geographic spread
in Southern Europe and provincial UK.
So for Steigenberger, we are expecting that 2013 will be
characterized, rst of all, by a net growth of the portfolio,
especially in international markets. Second, we expect growth in
revenues and EBITDA. And nally, well be making a continuous
www.hotel-yearbook.com
9
8
HOTELyearbook2013
We have to meet the demands
of future generations cont.
L E A D E R S H I P
commitment to what we call German Operational Excellence
in our German as well as international markets.
I also think we will witness in 2013 and the short term a new
denition of customer loyalty. It will go beyond the rewards and
use of cards, more in the direction of recognition.
HYB : What trends are you following that could have an
impact on how 2013 develops ? Are there two or three
uncertainties that you think could be critical for shaping
how the next year or two turns out for the hotel business
in Europe ?
CHHATWAL : The global nancial and economic crisis does
not seem to be ending, and as I mentioned before, I am more
optimistic about the second half of 2013, but not the rst half,
where I expect RevPAR growth to remain sluggish.
From our perspective, the three most challenging issues facing
our industry are, rst, the continuous uncertainty about the
political situation in the Middle East, including the recent events
in Egypt (where we have a lot of hotels), Syria, Bahrain, Libya
and Israel. This makes all of us quite nervous.
Second, if you look at some European economies, you see
that the rate of growth in hotel supply has exceeded the rate
of growth in hotel demand. The resulting low levels of room
occupancy are jeopardizing returns on investment there.
And nally, due to demographic trends, its becoming
increasingly difcult to nd and bind employees especially
young professionals. We are particularly seeing growing
competition for talent from other industries like airlines or
banking houses.

HYB : Looking at the longer term, say to the year 2020,
when you think about how the hotel business might
develop, is there anything that keeps you awake
at night ? Is there anything still on the far horizon that
you are keeping an eye on ?
CHHATWAL : What keeps me awake at night is nding the
balance between continuous brand building and protable
growth, especially on the international front.
Steigenberger is standing at a critical point today : the company
is ready and supported by its Board to take the leap into some
of the worlds emerging markets, and export our German
Operational Excellence. However, the costs and barriers to
entry in new markets are huge be it from a language, tax
or competition perspective, on one hand, or a lack of local
knowledge or local partner on the other hand. And as the
markets remain under pressure, its also not prudent to make
too extensive use of current resources on new businesses
that could be a very risky approach.
HYB : Is there anything that you think has the potential to
take the hotel industry by surprise in the next few years
in a positive or negative way ? How different could the
future business environment for the hotel industry be
compared to today ?

CHHATWAL : A look into the crystal ball would be helpful ! In
general, I think technical development will progress even faster
than before. The impact of social media will also continue to
grow. Communication between people around the world will
simply be faster than ever.
At the same time, the demand for rest and relaxation and
preventive health programs will grow. At the end of the day, the
hotel industry has to make sure to meet the demands of the
future generations.
HYB : Thank you, Puneet, and best of luck to you as you
steer Steigenberger into this exciting future.
HOTELyearbook2013
The view from the top
EMPLOYEE ENGAGEMENT AND GUEST INTERACTION HAVE BEEN KEY ELEMENTS OF THE SUCCESS OF THE DORCHESTER
COLLECTION UNDER THE LEADERSHIP OF ITS CEO CHRIS COWDRAY. TO FIND OUT MORE ABOUT THE IDEAS AND
VALUES BEHIND HIS WINNING MANAGEMENT STYLE, DR. GENE FERENCE, PRESIDENT OF FERENCE LEADERSHIP &
STRATEGY AND CENTER FOR SURVEY RESEARCH SAT WITH CHRIS ON BEHALF OF THE HOTEL YEARBOOK AND TALKED
ABOUT THE ROLE OF A LEADER IN HOSPITALITY AND WHAT WE MIGHT EXPECT IN 2013.
L E A D E R S H I P
GENE FERENCE : Chris, what do you think 2013 will bring
to the world of hospitality ?
CHRIS COWDRAY : From an economics viewpoint, I see a
more stable year worldwide. At the same time, there will be
political uncertainty affecting the hospitality markets : a new
president in China, re-election in the United States, continued
conicts in the Middle East and challenges in Europe. But in the
big picture, I see the world economy being strengthened.
FERENCE : What current trends are you paying attention to ?
COWDRAY : The luxury travel market looks strong, positive and
more robust today than in the recent past. Along with individual
leisure travelers and business guests, we will see more and
more families traveling together. This means we need to have an
array of products and services to meet all age expectations.
We continue to look very closely at the increasing role
social media are playing. This phenomenon has gained real
momentum, especially with younger generations. All of our
Dorchester Collection properties have cutting-edge media
technologies, such as high-speed Internet with signicant
download capability. We make it a priority to ensure these
services are continuously updated, user friendly and are of the
highest quality.
Chris Cowdray and Gene Ference
C
E
O
S

O
U
T
L
O
O
K
In 2013, there will be changes in fee structures for internet
services. Some guests think that because they are able to
obtain free Internet at a Starbucks, they should be able to
obtain this facility complimentary in a luxury hotel. In up-scale
properties, this service presents a very different situation,
because customers want a different kind of capacity: superior
high speed with the capability of downloading large les rather
than simple links that only connect to basics. Accordingly, we
invest very heavily in capabilities ranging from downloading
large les in guestrooms to providing extra connectivity in
conference areas. These are continuing big investments for a
hotel, regardless if they may or may not be deciding factors for
guests or groups staying with us. For now, standard capabilities
and basic Internet service will continue to be complimentary ;
however, when guests need to download a lot of data,
additional fees will be expected.
As an organizational trend, I see the amount and duration of
internal meetings being examined. Is the issue that employees are
attending too many meetings, or should management be running
better meetings ? Successful companies will be examining both
of these aspects more closely in the year to come.
FERENCE : What keeps you awake at night ?
COWDRAY : Nothing! You have to take a view that this is a
business. If you act ethically, focus on what the vision is for the
company, and do the best you can for the organization, you will
have your share of successes. Keep in mind that things will not
always go the way you expect, but the sun will rise tomorrow
and the world will continue to spin. If you start taking all things
at heart, your thoughts lose focus. What I want for our company
is to fulll our vision and deliver our brand promise to our guests
and employees.
FERENCE : As a CEO, is there a message you would send
today to other hotel industry executives ?
COWDRAY : We must anticipate what each guest needs upon
arrival. The real experience revolves around the purpose of their
trip. The goal is to make their physical accommodations and
service interactions more personal rather than just standard.
We need to customize responses to guest needs beginning at
the rst point of contact. There is a lot of psychology involved
in how well relationships are developed between staff members
and guests.
Unfortunately, service has become very standardized
impersonal and rote. Our employees are constantly moving
towards being more interactive and personable with guests,
while at the same time not being an irritant to them. For
example, many hotel interactions end with Is there anything
else I can do for you ?
Example : When booking a morning wake-up call : Mr. Smith, is
there anything else I can do for you ?
When placing a room service order : Mr. Smith, is there anything
else I can do for you ?
And so it goes throughout the day.
In our efforts to achieve service consistency, scripted responses
can be irritating, with the guest ultimately shutting down the
relationship. In todays service world, all employees need
to engage their own personality in guest interactions and
disengage from rote responses.
The people side of the business has become more challenging
today than ever before, with employee engagement, guest
demand, union issues, local laws and difculties in nding
talented people. Executives need to remember that the art of
delivering ultimate service is keeping it simple. Because the
pressures of successfully running a hotel are signicantly more
complex today, it is easy to get trapped in an ofce.
FERENCE : Any thoughts on the so-called war for talent ?
Is it real ?
COWDRAY : Yes. One of the biggest challenges in the years
ESSEC Hospitality Executive Education
Short Courses/Certications
Refresh your skill set or obtain new knowledge
- Designed for operationnal / corporate mid
senior-level managers.
- Concentrated 2.5 day modules held at ESSEC Executive
Education in Pariss La Dfense.
- Courses can be taken individually, or combined into
packages leading to an ESSEC Certication.
Hotel Electronic Distribution
Managing Social Media and User Reviews
Hospitality Revenue Management
Customer Relationship Management
ESSEC Hospitality Certicate: Online Distribution
Financial Management for Hotel Managers
Hotel Valuation and Feasibility Studies
Hospitality Asset Management
Management Contracts, Franchising and Ownership
ESSEC Hospitality Certicate: Real Estate and Finance
Leading and Motivating in the Real World
Managing Change
For more information:
http://executive-education.essec.fr
Programs / Topic : Hospitality Management
Contact: lanrezac@essec.edu
!nternationaIIy recoQnised.
EnQaQinQ the worId's foremost industry professionaIs and professors.
DemandinQ, thorouQh, and conducted excIusiveIy in EnQIish.
France's premier hospitaIity MBA riQorousIy prepares future manaQers for career success Iike no other.
One program, two tracks
The one-year, post-experience hospitality track is
tailored toward more experienced professionals
wishing to build their competencies, enhance their
career prospects, or begin a career in the
hospitality industry.
The two-year, hospitality track is designed for
young graduates with a hotel school, university,
or business school degree seeking to build and
rene their knowledge through graduate studies.
At the ESSEC MBA in Hospitality Management (IMHI),
our focus is on the practical as well as the academic, on
industry engagement as well as expert knowledge. You
will learn best practices in the classroom, and implement
them in the real world. Five areas of concentration
allow you to focus your studies on those aspects of the
hospitality industry that interest you most: luxury services
management, e-commerce, real estate and development,
entrepreneurship, and general management.
And a culminating eld project will demand that
you set down your textbooks and put your new
knowledge to the test in a real life consulting situation.
For more information: www.imhi.com
Contact: harris@essec.edu
ESSEC MBA Hospitality Management (IMHI)
and Hospitality Executive Education
30 years of expertise have shaped ESSEC Hospitality into the program it is today, attracting multi-cultural, multi-lingual
participants from around the globe. With several years professional experience behind them, our students embrace the
challenge of a highly-focused program designed to make them experts in all aspects of hospitality management, rening
their leadership qualities and joining a prestigious network of over 1,400 alumni in more than 55 countries.
Hotel Operations
42%
Development
11%
Sales & Marketing
13%
General Management
13%
Electronic Distribution
7%
Other Non Hospitality
3%
E-Commerce
4%
Hotel Corporate Ofce
15%
Consulting/Real Estate
15%
Room Division
17%
Restaurants/Food services
8%
Entrepreneur
5%
Food & Beverage
Management
16%
Consulting
14%
Finance/Accounting
6%
2D11 MBA HospitaIity ManaQement (!MH!)
Graduates by company type
Graduates by job function

E
S
S
E
C

B
u
s
i
n
e
s
s

S
c
h
o
o
I

-

4
4
6
2
1
2
1
2

-

D
e
c
e
m
b
e
r

2
D
1
2

-

13
12
HOTELyearbook2013
The view from the top cont.
L E A D E R S H I P
to come will be addressing the huge shortage of candidates
demonstrating the attitude of wanting to serve. Not only will the
challenge of nding talent prevail in this industry, it is going to be
the single biggest challenge of all luxury service organizations
worldwide. We can train people to perform a task, but the real
difference is in their attitude. Having a can-do-attitude and
making every request happen is key to success.
FERENCE : Looking back on your tenure as CEO, what are
your most gratifying moments ?
COWDRAY : When I took over the company, we were ve
hotels essentially all operated very individually. Today, we have
a company where all employees are absolutely focused on
the Dorchester Collection as one entity. We have evolved from
being a group to becoming a collection of hotels which all offer
the same high levels of quality products, personal services and
memorable guest experiences. Moreover, all employees are
proud to be members of our team.
We accomplished this quantum shift because we earned
our employees respect and showed them the advantages of
membership in the Dorchester Collection. In our last employee
feedback survey, we achieved 90 % employee satisfaction and
engagement score. The power of this survey shows us how we
have gained employee trust. This is very crucial. Survey results for
us are not just being generated for statistical purposes. They are a
blueprint of our culture, and we believe and act on the feedback.
What guests value the most in the luxury segment can be
simply summed up in terms of engagement, and to these ends
it is gratifying to see how we continue to excel in managing
guest interactions in delivering on our brand promise.
Our culture now is very strong in all hotels. Our values are
embedded and reinforced daily, and developing leaders will be
our biggest differentiator against our competitors. Last year we
invested an average of 12 days of training per employee, and 15
days of training per management staff member. In 2013 we will
raise the bar higher.
FERENCE : The Dorchester Collection is one of the most
unique hotel companies in the world. What has been your
greatest lesson learned as CEO ?
COWDRAY : My biggest learning curve regards operating
multinationally. All countries have their different complexities
where local laws and leadership styles create differing cultures.
These situations have modied my personal leadership style.
It takes more time to gain peoples commitment to vision, and
I need to apply different skills in order to inuence them, gain
support and make sure they feel a part of our valued team.
FERENCE : Can you share an experience you nd
particularly challenging ?
COWDRAY : Some people complicate things so much
they create organizational silos. I embrace the challenge of
eliminating as many of these barriers as I can. For example, too
many e-mails or copies of e-mails create problems, and people
start protecting their own areas. E-mails create silos because
people are messaging rather than going to other peoples
ofces or picking up the phone. This behavior complicates the
message. We need to return to the basics walking to other
ofces, being on the oor with restaurant managers, identifying
problems between departments and not waiting for the whole
chain-of-command to become involved.
FERENCE : Where do you see the Dorchester Collection
one year from now ?
We are actively looking to expand the company through
third-party agreements as well as acquire hotels.
The challenge at the moment is nding the right properties
that will t into our portfolio. The ones we have targeted are the
most difcult, because they are trophy hotels and owners are
unwilling to release them. At the same time, we will not damage
our brand by putting a ag on a property that does
not compliment us. Above all, we want to be true to the
Dorchester Collection brand.
Managing Change
Hotel Operations
42%
Development
11%
Sales & Marketing
13%
General Management
13%
7%
3%
E-Commerce
4%
15%
15%
Room Division
17%
8%
Entrepreneur
5%
Food & Beverage
Management
16%
Consulting
14%
Finance/Accounting
6%

E
S
S
E
C

B
u
s
i
n
e
s
s

S
c
h
o
o
I

-

4
4
6
2
1
2
1
2

-

D
e
c
e
m
b
e
r

2
D
1
2

-

Managing Change
Hotel Operations
42%
Development
11%
Sales & Marketing
13%
General Management
13%
7%
3%
E-Commerce
4%
15%
15%
Room Division
17%
8%
Entrepreneur
5%
Food & Beverage
Management
16%
Consulting
14%
Finance/Accounting
6%

E
S
S
E
C

B
u
s
i
n
e
s
s

S
c
h
o
o
I

-

4
4
6
2
1
2
1
2

-

D
e
c
e
m
b
e
r

2
D
1
2

-

Managing Change
Hotel Operations
42%
Development
11%
Sales & Marketing
13%
General Management
13%
7%
3%
E-Commerce
4%
15%
15%
Room Division
17%
8%
Entrepreneur
5%
Food & Beverage
Management
16%
Consulting
14%
Finance/Accounting
6%

E
S
S
E
C

B
u
s
i
n
e
s
s

S
c
h
o
o
I

-

4
4
6
2
1
2
1
2

-

D
e
c
e
m
b
e
r

2
D
1
2

-

Size matters
IN 2013, SIZE WILL MATTER EVEN MORE FOR HOTEL CHAINS, WRITES NICOLAS GRAF OF FRANCES ESSEC BUSINESS
SCHOOL. THE HOTEL YEARBOOK ASKED HIM TO EXPLAIN WHY, AND HOW HE EXPECTS THE HOTEL CHAINS WILL
ACHIEVE IT.
H O T E L C H A I N S
HOTEL CHAINS NEED TO GROW, AND THEY NEED
TO GROW FAST
As this is being written, the advertising budget of the
largest Online Travel Agency (OTA) by market capitalization
Priceline.com is over $900 million, representing half of
the gross prot of the largest hotel company (by market
cap), Marriott International. The gross booking revenue of
Priceline in 2011 was $21.7 billion compared to $12.3 billion
for Marriott. While this is already scary, more terrifying is the
number of participating hotels Priceline.com possesses in
its online inventory : 235,000 vs. 3,718 for Marriott, or 4,480
for InterContinental Hotel Group (IHG). Because breadth of
choice is one of the key features to attract consumers to
online booking sites, and since booking costs represent 10 %
to 25 % of room revenue, the battle for online market space is
paramount for hoteliers. Are they ready for a ght ? Not just yet.
What they need is size, and they need it fast. Here are three
growth engines that I believe will dene 2013.
1) FIT FOR CONVERSIONS
The rst engine of growth in the year(s) to come will be about
conversions in mature markets. While fast-growing markets
such as Asia-Pacic and Latin America will continue to attract
most hotel companies and will remain the markets with the
largest pipelines, North America and Western Europe will
experience an increasingly intense race for conversions.
Although we have witnessed several years of independent-to-
brand conversions, in the coming year(s), we will see many more
brand-to-brand conversions. Several hotel companies have
already signaled their intents with the adoption of conversion-
friendly brands, including Starwood Hotels & Resorts Worldwide
with Aloft, Even Hotels by IHG, or Ibis Styles by Accor.
I can see at least two reasons for speeding-up conversions in
mature markets. First, emerging markets are not growing fast
enough to cope with the need for size for hotel chains. Second,
in the ght with OTAs, increasing market share in mature
markets can provide chains with more bargaining power as they
could control a signicant share of the entire supply in a region.
In this way, chains could compete in size with OTAs in a specic
region since they cannot yet compete on a global scale.
M&A WHEN LIQUIDITY PERMITS
The second growth engine will involve Mergers and Acquisitions
(M&A). This engine has already warmed up this year. For
instance, Accor acquired two medium-sized companies, Mirvac
in Australia and Grupo Possadas in Latin America. In October
2012, Indian Hotels of Tata Group made a bid to take over
Orient-Express. Over the past summer, the super-sized merger
of Marriott International with IHG was rumored and Marriotts
CEO had to deny the story by saying they were already happy
with the acquisition of Gaylord Entertainment Companys hotel
brand and management company.
The typical drivers of merger waves are well known. First, an
industry entering a wave of mergers is typically experiencing a
slowing rate of growth which results in a need for consolidation
to gain economies of scale and scope. While growth outlooks in
emerging markets exist, it is clearly not sufcient for companies
the size of Marriott, Hilton or Accor, who would need to add
between 40,000 to 60,000 rooms each year to sustain double-
digit growth (without considering the compounding effect).
Secondly, merger waves are usually triggered by the emergence
of a disruptive technology that shocks an industry and ushers
it into a new environment. For over 10 years now, the industry
has struggled with third-party internet booking sites. At rst, the
industry was in denial and failed to commit sufcient resources
to the technology. As discussed earlier, OTAs were quick to
establish a dominant position in the market space, to a point
that currently prevents hotel companies from gaining sufcient
size by simple organic growth.
Third, mergers are also generally associated with times
when liquidity is there and when nancing is available. My
argument here is that, while liquidity is not high by historical
standards, the depressed levels from which we are emerging
have prevented M&A activities, and the little improvements in
liquidity we are witnessing will be sufcient to unleash appetites
15
14
HOTELyearbook2013
for larger acquisitions. Hence, as all of the ingredients are
coming together, I would not be surprised if a very large merger
occurred in 2013, possibly joining major hotel companies such
as IHG, Accor, Marriott or Wyndham.
WHITE LABELING TO SPEED-UP SIZE OF INVENTORY
The third prediction for 2013 is the emergence of what I call
white labeling (for lack of a better term) of Internet booking
engines by hotel companies. By this, I mean the sale of the hotel
chains own booking engine capabilities to independent hotels.
In other words, I believe hotel companies will start to enroll
independent hotels in their own systems, and sell their room
inventory through a white label website. This is in a way very
similar to what Marriott is offering with the Autograph collection,
or what Best Western has been doing for years.
There are two main reasons to justify such a move. First,
to compete with the advertising budgets of the OTAs, hotel
companies must signicantly and quickly increase their sales
volume. If you imagine that a major hotel company, generating
6 billion Euros in yearly sales (about 300,000 hotel rooms, at
65 % occupancy and an ADR of 85 Euros), dedicating 5 % of
total revenue to online advertising, it would only provide 300
million in budget. This is about one third of the budget of the
major OTAs. Hence, the hotel chain would have to triple its
room inventory to compete on a leveled playing eld. Apart from
gaining such a size by merging three major chains such as IHG,
Marriott and Accor, the only other option I can think of to reach
such a gigantic size is enrolling independents.
The second reason lies in the attractiveness of the chains
websites and booking engines. As breadth of choice is critical
to drive consumers preference, adding more choices through
enrolling independents would not only benet the volume of
sales, but it would likely result in higher consumer preference
for the entire system, thereby providing a positive network effect
for existing branded properties.
THE FUTURE IS ABOUT MUCH MORE GROWTH
AND MUCH FASTER
While growth has been on the agenda of all large multi-brand
hotel chains for a long time, what is different in the year(s) to
come is the need for much more growth and much faster
growth. Will the three growth engines run at full speed next
year ? Maybe not. The battle for the online market space
started years ago, and the OTAs are dominant. Yet the industry
nally seems to be ripe for striking back but it will require
signicant consolidation.
T
H
E

E
N
V
I
R
O
N
M
E
N
T

I
N

2
0
1
3
17
16
Lending: More of the same ?
THE CURRENT LENDING ENVIRONMENT IS SLOWLY IMPROVING, BUT TRANSACTION ACTIVITY REMAINS AT A LOW
LEVEL, WITH FEW QUALITY ASSETS ON THE MARKET. WE ASKED MICHELLE WEISS AND CHRISTOF WINKELMANN
OF WIESBADEN-BASED AAREAL BANK TO EXPLAIN THE REASONS FOR THIS, AND TELL US WHAT THEY THINK 2013
WILL BRING.
One year ago, we were in a situation where a great degree
of uncertainty prevailed as a result of the Euro crisis, and in
view of that, so was the state of the hotel investment industry.
Twelve months later, it seems that there has been little change :
the sovereign debt crisis in Europe still lls our newspapers
and we are still confronted with political volatility, while overall
condence remains weak and markets are still illiquid. However,
a more positive feature that seems to be different is the fact that
the actual trading fundamentals within the hotel industry are
positive and are holding up on a year-on-year basis.
THE CURRENT STATUS
We saw signs of recovery in the debt market in 2011, with
activity picking up in terms of hotel transactions, even though
investment volumes were still at a substantially lower level than
during the peak years. The mood changed, however, in the
second part of the year, with the return of the uncertainties
linked to the Eurozone debt crisis, and all parties remained
cautious well into 2012. Accordingly, global hotel investment
volumes declined during the rst six months of 2012 by 26 % to
USD 12.7 billion (source : JLL), with activities expected to catch
up somewhat towards the end of the year.
The environment remains difcult ; investors continue to face
the challenge of illiquid markets and the lending world is
experiencing substantial transformations. On the one hand,
we see a withdrawal of more traditional funding sources with
several banks exiting the market or tightening their budget with
a predominant focus on their home country. A reason for this
retreat is, among others, the uncertain regulatory environment
following the global economic crisis. On the other hand, the
introduction of policies such as Basel III, maximum leverage
returns, and Solvency II puts pressure on the banks capital
ratios and consequently reduces the amount of funds available
to lend. In addition, banks face further strain in renancing
availability with the continued weak market condence and the
economic crisis, making it also more expensive. Accordingly,
many banks are busy shrinking their balance sheet to prepare
themselves for meeting the new rules and regulations.
F I N A N C I N G
HOTELyearbook2013
Then again, new alternative sources seem to appear, especially
in Europe, with insurance companies and pension funds, but
also some dedicated debt funds testing the hotel lending
market. Competition on the lending side remains limited, though,
giving lenders the chance to be selective and focus on quality
assets in prime markets. This makes it difcult to nd nancing
for hotels in secondary or even tertiary cities, with the exception
of some secure income deals such as leased hotels in Germany.
Transactions, however, do take place and there are currently
two main approaches that can be observed : opportunistic
investors acquiring properties at a discount to reposition them
and to create value, and the low-risk/low-leverage buyers. The
latter group is after trophy assets in prime locations, including
London, Paris and New York. Investors possessing sufcient
equity are currently dominating the hotel investment landscape,
such as high-net-worth individuals from the Middle East,
investors from Asia and increasingly the USA, who enjoy easier
access to non-traditional debt sources. Examples include India-
based Sahara India Pariwars purchase of a 75 % stake in the
Plaza Hotel in New York and the Grosvenor House in London.
TIME TO INVEST BUT WHERE ARE THE TRANSACTIONS ?
The good news is that, apart from Southern European
countries, performance in most markets has remained sound
with RevPAR growing, though they are still below pre-crisis
levels. An additional aspect with a positive inuence is the
fact that the overall pipeline of new supply has decreased,
since construction nancing is almost impossible to obtain.
Also, hotels in some markets are selling at a lower price than
construction cost. The lack of new hotel projects adds pressure
on operators but also creates opportunities for the rebranding
and repositioning of existing hotel properties, in general a
healthy development. Operators are therefore more likely to be
willing to offer some sort of guarantee or nancial incentives
such as key money or even mezzanine nancing for projects
that they perceive as key assets.
Because of the continued record low base rates (i.e. Libor
or Euribor), overall all-in interest rates are currently fairly
attractive, despite the scarcity of debt nancing, low leverage
ratios of 50 %-55 % and wider margins. Moreover, despite the
decreasing trend in cap rates, they are still not back to their pre-
crisis level and remain appealing.
This makes the current environment a good time to invest for
parties with sufcient equity. Nonetheless, activity remains slow.
One essential cause for this slowdown is the lack of quality
assets on the market, of which only a few are in prime locations,
making the others difcult to nance. Apart from that, there
is still a considerable bid-and-ask spread present, preventing
owners from putting their hotels up for sale. Although numerous
loans underwritten during the peak years at high leverages were
due to mature in 2012, and therefore it was expected that with
todays lower leveraged and tightened lending conditions, more
hotels would be put on the market, this has not proven to be
the case to the extent anticipated. Lenders were often willing to
cooperate and extend at reasonable terms.
Another aspect that holds back activity is the fact that
transactions are taking considerably longer to close compared to
previous years, in some cases even up to one year. The problem
does not lie in the nancing, but rather the certainty of having
a deal done. During the peak years in 2006/07 when activities
where high, there was a large number of properties and strong
competition on the market, putting pressure on all parties to close
quickly. Nowadays, however, the lack of quality assets, limited
lending and only a few investors with considerable equity takes
pressure off, as there is no back-up. All parties are precautious,
and processes are characterized by a great deal of due diligence.
THE 2013 OUTLOOK
The current environment is still challenging and characterized
by the yet unresolved sovereign debt crisis in the Eurozone, with
continued uncertainty in terms of the political framework. However,
with the continued volatility in the equity market, an investment
in property presents a good alternative. We can see a few new
players entering the market, with Middle Eastern, Asian and
increasingly US high-net-worth individuals. Private equity investors
and REITs are expected to continue dominating activities.
With the new regulations and the continued crisis, debt
availability remains limited. This presents an opportunity for
non-traditional sources, including insurance companies and
debt funds, to enter the European lending market, following the
US model. Nevertheless, nancing will remain at conservative
terms, with loan-to-value ratios in the low 50s, higher margins,
but at an attractive all-in interest rate. Focus will continue to be
on existing quality assets in prime locations that feature a strong
track record with yield-on-debt based on historical gures
becoming ever more important.
On a brighter side, despite the continued economic slowdown
and weaker sentiment, the fundamentals within the tourism
industry are expected to remain robust. Furthermore, a few
quality assets and some larger portfolios that are currently on
the market are likely to close before long, which may create
momentum for increased activities in 2013.
Overall, with little change in the underlying circumstances,
2013 will likely see more of the same, with parties pursuing a
cautious investment and nancing strategy. Nevertheless, the
second half of 2012 was slightly more optimistic, with improved
condence for transactions for 2013. Ultimately, the pace of
activity is being determined by the debt funding and especially
by the availability of top properties in primary markets or
as Conrad Hilton once rightly put it : it is all about location,
location, location. And this will likely not change in 2013.
T
H
E

E
N
V
I
R
O
N
M
E
N
T

I
N

2
0
1
3
Sustainability:
the value proposition
THE TIMES THEY ARE A-CHANGING, SANG BOB DYLAN AND RICHARD GARLAND, PRINCIPAL AT LONDON-BASED
RGA HOTEL AND LEISURE CONSULTANTS, CERTAINLY AGREES. THE HOTEL YEARBOOK ASKED RICHARD FOR HIS TAKE
ON THE KEY DESIGN AND DEVELOPMENT ISSUES FOR 2013 AND BEYOND. HIS ANALYSIS COMES DOWN TO ONE THING :
THE NEED FOR SUSTAINABILITY IN THE FACE OF INCREASINGLY DIRE CLIMATIC THREATS.
Before the turn of the millennium, climate change was a phrase
you might only have found in an article published in some
obscure scientic magazine. Fifteen to twenty years later,
it represents the single greatest challenge to the survival of
mankind and is uppermost in our thinking and decision making
in shaping our lifestyle, future existence and prosperity.
While the scope and speed of change is a cause of much
debate with its uncertainty and contradictions, as governments
ddle, the scientic community is increasingly speaking with
one voice that change is not only underway and becoming more
extreme but, in some areas, irreversible. There is irrefutable
evidence that similar climate and environmental changes have
taken place several times over millions of years but, this time,
there are a number of major differences : rising total population ;
rising consumption levels as one half of the population aspires
to the lifestyle, housing and possessions of the other half ;
diminishing natural resources ; rising carbon emissions leading
to global warming and dangerous levels of toxic pollution which
are producing huge economic and commercial challenges
across the globe. If life as we know it is to be maintained,
the current scenarios many of which man has created and
continues to contribute to are unsustainable.
With the exception of a few farsighted environmentally
concerned independent owner/operators, it was with the
emergence and rapid global growth of the budget sector
hotel brands some 15 years ago that the value and benets
of sustainable design and development, coupled with a
focus on energy conservation, surfaced as a vital contributor
to increasing the commercial viability of hotel projects and
services. With the budget nancial model only offering
limited revenue and income streams, and with development
budgets required to be tightly controlled, every dollar saved in
design, development and operating is carried to the bottom
line optimizing prot potential. Despite becoming the fastest
growing sector and outperforming all other categories, both
developers and the industry have been slow to pick up on the
wider commercial benets, and in many countries around the
world, in contrast, the higher the star rating and the more
D E S I G N A N D D E V E L O P M E N T
prestigious the project, the priorities and criteria for return on
investment vary signicantly, with some investors seemingly
ignoring options for more economic and potentially protable
development and operating efciencies.
That is the bad news, much of which is self evident. The good
news is that real estate investment, across the entire spectrum
of property development and management around the world by
those institutional investors who have signed up to the United
Nations Principles for Responsible Investment (PRI), has a value
in excess of thirty trillion dollars and is rising every year. Funds
like these are seeking investment opportunities, including the
hospitality sector, which meet certain minimum sustainability,
environmental, governance and social criteria. This is evidenced
by the fast emerging realization by communities and businesses
around the world, with the exception of some blinkered
politicians, that sustainability, the word now on everyones lips,
represents a signicant part of the solution to slowing change,
helps maintain our way of life and ultimately, contributes to
mans survival.
In the last decade, climate change has touched us all and, while
the real estate industry and general property development have
embraced sustainability as the way forward, with a few notable
exceptions, the hospitality sector is only now coming to terms
with both the regulatory requirements and commercial benets,
and adapting the rules under which it operates.
WHERE ARE WE NOW AND WHERE DO WE GO FROM HERE ?
Until recently, mature industrialized economies often ignored
consequences of their inaction, while the growth of economies in
emerging countries was frequently linked to eco-tourism and the
development of environmentally sensitive locations with decisions
governed solely by nancial and political considerations.
With no global regulatory body, universally accepted standards
or cohesive benchmarking practice, the industry, with the
exception of those who signed up to the United Nations PRI,
has largely been relying on voluntary codes of practice or
local building codes. This is not due to lack of information or
19
18
HOTELyearbook2013
awareness, but is driven by short-term gain. Such a strategy
is usually justied, across all categories of hotel development,
as being the most effective way of leveraging the investment.
And with the advent of branding as the industrys most effective
marketing tool, formulaic development and design concepts
for creating homogenized products that can offer a measurable
return on investment for all the stakeholders, the industry has,
over the years, developed a winning formula. Any adjustment or
challenge to this, such as upgrading the physical asset through
design, adjustment, improved construction standards and
practices, technological upgrades, or improving the efciency
and intelligence of buildings and the built environment, is
often rejected out of hand, as any such change disturbs the
predictability and certainty of the nancial model. But now this
accepted formula is being challenged on several fronts.
For many years, designers, architects and other members of
the design team appointed to interpret the vision and develop
the product in adherence with the brief, budget and program
have been constrained by operators and their investment
partners, whose understanding of conservation was often
restricted to the use of low wattage light bulbs and not
changing the towels and sheets on a daily basis, or putting half
a brick in the cistern to save water. Investment in sustainability
generally was considered too expensive, as it reduced the
prot potential and might unnecessarily extend the return on
investment program.
But with the convergence of the global nancial crash,
mounting evidence of the accelerating risks associated with
climate change, and emerging changes in consumer/guest
expectations, many established design practices and hotel
companies formed R&D teams to focus on the expanding
impact of regulation and compliance issues in different
countries and environments around the world. This includes
Green Building Rating Assessment tools for new and renovation
projects that address standards, incentives and certication
schemes, country by country, focusing on wide-ranging
environmental and sustainability options that make specication
easier, more compliant and environmentally friendly. They
also ensure that the use of natural materials is a priority where
appropriate, that they are biodegradable, where possible, and
come from a renewable source rather than a vulnerable or
endangered species.
While such information is readily available to all stakeholders
and members of the development team throughout the design
process, if the specication is considered too high or too
expensive and exceeds the budget, a cheaper alternative is
used. This may not only compromise the design intent and
integrity but, ultimately, can diminish the guest experience and
depress the value of the asset. However, with the changes in
investor criteria, corporate development strategies and rapid
advances in technology, this approach is also being challenged
to keep pace with consumer demand and expectations.
WHAT WILL DRIVE SUCH CHANGES IN 2013 ?
First, investor attitude and behavior, particularly since the global
nancial crash of 2008, has altered radically. In support of PRI,
prime lenders are demanding greater in-depth analysis and
more detailed information to ascertain that any project is not
only nancially viable, but that the design and development
processes are sustainable and fully compliant.
An increasing number of international banks and other
institutional investors, including the Hong Kong Stock
Exchange, have departments led by a Director of Climate
Change Strategy which develop guidelines for environmental,
social and governance criteria side by side with their
development nancial models. Their main focus is to assess
and analyze their exposure, and make recommendations to
their lending committees, especially in locations that are, or
could be in the future, at risk from natural disasters, subject to
change in continuity of availability of natural resources and with
restricted or difcult accessibility.
Second is the huge technological advances made in harnessing
the supply of solar, wind and tidal power as optional renewable
energy sources which are cleaner, more reliable, and safer
than some existing alternatives, and are becoming more
T
H
E

E
N
V
I
R
O
N
M
E
N
T

I
N

2
0
1
3
Sustainability:
the value proposition cont.
nancially competitive. With the urgent need to lessen industrys
dependence on fossil fuels for energy and power generation,
many lenders are demanding full compliance and commitment
from borrowers and are likely to look more favorably on projects
where investors take such criteria into account voluntarily.
Third, consumers and stakeholders are increasingly only willing
to support organizations and businesses many of whom
touch most parts of our daily lives that operate and promote
an integrated and transparent Corporate Social Responsibility
(CSR) policy as part of their company philosophy and business
strategy. Consumers want to be able to sign up to, inuence
and, if needed, hold these companies to account.
While many corporations across the spectrum of business
activity are already reaping the benets of fully engaging with
the shifts in consumer thinking, attitudes and behavior through
CSR, for a people-centric industry, the hospitality sector has
responded surprisingly slowly. But it is now raising the bar to
D E S I G N A N D D E V E L O P M E N T
align with others. As we are seeing on an increasingly regular
basis, the power of social media in inuencing public perception
and mobilizing opinion is immeasurable and being used by
shareholder and consumer pressure groups with increasing
effect. If dissatised, they can quickly bring pressure to bear for
change or, in extreme cases, withdraw their support, boycott
products and services or lobby through the legal process for
suspension or termination of trading.
However, if developed sensitively and implemented with
common objectives and a shared vision, the benets of a truly
transparent dynamic CSR policy are far wider than providing
consumers, stakeholders and shareholders with a voice and
a platform, as it can support and promote sustainability in
a practical and measurable way. Some of the positives that
hospitality can create include local sourcing, supporting
businesses in the local community, reducing logistical needs,
creating and developing employment, training and personal
development while striving to provide and deliver an authentic
21
20
satisfying guest experience. While successfully tackling
environmental and sustainability issues is crucial to mankinds
future, as illustrated above, the social impact and benets CSR
generates for local businesses and the community are equally
as important.
SO WHAT DOES THE FUTURE HOLD ?
Looking at 2013 and beyond :
Climate change is here to stay. Without any international
political agreement on targets, program and timetable to
reduce carbon emissions, there will be worse to come.
Extreme weather and natural disasters are expected to spread
and become more frequent, including countries and regions
that historically have enjoyed a stable and temperate climate.
The threat to natural resources will continue to grow.
Without a cataclysmic catastrophe, the political agendas
between rich and poor, developed and undeveloped countries
are unlikely to merge in the short and medium term, with the
possibility of consensus remaining remote.
With little political commitment and effective cohesion,
regulation between the diverse groups supporting differing
agendas will remain disjointed and un-coordinated.
In countries where regulation is already in place as global
warming issues become more widespread, compliance will
become stricter, with tougher penalties for failure to meet
targets or conform to published standards.
While solutions to global warming will be left to scientists,
technocrats and visionaries in the private sector supported
by a variety of charitable trusts, designers and architects will
continue to develop more efcient, robust and affordable
options to improve sustainability and reduce maintenance and
replacement costs.
In 2013, as well as the rest of the coming decade, any investment
in the development of products and services to expand the
green economy, with the exception of investment incentives and
some tax breaks, is likely to come from the private sector rather
than governments in most regions of the world.
Hotel owners and developers, provided they can satisfy
the requirements, have the opportunity to tap into funds
controlled and offered by institutions who have signed up to
PRI. Those organizations who get it right can enjoy lower cost
of capital, lower risk prole, increases in protability and a
potential share price premium.
With growing pressure from tougher regulation, increasingly
vocal stakeholder groups and more sophisticated and
affordable technology, hospitality investors and operators are
now able to promote their green credentials on a wider scale.
In order to shore up and grow market share in a fast-changing
market with expectations continuing to rise and evolve,
both independent and chain operators are developing CSR
strategies, green carbon-neutral hotel products and brands to
match growing consumer demand.
In conclusion, although seemingly slow on the uptake, in 2013
the hospitality sector often in countries where tourism and
the hard currency it generates is either the only or major source
of income and employment will be rapidly catching up and
even overtaking other sectors in some countries. Standards
of sustainable design and development are underpinned by
advances in technology focusing on energy conservation
and efciency and improvements in construction standards
and techniques, and a deeper awareness and understanding
through scientic research of how negligence and non-
compliance will engulf us.
Hospitality has an advantage ; as an industry created and
managed by people for people that operates in some capacity
24/7, it can be both humanizing and inspiring. However, service
that meets and occasionally exceeds expectations is only one
part of the experience the industry offers, and to succeed and
be protable, its products and services must be planned and
designed appropriately to meet and deliver all of the criteria that
owner, investor, operator and, ultimately the guest, demand.
In the decades ahead, as climate change tightens its grip on
the planet and poses mankind with ever tougher challenges,
sustainability will play an increasingly integral and invaluable role
in nding and offering solutions that can meet and defeat the
challenges that lie ahead for our industry.
T
H
E

E
N
V
I
R
O
N
M
E
N
T

I
N

2
0
1
3
23
22
Thirteen tales of hope
ACCORDING TO HORWATH HTL, 2013 WILL BE A YEAR WHEN MOST EUROPEAN HOTEL MARKETS FINALLY EMERGE FROM
THE DOLDRUMS THEY HAVE BEEN IN FOR THE PAST 4 YEARS. THATS NOT TO SAY THE SITUATION WILL BE ROSY FAR
FROM IT. BUT THE INDICATORS ARE LOOKING BETTER THAN THEY HAVE FOR QUITE SOME TIME. TO GET AN IDEA OF THE
OUTLOOK IN THE KEY MARKETS ACROSS THE CONTINENT, THE HOTEL YEARBOOK ASKED 13 DIFFERENT OFFICES OF
HORWATHS INTERNATIONAL NETWORK TO CONTRIBUTE THEIR PROFESSIONAL ASSESSMENT OF WHERE WE ARE AND
WHERE WE ARE GOING.
R E G I O N A L O U T L O O K : E U R O P E
HOTELyearbook2013
THE NETHERLANDS
SITUATION REPORT
The lodging supply in The Netherlands, consisting of hotels,
pensions and hostels, is clearly dominated by hotels. Here
lodging accommodations are only allowed to carry the label
hotel if they have been classied according to the Dutch
Hotel Classication System. Within the hotel market, the 4-star
segment has without a doubt the largest market share.
During the last ve years, however, the market share of hotels
within the supply of all Dutch lodging accommodations
decreased, as the supply of non-hotels increased more quickly
than that of hotels. This development is indicative of two supply-
related trends in the Dutch hotel industry. Modern hotel concepts
such as Qbic and citizenM, both made in Holland, do not t
the traditional classication system, mainly because of the room
sizes. This leads to the decreasing use of the classication
system, and a corresponding negative effect on the market share
of hotels. At the same time, the relatively low prices, personal
hospitality and increasing level of professionalism among B&Bs
in the Netherlands are leading to both an increase in the number
of B&Bs as well as the number of B&B registrations, with again
a negative effect on the market share of hotels.
Another supply-related trend in the Dutch hotel industry is the
increasing chain afliation. At the end of 2011, only 39 % of
Dutch hotel rooms was still independent of hotel chains, which
was a reversal from ten years earlier when only 35 % of Dutch
hotel rooms were chain afliated. At the end of 2011, 50 hotel
chains were active in The Netherlands, with 63 brands. In 2012,
this increased due to the addition of chains such as Meininger
Hotel Gruppe and brands such as DoubleTree by Hilton, Hilton
Garden Inn and Best Western Plus.
Facts & gures: Dutch hotel supply 2012
No. of lodging accommodations 3,151
No. of rooms in lodging accommodations 110,332
No. of hotels 2,215
No. of hotel rooms 91,108
Market share of hotels 83 %
Chain afliation 61 %
Growth, rooms in lodging accommodations 2008-2012 + 11 %
Growth, hotel rooms 2008-2012 + 4 %
Growth, market share of hotels 2008-2012 - 6 %
In 2011, guests spent almost 35 million nights in Dutch hotels,
of which 52 % were Dutch as opposed to international guests,
and 56 % were traveling as tourists rather than business guests.
With respect to both national and international overnight stays in
hotels, 2011 was a record year in the period 2007-2011. However,
the number of overnight stays by business guests, in particular
individual business guests, still had not recovered from the effects
of the 2008-2009 international economic crisis. Hoteliers tried to
make up for this lack of business demand with a rather aggressive
sales strategy, targeting mostly Dutch, German and Belgian tourists
traveling individually, with an increased use of pricey online booking
intermediaries, online auctions, and discounts up to 50 %. Because
both Internet transparency and the competitive supply continued to
increase simultaneously, the RevPAR of Dutch hotels in 2011 was
still well below the record level in 2007, as were the margins.
At the end of 2011, 50 hotel
chains were active in the
Netherlands, with 63 brands
3 %
7 %
34 %
52 %
5 %
5*
1*
2*
3*
4*
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
The rst quarter of 2012 showed a revenue increase of 2 % in
relation to the same period in 2011. At 3 %, the increase in the
second quarter was even a little higher. However, more than half
of the hoteliers interviewed to determine the sentiment in the
hotel market indicated that their revenue in the rst half of 2012
was lower than expected, mostly due to disappointing average
room rates. Also, in the course of the year, many hoteliers felt
increasing pressure on revenue and margins, leading to the
belief that the initial growth in 2012 will be moderated to a zero
growth at the utmost for the whole year. Many hoteliers are even
taking another revenue decrease into consideration.
Facts & gures: Dutch
hotel demand
2007 2008 2009 2010 2011 Growth
Overnight stays in hotels
(in M)
34.1 32.6 31.4 33.7 34.6 + 1 %
National overnight stays in
hotels (in M)
17.8 17.7 17.1 17.5 17.9 + 1 %
International overnight
stays in hotels (in M)
16.3 15.0 14.4 16.2 16.7 + 2 %
Business overnight stays in
hotels (in M)
16.8 15.8 14.1 14.6 15.2 - 10 %
Occupancy 3-, 4- and 5*
hotels (in %)
72.5 68.1 62.1 65.1 67.2 - 7 %
Average room rate 3-, 4-
and 5* hotels (in )
110 105 93 93 98 - 11 %
Revenue per available room
3-, 4- and 5* hotels (in )
80 72 58 60 66 - 18 %
OUTLOOK FOR 2013
As recent history proved once again, results in the Dutch
hotel industry are strongly related to international and national
economic developments. For 2013, slow economic growth at
best seems to be realistic, as it is expected to be held back not
only by the challenges and uncertainties of the European debt
crisis, but also by political uncertainties, as new government
policies are slowly taking shape.
At the same time, from the supply side, the competitive
pressure is expected to continue. For various urban locations,
the real estate world sees hotels as convenient alternatives to
empty ofces. Also, the expansion drive of international hotel
chains is leading to even more chains and brands entering the
Dutch hotel market. Hyatt Hotels and Resorts aims to follow
up on its 2012 entry in the Dutch hotel market (Andaz Hotel
Amsterdam) with the opening of the rst Dutch Hyatt Place
Hotel near Amsterdams Schiphol Airport in 2013. Other chains
expected to enter the Dutch hotel market in 2013 with new
brands are the Spanish chain and brand Room Mate and Hilton
Worldwide with the brand Waldorf Astoria.
These chains prefer a location in or near the capital Amsterdam
because of its strong position in the Dutch hotel market. This
position is expected to be even stronger in 2013 and onwards
due to the many festivities planned for this year, among which
are the 400th anniversary of the canals, the 125th anniversary of
the citys concert hall, and the reopening of some of the largest
museums. It is no wonder then, that Lonely Planet designated
Amsterdam as the second best city worldwide to visit in 2013.
Rachl Lardenoye
2006 2007 2008 2009 2010
0
10
20
30
40
50
Business group segment
Business individual segment Tourism group segment
Tourism individual segment
%

o
f

t
o
t
a
l

d
e
m
a
n
d
Other Segments
25
24
RUSSIA
SITUATION REPORT
Another tough year globally, but Russia is still performing from
a strong economic base which is reected in comparably
good hotel trading performances in cities like Moscow and
St. Petersburg.
At the annual Russian Hotel Investment Conference held
in October 2012, opening presentations by two leading
economists painted a mixed picture and some uncertainty
where the global economy, and in particular the Euro crisis,
were going. But nonetheless they felt that Russia will remain
economically strong relative to Europe, buoyed by continuing
strong oil prices representing the core of its economic success.
So what has been happening in Russia during the last year as
far as hotel development is concerned ?
New properties form luxury to budget continued to open
throughout Russia, but many more projects remain in the
pipeline awaiting nance. There seems to have been renewed
interest in hotel real estate from domestic banks in 2012, but
again with interest rates very high and term of loans short
and continued lack of interest from foreign banks, the result
remains that the rate of hotel development in the country is
slowed down when compared with emerging markets such as
Turkey and China.
Nonetheless, hotel development teams are being bolstered in
order to sign up potential investors, as the market becomes
increasingly competitive in terms of hotel operators offering a
wider array of brand segmentation.
The level of interest in resort type properties has notably
increased over the last 18 months, as the market becomes
Thirteen tales of hope cont.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
more leisure-oriented, with anticipated competitive air fares and
a more lenient visa regime for international visitors.
OUTLOOK FOR 2013
Thirteen may be an unlucky number for some. But the next
ve years will provide increased growth of hotel supply and
prole exposure of Russia through the forthcoming Sochi
Winter Olympics 2014 and FIFA World Cup 2018. Signicant
infrastructural projects have been undertaken in the Sochi area,
while interest in the 11 cities selected for the FIFA World Cup are
attracting investors already. These events are Russias chance
to sell itself to the worlds media.
So, will 2013 prove to be the year when major deals are signed
allowing the development of several signicant portfolios of
hotel brands, not only in Moscow but regionally ? Will we nally
see budget hotel properties entering smaller cities as the
leading product, at least until the level of supply grows ? Will
everything be complete on time, that is, by the end of 2013 in
readiness for the Winter Olympics ? Will Russian banks start
to offer more realistic levels of interest on loans to expedite the
number of international properties entering the supply chain ?
Will franchising start to be the most popular form of agreement
between owners and operators ?
These are the key questions that will dene Russias progress
in terms of successful hotel development in 2013 and beyond.
If these issues are properly addressed, then the signs suggest
that 2013 will be lucky for Russia.
Michael OHare
FRANCE
SITUATION REPORT
After the strong recovery in 2011, the slowdown of the French
economy over the past 10 months combined with the uncertain
outcomes of budgetary pressure call for cautious forecasts.
Indeed, France saw zero growth in GDP during the rst half
of 2012. So far, the French economy is likely to remain at a
standstill, as growth is anticipated to stagnate at the same level
for the full year.
The graph hereunder shows the evolution of the GDP at current
values and the corresponding evolution of RevPAR, based on
growth ratios.
FRANCE : GDP AND REVPAR GROWTH
Source : INSEE/Horwath HTL
As shown above, the hospitality industrys performance has
proven to be directly linked to the changes in current GDP.
Therefore, it has to be noticed that since the peak reached in
2008, and despite the post-rebound crisis of 2010, growth in
current GDP never regained its pre-2008 level, oscillating from
3 to 5 %.
Current GDP forecast for 2013 indicates 0.8 % growth in volume
which seems ambitious in the current context. At the same time,
ination should remain in the range of 2 %.
-12
-8
-4
0
4
8
12
16
RevPAR Current GDP
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
2
2
0
1
0
Soccer 98
Rugby 07
Sept 11
Iraq
Subprime
C
h
a
n
g
e

i
n

R
e
v
P
A
R

%
-9
-12
-6
-3
0
3
6
9
12
15
C
h
a
n
g
e

i
n

c
u
r
r
e
n
t

G
D
P

%
27
26
HOTELyearbook2013
As a consequence, growth in RevPAR in 2012 is anticipated to
be moderate and price driven only at around + 3 % versus 2011.
Occupancy is stable in most categories, while prices are pulled
up by the upscale segment.
Undoubtebly, the French hotel industry remains driven by
Paris which beneted from a favorable combination of high
occupancy and continuing increase of ADRs. In this favorable
context, Paris has achieved or planned upgrades of many hotel
facilities in the 4 and 5 star segments. This, combined with the
scarcity of land plots available for development, translates into
ever higher rates.
Hotel investment in France, although affected by the crisis, was
still solid in 2012, thanks to transactions of trophy assets in
Paris. But if France remains globally one of the most dynamic
markets in terms of hotel transactions, the increased uncertainty
in nancial markets has caused banks to be more selective and
debt to become more difcult to source for new built projects.
OUTLOOK FOR 2013
The perspective for 2013 is rather stable. However, we
anticipate a slower growth in RevPAR than in 2012, in relation
to the poor performance in GDP anticipated by economists. In
addition, we anticipate that the context will be less favorable to
increase ADRs well above the expected ination rate of 2 %.
Development remains driven by two factors :
A signicant part of the stock of existing branded hotels
continues to age (> 20 years on average), featuring too-small
average size and often unattractive suburban locations. As a
result, the city center is attractive again to hotel developers.
The new star rating system, implemented gradually since
2010, should contribute to improve the overall quality of
supply, but the weakest properties will exit the market. This
will offer opportunities for renewal.
In total, this results in a two-gear hotel market :
On the one hand, the Paris region, driven by international
business and leisure dynamics, has proven to be a solid
market. Interest from investors remains strong and demand is
expected to remain solid, supported by sustained rates.
On the other hand, regional markets are more volatile. They
perform at a lower level, as they are often impacted by
seasonality. However, regional markets could be looked at
opportunistically if well located in a city center and/or in a
perspective of market renewal.
Philippe Doizelet
Trianon Palace, Versailles
C
o
u
r
t
e
s
y

R
i
c
h
m
o
n
d

I
n
t
e
r
n
a
t
i
o
n
a
l
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
SPAIN
SITUATION REPORT
After many seasons of being battered by the global economic
downturn, Spain is living up to its name as one of the top tourist
destinations in the world, as the country has received, up to
September 2012, 47 million tourist arrivals, an increase of 3.8 %
from the previous year, with the Islas Baleares and Catalua
leading the results.
Tourist spend up to September 2012 sees a 7.2 % increase from
2011, with a total of 45,106 million. September itself saw a 13 %
increase from 2011, with 6,242 million spent, and an increase in
spend per tourist and daily spend of 7.8 % and 7.6 % respectively,
thanks to a 5.1 % increase in tourist arrivals for this month.
Overall numbers see Catalua as the main receptor of tourist
arrivals with a total of 11.9 million tourists, an 11.6 % increase,
although the summer months see the Islas Baleares as the
leader in tourist arrivals.
Neighboring countries Germany and the United Kingdom
are the main markets, preferring the Islas Baleares (Mallorca
especially) for their holidays, with an important increase in
the French, Scandinavian and especially Russian markets.
In Catalua, the Russian market, for the rst time, has taken
the lead from the traditional French market in this area, and
although their numbers have only just reached 1 million, that
actually represents a 40 % increase from 2011. The US market
is proving also to be a reliable market for Spain, with an
increase of 25.2 % in September.
Andaluca and the Islas Canarias have also seen important
increases in their tourist arrivals and spend, and Valencia
saw the most important growth, 28 %. On the other hand,
Madrid has seen a decrease in both tourist arrival and spend
in September, although the YTD is a 3.7 % increase from 2011,
with a total of 3.4 million foreign arrivals.
Leisure is still the top reason for travel to Spain, with a slight
decrease in the results for business travel in many communities.
The preferred accommodations remain the hotels, with a 5.9 %
increase from 2011, and an important increase of 19 % in
apartment rental is also an signicant trend.
OUTLOOK FOR 2013
The forecast for 2013 is tricky : the ailing Spanish economy has
a direct impact on touristic income. Government budget cuts
and VAT increases negatively affect the competitiveness of
Spain as a destination.
As many typical sun & beach communities depend between
50 and 70 % on tour operators, package agreements for 2013
are difcult to close. The uncertainty of the tax factor in pricing
has meant many hotel businesses have prepared blindly for
2013, and certain tour operators have made it very clear that
they are not willing to accommodate tax increases within their
contract clauses. The result is hotels having to cover the cost of
the tax increase that they cannot charge to the client.
Business travel from the Spanish market (Spanish business
travelers within Spain) is set to follow the same negative trend
in 2013, with expected falls of total spend of 4.1 % down to
14,700 million, due to the lower rates of economic growth
and the austerity measures adopted by Spanish companies.
2008 saw a total business spend of 16,620 million, while 2011
reached only 15,350 million. Spanish hotel companies look to
the European market for increases in business travel results.
However, Spain is expected to enjoy an increase in tourist
arrivals in 2013, second only to the USA, thanks also in measure
to the impulse created by the increase in travel of the BRIC
countries to Spain, especially Russia, direct ights from these
29
28
HOTELyearbook2013
countries being the main factor affecting growth. Also affecting
growth are the persistent uncertainties in the European
economy, with the continued debt crisis, added to the increase
in energy and food costs.
Perspectives for 2013 tourist arrivals are cautiously optimistic,
although the rst quarter of the year will set the tone for the
rest. But results are expected to be as positive as 2012, or even
slightly better.
Mari Rosa Barcia
IRELAND
SITUATION REPORT
After three years of negative sentiment, the Irish hotel industry
is gaining condence with a stronger performance in 2012 and
a general optimism for the year ahead. RevPAR is forecast to
grow for the third year in a row in 2012, with improvements
predicted in both occupancy and average rate. Dublin has
experienced 22 months of consecutive rate growth and is
ranked among the top 10 European cities in occupancy terms.
Hotel performance is improving in city-based hotels, while rural
properties continue to face challenges with an over-reliance on
the price-sensitive domestic market.
HOTEL TRENDS REPUBLIC OF IRELAND
Source : Horwath HTL Ireland and Northern Ireland Hotel Industry Survey
and Forecast
TOURISM NUMBERS
A total of 6.5 million trips were made to Ireland in 2011, up from
6.0 million in 2010. This boost in tourism numbers was helped
by events such as President Obamas and the Royal Visit to
Ireland in May 2011. There has been an estimated 4.5 million
overseas visitors to Ireland in the rst 8 months of 2012, 1.4 %
fewer than the same period last year. The forecast to year-end
is ca. 6.4 million visitors, a modest reduction on 2011.
The UK, which accounts for ca. 44 % of total visitor numbers,
has experienced a decline in visitor numbers during 2012.
Promoting Irish tourism in the UK is a key priority for
Tourism Ireland.
02 03 04 05 06 07 08 09 10 11 12(F)
ADR () Occupancy (%)
0
20
40
60
80
100
120
54
58
56
60
62
64
66
68
70
72
!
Dublin has experienced
22 months of consecutive
rate growth and
is ranked among
the top 10 European cities
in occupancy terms
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
OVERSEAS VISITOR NUMBERS
Source : Central Statistics Ofce and Horwath HTL Forecast
Tourism accounts for an estimated 196,000 jobs, equating
to ca. 11 % of Irelands total employment. Tourism continues
to make a valuable input to the national economy, generating
substantial export revenues and tax contributions, contributing
ca. 5.3 billion in spending to the Irish tourist economy and
generating ca. 1.3 billion in tax revenues.
Domestic tourism continues to account for a high share of total
tourism demand. While the Irish economy has shown signs of
a recovery and growth, the outlook remains vulnerable. While
consumer condence has risen during 2012, it has seen a
decline in the third quarter, driven by concerns in relation to the
outlook for household nances over the next 12 months. Budget
2013 is expected to result in a contraction of the public spending
decit by 3.5 billion through a mix of extra tax charges and
spending cuts. These measures will weigh on consumer
spending and will have an impact for the tourism sector.
BANK FINANCE
The Irish hotel industry is suffering from a signicant debt
overhang problem which is curbing recovery in the sector. The
hotel sector is overleveraged and overweighed by debt as a
result of high investment during the Celtic Tiger years.
There is an estimated 6.7 billion of debt in the sector.
Indebtedness in the hotel sector has more than doubled from
ca. 50k per room in 2001 to ca. 120k per room in 2011. This
rapid increase in hotel indebtedness was driven by a signicant
investment in new supply, the refurbishment and upgrading of
existing hotels, and a buoyant transaction market in the years to
2008 before the economic collapse.
While hotel prots increased in 2011 to 5,220 per room, these
levels are insufcient to repay the debt facing the sector. We
expect the debt overhang to be resolved over the coming years
through a mixture of asset sales or renancing and through
formal debt restructuring. Banks are continuing to assess their
hotel portfolio to decide which loans to restructure and to
establish an appropriate sustainable debt level.
Domestic based banks, in particular, have expressed
and demonstrated appetite for providing funding for new
acquisitions and capital expenditure projects. This is a positive
step towards Ireland retaining a high quality hotel stock.
MARKET
After 3 years of almost no transactional activity, 2012 has
witnessed a surge of hotel properties being brought to the
market by lenders. A number of banks have signalled their
exit from the market and are committed to winding down their
operations and are now aggressively selling assets. This activity
will present exciting opportunities for new entrants to the market
to acquire quality hotel assets at attractive prices. Hotels in
prime urban locations have seen strong international demand
with transactions over the past 12 months including the Four
Seasons, The Marker and The Morrison.
International purchasers have successfully acquired a number
of hotel assets and opportunities are certainly evident for
consolidation in the market.
02 03 04 05 06 07 08 09 10 11 12(F)
0
2 M
4 M
6 M
8 M
31
30
HOTELyearbook2013
OUTLOOK FOR 2013
We are optimistic that 2013 should deliver improved results for
the Irish hotel industry. Occupancy levels should continue to
grow on a national basis. Rate recovery will continue to be led
by the key cities, but it will be a slow process and may take
several years to recover to pre-recession levels.
A number of government incentives have been introduced to
support the Irish tourism industry. These include a reduction in
air tax, maintenance of the current 9 % VAT rate and increased
funding for tourism marketing.
The governments agship tourism program, The Gathering
has also been launched for 2013. The Gathering is a year-long
calendar of events hosted by local communities throughout the
country to showcase and share the very best of Irish culture and
tradition. Statistics show that over 70 million people worldwide
claim Irish ancestry and it is hoped that The Gathering will
entice an additional 300,000 visitors to Ireland next year.
The Tourism Recovery Taskforce has been established as an
industry initiative, which identies the market segments which
offer the best potential for growth, and sets out a plan for future
marketing and development in Great Britain. The Taskforce is
condent that the implementation of all elements of this strategy
will restore growth from the GB holiday market to the island of
Ireland, yielding increases of close to 5 % per annum over the
next 4 years, or 200,000 additional visitors annually by 2016.
From January until June 2013 Ireland will host the Presidency of
the Council of the European Union. For those six months, it will
be at the center of decision making in Europe, helping to shape
policies and drive forward legislation that will impact on the
futures of over 500 million EU citizens. Hosting the Presidency
is an important position, as the host nation must undertake a
number of functions that are essential for the smooth operation
of the European Union as a whole. This will encourage many
representatives worldwide to visit Ireland, having a positive
impact on overseas visitor numbers.
The current economic conditions will continue to create a
difcult operating environment for the Irish hotel industry. The
reliance of the industry on the domestic market will impact
the level of recovery during 2013. There was evidence of a
turnaround for the industry in 2011 / 2012, and through the
recently introduced initiatives and uplift in overseas visitor
numbers, we are condent that the Irish hotel industry will
continue to grow in 2013.
Naoise Cosgrove
BALKANS
CROATIAN tourism volumes continue to grow in 2012, reaching
more than 60 million annual overnights and growing around
4 % compared to 2011. EU accession in July 2013 now seems
denite driving hotel performance as well, both on the side
of occupancy and especially ADR. Important administrative
adjustment is going to take place as of January 1st, 2013, when
the VAT rate is set to decrease to 10 %. Croatia is in the nal
stage of adjusting its tourism and hotel-related legislation to EU
standards, a process that is expected to be nished in a years
time. There have been few hotel openings (notably the Zagreb
Hilton DoubleTree), but several state-owned browneld objects
have been initiated, meaning that the period from 2013 to 2015
will probably see further growth in supply of new capacities
and a revitalization of destinations that so far have remained
underdeveloped.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
Although the crisis fully hit BULGARIA three year ago, the
hotel market is still feeling the impact in terms of ADR, while
arrivals continued their weak recovery. According to estimates,
occupancy growth in Bulgaria should show a slight recovery,
but not yet one that provides a protable framework for the
majority of non-branded hotels. Taxation and the gray economy
will still remain among the top issues in Bulgaria in 2013.
ROMANIAN tourism is still mostly business-related, with
Bucharest as the most important city destination. Followed
by a room oversupply resulting in hotels struggling to maintain
protable performances, the year 2012 brought a recovery in
ADR of over 6 %, on account of a slight further decrease of
occupancy by 2 %. In 2013, slight performance improvements
can be expected, mainly in terms of occupancy also an
impact of the new branding of 2010. The investment cycle in
Romanian tourism is still in a downturn following the recession
in the EU and key markets.
MONTENEGRO in 2012 continued the growth begun in 2010
following the global crisis recovery. In 2012, the estimated
growth in terms of overnights will be around 2 %. Tourism
receipts amounted 680 million in the rst nine months of the
year, while on a yearly basis, receipts are estimated to grow by
3 %. In 2012, Montenegro continued to attract hotel investors.
There have been public tenders on several seaside locations
33
32
HOTELyearbook2013
which attracted a set of interested parties. There are still
pending issues for the Lustica development project and the
Sveti Marko island project, so the expected projects are still in
preparation phase. According to the WTTC, Montenegro is the
top country in the world regarding long-term growth prospects.
In MOLDOVA, the hotel market is still predominantly
concentrated in the capital Chisinau, which generates 80 % of
all the hotel overnights recorded in the country. After years of
crisis, the market has started a strong recovery in 2011 which is
expected to accelerate further with the announced opening of
the Radisson Blu in Chisinau in spring 2013.
The tourism sector in SERBIA is still focused on business
travel to the capital, while the main focus of development is
in the Danube region, Kopaonik, Stara Planina and Zlatibor
mountains, predominantly through public sector initiatives in
competitiveness building and destination management. Both
tourism and hotel performance were stagnating in 2012 on rather
unfavorable levels of business performance. However, there are
several projects that have been launched recently or are awaiting
their launch in December 2012 Metropol in Belgrade and
two Falkensteiner objects (Stara Planina and Belgrade). These
developments, together with expected results of the public
sector development initiatives in several regions mentioned
above, provide arguments for expected growth in 2013.
Miroslav Dragicevic
SCANDINAVIA
SITUATION REPORT
Nordic Choice Hotels retains its position as the largest hotel
operator in Scandinavia, and recently surpassed Scandic in the
number of hotels, also in Sweden. Hilton has withdrawn from
both Oslo and Malm, leaving Rezidor and Best Western as the
only chains with a presence in all the Nordic countries.
Total Avg. hotel
size
(rooms)
Per September 2012 Hotels Rooms
Nordic Choice Hotels 161 25,096 156
Scandic Hotels 120 22,890 191
Rezidor Hotel Group 48 11,771 245
Best Western 136 11,161 82
Rica Hotels 73 10,498 144
Local property owners and banks are reluctant to sign
management agreements, and hotel operators prefer xed
and variable lease contracts. As such, the meager presence of
international operators in the region is not likely to change any
time soon.
Four of the ve cities with the highest RevPAR in Scandinavia
are located in Norway :
Stavanger 89
Stockholm 87
Bergen 84
Oslo 80
Trondheim 71
2011 gures from STR Global, based on average Euro exchange rate for 2011
Gothenburg is trailing right behind, with a RevPAR at 70 for 2011.
Economic development in Scandinavia is mixed, and so is
hotel performance. As visitor demand is fairly stable, hotel
performance is most signicantly inuenced by additional supply.
DENMARK
Denmark is signicantly affected by the troubles of the Euro-
zone and is on the verge of recession. Despite overall economic
development, overnight stays increased 3.4 % compared to
YTD September 2011. Fifty-ve percent of all guest nights in
Denmark are in the Copenhagen area. The Copenhagen hotel
market is performing quite well, with an increase in rates having
generated 6 % RevPAR growth as of September.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
NORWAY
During 2012, guest nights are up by 2.7 % from a year earlier.
RevPAR has increased by 1.7 %, negatively affected by large
capacity increases in some of the bigger cities. Especially hotels
in Oslo have experienced pressure on prices (slightly down this
year) with an occupancy decline of 3.3 %, despite an increase in
guest nights of 1.4 %.
SWEDEN
Sweden rebounded quickly after the economic crisis in 2009,
and its economy has been stable since then. The country as
a whole posted a small increase in sold room nights of 1.5 %
as of September, but due to an increase in supply, occupancy
is down 1.7 %, and RevPAR is down 1.5 %. Stockholm is in a
negative trend with a RevPAR decline of 4 % in 2012 (-11 %
in Q3). This is in large part due to capacity increases, and to
make things worse, several new hotels are being built to be
introduced in late 2012 and 2013.
OUTLOOK FOR 2013
Scandinavia benets from signicant intra-regional travel,
both in the business and leisure segments. Interest rates in
Scandinavia are being kept low for the foreseeable future to
counteract the effect of local currencies growing too strong.
The economic outlook varies, but the Norwegian oil industry
continues to put Norway ahead of the rest.
Hotel capacity is set to grow by 5 % in Norway in 2012 and
2013. Further growth is expected in 2014-2016. Several of the
major cities in Norway could experience a decline in occupancy
and ARR, though some areas will be hit harder than others.
The Swedish economy was surprisingly strong during rst half
of 2012, but the outlook is more clouded. Foreign investment
interest in Stockholm, along with domestic investors, has led to
several new projects being developed in and around the capital.
Both ADR and occupancy should be inuenced, leading to a
at RevPAR development, at best, for next year. A recent study
of condence among Swedish hoteliers shows negative values,
indicating a more difcult hotel market in 2013.
Forecasts for the Danish economy project slow growth in 2013.
In Copenhagen, capacity growth is expected to be moderate,
which should lead to an optimistic outlook for 2013.
Bjrn Kjlstad
GERMANY
SITUATION REPORT
During the rst eight months of 2012, the German hotel
market beneted from a general economic upturn which
is also proven by recent tourist statistics. According to the
German Federal Bureau of Statistics, the accumulated number
of overnight stays from January to August 2012 increased
by 3.9 % compared to last years period, to 278.9 million.
During the same period, the accumulated arrivals in German
lodging establishments increased as well, by 4.6 % to roughly
102.4 million. As already mentioned in the Hotel Yearbook
2012, in particular the decrease of the Value-Added Tax
has signicantly contributed to improving the German hotel
markets international competitiveness, resulting in an increase
of foreign arrivals and overnight stays by respectively 7.7 % and
8.4 % in 2012.
The positive development of overnight stays and arrivals is also
reected in the performance measurements of the rst half-year
of 2012. The average occupancy rate increased by roughly
2.2 % to 63.8 %, whereas the average net room rate rose as
well by 3.2 % to 95. As a result, the German hotel market
Positioned in the luxury segment, The Thief
will open at Tjuvholmen (Thief Island) in Oslo
in 2013. All 120 rooms will have a private balcony.
HOTELyearbook2013
proted from RevPAR growth to 61, an increase of 5.4 %
compared to the rst six months of 2011. Thanks to the overall
positive development, German hoteliers recorded an increase in
ination-adjusted revenues of 1.1 %.
OUTLOOK FOR 2013
Increase in international tourists
Based on the positive developments in the year 2012, we can
expect that the German hotel market will register an ongoing
upswing in 2013. According to the German National Tourist
Board (DZT), the German hotel market will especially benet
from an increase in international tourists, since in the long run
it is capable of accommodating roughly 80 million overnight
stays of foreign guests, which would connote an increase of
roughly 70 %. In the near future, a great percentage of foreign
arrivals and overnight stays will be generated from European
source markets, particularly Spain and Italy as well as Eastern
European countries, such as Poland and the Czech Republic.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
China and India constitute further signicant source markets
for Germany.
Predicted economic slowdown due to European debt crisis
The German Hotel and Restaurant Association (DEHOGA),
though, preaches caution due to the European debt crisis and
the slowdown of the global economy which might both lead
to an economic slowdown in Germany as well. Whereas those
lodging establishments situated in primary locations, as well
as business and convention hotels, are facing a promising
2013, hotels that are located away from the classical tourist
centers and in secondary locations, by contrast, are slightly
less optimistic. About 37 % of German hoteliers are expecting a
decrease in revenues for 2013 and even 44 % are preparing for
lower prots. These negative expectations are primarily based
on increasing cost pressure, in particular with regard to rising
food prices and energy costs.
Trends and developments
In 2013, budget hotels as well as hostels will still constitute
a signicant trend. Especially hybrid forms, such as design
budget hotels, will become increasingly popular for both leisure
and business travelers. This implies also that hostels and
budget hotels will be converging more and more so that a clear
distinction will be almost impossible.
Especially domestic tourism and health tourism or a
combination of both will constitute protable market segments
in the next year. German hoteliers will increasingly catch the
trend of medical wellness and even cooperate with physicians
and health insurance companies. This trend will not be limited
to tourist regions any longer, but also expand to city hotels.
Rdiger Knospe
POLAND
SITUATION REPORT
The year 2012, when Poland together with Ukraine undertook
the organization of the European Football Championship UEFA
EURO 2012, was a very interesting period, not only for the
Polish hotel industry. The decision on where the championship
would be held was made on April 18th, 2007 in Cardiff, which
gave Poland ve years to make all the necessary investments
to prepare for the event. The preparations had an impact on
most of the sectors of the economy, including the hotel industry,
which was expected to benet greatly not only from an inow of
tourists during the event, but also from intense development of
the infrastructure and promotion of our country.
Six months after this event, it can safely be said that the Polish
hotel market in 2012 recorded a steady growth, both in terms
of an increase of the hotel base, as well as hotel results. We
estimate that during this year, over 100 new hotel projects
entered the market, which represents ca. 5 % of the hotel
market. The table below presents the results of the Polish hotel
industry in 2012 compared to 2011.
POLISH HOTEL RESULTS IN 2011 AND 2012
Occupancy ADR in PLN RevPAR in PLN
2011 58.7% 271.09 159.21
2012* 60.1% 282.95 170.03
Source : STR Global *Data for 11 months of 2012
2012 was marked by the development of hotel chains. No new
international hotel chain emerged in Poland ; however, chains
already present opened new properties. In total, 13 hotels under
international hotel brands were opened, mainly by Orbis/Accor
(4 hotels), Louvre Hotels Group (3 hotels) and Best Western
(3 hotels).
Another signicant trend on the hotel market in 2012 is the
increasing importance and interest of investors in economy and
budget hotels. In todays uncertain times, investing in economy
hotels was regarded by both Polish and international investors
as the most reasonable option. Whats more, these investors
were more likely to choose less promising destinations, such as
regional cities. Locations such as these have great potential for
the hospitality industry.
HOTELyearbook2013
OUTLOOK FOR 2013
In terms of new hotel openings, we assume that the year 2013
will be slightly worse than 2012. This is mainly due to the many
new openings that took place in 2012, which were partly related
to UEFA EURO 2012. Due to the fact that nowadays, many
hotel chains are planning their investments, and new chains
are showing an interest in the Polish market, we anticipate a
growing importance of hotel chains in the country.
Janusz Mitulski
HUNGARY
SITUATION REPORT
Circumstances could not be more difcult and challenging,
as economic conditions experienced in Hungary in 2012 have
not been favorable, to say the least. While endless lists of
complaints could be compiled, luckily the moaning has been
replaced by action, as hotel industry stakeholders have rolled
up their sleeves.
Owners have no reason to cheer yet, as in part at least, they
need to blame themselves. While banks have shown patience
in sorting issues with non-performing loans, management and
owners have panicked and gured that a lled bed at any price
is better than an empty one. This self-destructive price policy
has hurt the market overall, and the already bargain-basement
price level of Hungary became even more affordable. There
was no need for such price dumping, as senselessly priced
bookings largely through web-based distribution channels have
resulted in more volume, but often less revenues or prots. The
long-lasting pain is still healing, as only now, after three years of
signicant occupancy increases, have we begun to see some
across-the-board increases in ADR levels (Budapest registered
a 21.7 % RevPAR increase in October, according to STR,
posting the second highest gain in Europe).
Demand proles have also shifted heavily towards an
extraordinarily value-conscious segment, as with the collapse
of the national carrier, low cost airlines have descended on
Budapest to grab as much of the 36 % of the cake MALV left
behind when it shut down overnight. Business passenger seats
and the airlines alliance partners from overseas have been lost,
which really hurt the hotels.
It is clear that hotel nancing, as other corporate loans, will
not get the backing of the government, forcing banks to apply
a xed exchange rate to ease the blow on outstanding loan
balances, as was the case with mortgages on residential
housing. The depreciation of the national currency against the
fast-appreciating Swiss Franc and Euro-dominated debt sent
debt obligations through the roof in 2010 and 2011. The resulting
nancial obligations of borrowers have clearly put properties
into technical defaults, as asset values were quickly eclipsed by
outstanding debts. As such coverage imbalance has emerged
practically for the entire real estate industry, exceptional
patience has been demonstrated by lenders, who have had their
hands full with a number of issues, including bank taxes, losses,
reorganizations and write-offs of unprecedented proportions
(similarly to other parts of Central/Eastern Europe).
The banks slow actions have been attributed to a number of
factors. The banks need sufcient reserves to write off bad
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
debt. Taking possession in Hungary is a real legal challenge,
and some owners can sit in their properties without paying the
bank with relative comfort. Clearly, most banks are not set up to
deal with becoming the owners of these assets understanding
that no apparent real buyers are around and taking on the
burden of employees, providing working capital and dealing
with operating companies. Accordingly, banks have little choice
but to wait for better times and for the owners/operators to
sort out these issues themselves. Such lack of real pressure
on some owners to maximize revenues has also hurt efforts to
increase prices.
While hotel prices suffered, the national Tourist Board has
had notable, albeit long-awaited, successes in numerous
markets. While the work is in no way complete (as it never can
be), the dedication and hard work has also become a source
of motivation for struggling hoteliers. More needs to be done,
however, to nally get a proper convention center for Budapest,
and the Tourist Board must be the lightning rod in ghting for it.
The challenges of Budapest hotels, the key tourist destination
in the country, have been very different from the hotels in the
countryside, which depend largely on domestic leisure and
MICE business, both of which are clearly witnessing shrinking,
or entirely disappearing, travel budgets. The thermal wellness
and spa segments, with escalating increase in demand from
Russia (nally hoteliers woke up to the obvious after a two-
decade hiatus) have saved the day. The domestic market has
also got tired of the constant negative news and decided to
relax and enjoy spa weekends and packages at the countrys
overwhelming supply, given the size of the population, of
relatively new wellness resorts. The health of this segment
has proven resilient ; hopefully, banks will start noticing as
the development of spa hotels remains a clear niche in the
Hungarian hotel industry already in the short term, to help
attract a larger share of the constantly growing international spa
and wellness travel markets.
While the asset mix of hotels is quite amazing, so is the cross
section of brands in Budapest. Room for niche products and
brands still exists as much in the capital as elsewhere in Hungary.
Banks ; nancing ; hotels ; three words in one sentence, which
have yet to regain their meaning in Hungary. Although the
sentiment is understandable, the banks attitude should not
be black and white when it comes to hotel lending. We see
the evidence of some projects clearly deserving attention,
particularly if the developers have proven track records, good
credit standings and successful hotels under ownership.
OUTLOOK FOR 2013
Bargains are great, and it is time to visit Hungary. Who knows
how long such rates will last, as 2013 is expected to bring, by
all international accounts, positive GDP growth. Hence the hotel
industry is due to see some encouraging changes in the much-
awaited recovery of the corporate and MICE travel sectors to
complement the already strong, but still budget-conscious
leisure markets.
Marius Gomola
Buddha-Bar Hotel Budapest, opened in 2012
39
38
HOTELyearbook2013
UNITED KINGDOM
SITUATION REPORT
The UK entered 2012 with great expectations for the year
ahead, as the year was peppered with numerous one-off events,
including the Diamond Jubilee, The London Olympics and the
Paralympics, providing worldwide exposure to the country.
The UK economy, however, continued its bumpy ride with on-
going uncertainty in the Eurozone as a result of the sovereign
debt crisis playing its part, resulting in the country returning to
a technical recession at the beginning of the year. Nonetheless,
the UK experienced growth of 1 % in Q3 boosted by the Olympic
Games and has subsequently exited the recession, although the
economy overall is expected to shrink by 0.1 % in 2012.
International arrivals to the UK (foreigners staying at least one
night) fared well this year and are expected to rise by 1.9 %
to 29.7 million by the close of 2012 according to Tourism
Economics. Despite the good growth this year, this gure
remains somewhat short of the 2007 peak which recorded 30.9
million arrivals.
According to STR Global (the source of all performance data
here), London has recorded another strong year, inuenced by
the Olympic Games, and in spite of an occupancy reduction of
2 % to 81.1 % in the year-to-date (to October 2012) ADR grew
by 5.4 % over the same period last year resulting in an ADR of
140.67, posting record year-to-date in ADR terms.
As anticipated, some regular leisure and business tourists were
displaced by the Olympic effect, preferring to avoid the capital
altogether during the Games for fear that venues would be
crowded and prices high. In fact, many tour operators removed
London entirely from their 2012 itineraries as a result of the
Olympics and the anticipated associated price hikes.
However, what was not foreseen was the pre-games decline
in London arrivals which was recorded in June and July with
a lot of tourist attractions experiencing diminished levels of
visitation. The reasons were many : poor weather ; logjams at
Heathrow ; media coverage of the transport problems ; reporting
of high prices ; Ramadan which fell early this year, resulting in
a reduced number of Middle Eastern guests or a shortening in
the length of their stay ; a strong June and July 2011 ; and on
the corporate side a number of big corporations asking staff
to avoid London during the summer, impacting expectations.
Furthermore, big events such as Farnborough and Wimbledon,
which typically create signicant additional demand, did not
have much of an impact this year. The Diamond Jubilee didnt
generate much demand, either, as fewer people than expected
travelled to London than the capital experienced with the Royal
Wedding last year.
In August, however, London ADR increased by an incredible
43.7 % while occupancy rose marginally, illustrating the Olympic
effect and local hoteliers focus on rates during this period. The
luxury end of the market seemed to benet most, and in the
early stages of the Games (27 July 1 August) occupancy was
up 16.6 % to 89.3 % and ADR spiked by an incredible 95.9 %
to 461. Budget hotels, however, fared less well in terms of
volume during this period and recorded a 15.6 % reduction in
occupancy to 79 % although experienced ADR growth of 62.6 %
to 110.66.
While the Paralympic Games were largely successful with sold
out events, they proved to be the Londoners games with more
limited inbound demand.
Hotel performance in the provinces remains closely connected
to the strength of the national economy and as a result,
there is an intimate connection between RevPAR and GDP.
Furthermore, provincial hotels are dependent upon corporate
demand (which has historically been government-led in some
markets) and as the meetings and events market has been
badly affected by the recession, this has had a particular
effect on regional hotels. As a result of the sluggish recovery,
performance in the regions remains challenging with a 1.7 %
reduction in occupancy to 70.9 % year-to-date (to October
2012) and a 0.9 % growth in ADR to 59.55 over the same
period. However, there is apparently some light at the end of
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
the tunnel with some return of the corporate sector, although
this remains restricted to day meeting events as opposed to
residential events. In addition, there are reports of prot growth,
illustrating that provincial hoteliers are now starting to effectively
control costs.
The picture has, however, been quite mixed with some cities
such as Aberdeen, which continues to reap the benets of the
local oil market, and Belfast, the birthplace of the Titanic which
marked the 100-year anniversary of its sinking and opened
a commemorative museum, recording strong occupancy
increases and good rate growth. Other cities which have also
posted positive results include Brighton, Cambridge, Gatwick,
Southampton and York, some of which are the result of the
Olympic halo effect. Other markets fared less well such as
Newcastle and Heathrow which have opened a number of
new hotels recently so the market is trying to stabilize, and
Edinburgh and Bradford, all experiencing reduced performance.
This relates to performance year-to-date (to September 2012).
Room supply in the UK in 2012 increased by the highest
rate in the last 10 years, with the London Olympics sparking
signicant new hotel development in addition to some regional
cities trying to establish themselves in the short-break market.
Branded budget supply has dominated the regional pipeline,
and the shortage of nance for new developments has
shaped development in the provinces with new supply led by
conversions which are then rebranded and refurbished.
41
40
HOTELyearbook2013
The investment market remains well below peak levels with deal
activity mostly down across the country with 1.3 billion year-to-
date in November 2011, compared to approximately 2.4 billion
over the same period last year, including the contested 700
million Maybourne Group transaction. The transaction of the 42
Marriott hotels could change this gure signicantly, although
this deal has been in the market for over a year and is taking its
time to complete. The limited availability of nance continues
to present challenges and shape the market (it is only available
for the right deal, in the right location, often with existing
customers only and with an appropriate brand proposed). This
remains a major issue outside London. We have, however, seen
a number of alternative funding sources entering the market,
including private equity and insurance companies which are
stepping in to ll the void left by the banks, although the current
market is clearly favoring cash-rich buyers of which there are
a good number who are currently examining opportunities.
Nonetheless, the pricing mismatch continues between buyer
and seller expectations.
London remains a prime location for investment, with foreign
investors seeing the capital as a safe haven given its balanced
leisure and business demand prole from a number of
international markets. This has become of particular importance
given the current uncertainty within the Eurozone and the wider
global economic fragility that exists at present. The upscale and
luxury end of the market continues to drive transactions, with
yields for trophy assets back to pre-recession levels.
In the provinces, there is interest in well-positioned hotel
assets, although a dearth of obtainable quality product remains
an issue.
Despite reporting a 20 % increase in prots last year to 55
million in 2011, the UKs second biggest budget hotel chain
Travelodge caused a stir earlier in the year when Goldman
Sachs and two New York hedge funds took control from the
heavily debt-laden Dubai International Capital. Travelodges
new owners have now put the budget hotel company into a
company voluntary arrangement (CVA) to deal with its crippling
debt pile. It is expected to ofoad 49 hotels, while the landlords
of a further 109 will take a 25 % cut in rent. The remaining
347 will be unaffected, but this sent shockwaves around the
investment community given Travelodges solid reputation and
strong historic performance.
In the last few years, we have seen some banks disposing of
the easy wins where they were able to sell hotel assets quickly
and with limited exposure. However, now we are starting to see
Lloyds ofoading its hospitality loans where they have already
taken a write-off rumored to include Menzies Hotels.
OUTLOOK FOR 2013
The Bank of Englands GDP growth forecast for 2013 is around
1 % (cut from nearer 2 % earlier in the year), with recovery
expected to be slow and protracted. Lower growth is
attributed to reduced growth internationally and the expectation
of further austerity measures. Osborne recently indicated that
austerity measures will remain in place until 2018. GDP growth
next year is likely to rely more on household consumption.
However, positive indications from lower unemployment and
falling ination rates could spark a resumption of condence
from consumers and businesses.
It is clear that the UK experienced unprecedented levels of
international media exposure in 2012 thanks to the Diamond
Jubilee, the Olympics and Paralympics. The hope now is that
this will translate into a surge in international visitors in 2013 and
thereafter. London and Partners anticipates a further one million
tourists between now and 2017 thanks to the Olympic legacy.
Despite this, Tourism Economics forecasts that UK international
arrivals will soften in 2013, falling by 0.9 %, largely driven by a
decline in arrivals from Eurozone markets, which account for the
vast majority of international arrivals to the UK (over 21 million)
which illustrates the countrys intrinsic links and dependence
upon this market. Furthermore, while it is common for hosts
to see a drop in arrivals post-Olympics, this reduction is much
smaller than witnessed in other host cities. The weakening
is the result of the tough on-going economic climate in the
Eurozone, and looks set to continue until the economic situation
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
improves. While there is strong growth in emerging markets
and thanks to the Olympics, this is likely to have been further
increased these markets remain in their relative infancy and
will not be enough to offset the fall in arrivals from Europe.
As a consequence, London occupancy is expected to fall
marginally in 2013 as the fallout of the Eurozone crisis is felt
and further new room supply enters the market, even though
dissuaded travellers are likely to return. Nonetheless, tour
operators which avoided the capital in 2012 are expected
to return to London in 2013 which is encouraging. While
London has witnessed strong ADR growth in the recent past,
the question is, how long can it last ? Given the positive impact
on ADR during the Games, which is likely to help lift London
to another record year, it is not estimated that this can be
replicated in 2013, and ADR is expected to drop marginally. We
anticipate that it will move back to growth in 2014. As a result,
RevPAR is forecast to drop by 1.6 % in 2012.
In the provinces, future performance is expected to be at
and while a small reduction in occupancy is expected to 69 %,
ADR is forecast to grow, resulting in a 0.9 % growth in RevPAR.
As a result, provincial hoteliers are likely to continue to face
challenges, with costs continuing to escalate above rate growth.
Across the regions particularly, the speed of economic recovery
will be the biggest inuencer for business travel going forward,
and given the UKs sluggish and patchy recovery, companies
are likely to remain prudent and cost conscious. The south east
(excluding London) is expected to recover more quickly than the
rest of the UK, and those hotels which have international brand
afliation are likely to outperform the unbranded offerings.
Concerns remain regarding post-Olympic oversupply in the
Capital, with a further 5,000 keys anticipated in 2013 according
to AM:PM Hotel Database. The average supply increase has
historically been circa 1,500 bedrooms annually. While there
may be some readjustment, and occupancy could be impacted
in the short-term, London has experienced unprecedented
global showcasing in 2012 and this is very likely to have a
positive impact on arrivals going forward. We anticipate that
the market will absorb the rooms over the next few years.
Furthermore, the city continues to evolve and diversify its
demand markets, thereby positioning itself as a key global hub
and insulating it further. As a result, we do not anticipate that
this will create a big shock in the market as experienced by a
number of other Olympic hosts in their post-games period.
In the coming years, we expect continued rebranding in the
regional mid-market is expected. This would provide the
opportunity for new owners to clean up the portfolios, disposing
of non-core or poorly performing assets, refreshing others and
restructuring them into groups or brands.
London is likely to maintain its position as a highly sought-after
investment market with high barriers to entry, as long as there
are no worldwide market shocks. In the regions, we anticipate
that more portfolio transactions are likely to enter the market
in 2013, particularly in the form of small UK branded hotel
groups, and coming out of the bank portfolios, offering investors
the opportunity to dispose of non-core assets, refurbish and
rebrand with a view to a short- to medium-term hold accelerating
regional consolidation. While we are waiting for the return of
bank nance, we also expect other institutional investors to move
into the lending market, replacing parts of the bank nancing.
We expect the gap between buyer and seller price expectations
to continue. Equity-rich buyers, or those that are not subject to
bank nancing, will continue to be the frontrunners in any deals.
We also expect that more banks will start to off-load their debt in
2013 now that the easy wins are behind them.
Alexandra van Pelt
Equity-rich buyers, or those
that are not subject to bank
nancing, will continue to be
the frontrunners in any deals
43
42
HOTELyearbook2013
ITALY
SITUATION REPORT
2012 was a hard year for Italy in terms of political and
economical issues, impacting considerably the tourism market,
as well as the hotel market, mainly driven by domestic travelers,
forcing hoteliers to attract travelers from outside the country.
Indeed, according to STR Global data, occupancy fell from
62.0 % year-to-date October 2011 to 60.4 % year-to-date
October 2012 (a drop of 2.6 %), whereas ADR slightly increased
from 128.98 year-to-date October 2011 to 130.82 year-to-
date October 2012 (an increase of 1,4 %). Combined, these
factors led to stabilization of the RevPAR, which experienced a
decrease of only -1.1 %.
ITALY HOTEL MARKET HISTORICAL PERFORMANCE
2009 TO YTD OCT 2012
Elaborated by Horwath HTL from STR Global Data
Both primary and secondary destinations were impacted by the
crisis, with all indicators in decline. The market is still driven,
both in terms of occupancy and rates, by the leaders Venice,
Florence, Milan and Rome, which were able to compensate for,
or at least reduce, the impact of the drop in occupancy with
an improved ADR, leading to a balanced or slightly negative
RevPAR compared to the same period (January to August) last
year (source : AICA - Associazione Italiana Compagnie Alberghiere /
Italian Association for Hotel Companies).
OCCUPANCY
40-49 % 50-59 % 60-70 %
Rome
Venice
Milan
Florence
Turin
Bologna
Brescia
Bergamo
Genoa
Padova
Catania
Naples
Verona
Elaborated by Horwath HTL from AICA Data for branded hotels located
in the Pronvinces
The four leading cities Florence, Milan, Rome and Venice all
experienced a drop in occupancy, from -0.4 % in Milan to
-5.9 % in Rome. However, they all beneted from an increase of
ADR from +0.2 % in Milan to an impressive +6.9 % in Florence,
reducing the effects on the RevPAR with a drop of -1.0 % in
Milan and -2.9 % in Venice, and a stabilization at +0.0 % of the
RevPAR in Rome. Florence is the only one of these markets that
saw its RevPAR growing, by +6.9 %, driven by the signicant
increase in rates.
ADR () RevPAR () Occupancy (%)
0
10
20
30
40
50
60
70
60
70
80
100
110
90
120
130
140
2009 2010 2011 Oct.
2009
YTD
Oct.
2010
YTD
Oct.
2011
YTD
Oct.
2012
YTD
A
D
R
6
0
-
7
9

8
0
-
9
9

1
0
0
-
1
1
9

1
2
0
-
1
3
9

1
4
0
-
1
6
0

H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
OUTLOOK FOR 2013
2013 is expected to be a challenging year for the Italian hotel
market. The general condence of Italian hoteliers is at half-
mast, and they expect performance to remain stable next year.
As the political situation of the country remains uncertain, they
do not anticipate a recovery of domestic travel. However, they
believe that an increase in occupancy is possible, especially
thanks to a likely increase ion the number of international
travelers, driven by the Americas and Europe as well as
BRIC countries, whose share of the Italian tourism market is
increasing each year.
Regarding the market leading cities, the hotel pipeline is strong
in Milan, in anticipation of the Milan 2015 World Exposition,
as well as in Venice, where 15 new hotels are planned or
in renovation, including the iconic Gritti Palace, which is
worrying hoteliers, as they doubt that the demand will be able
to sustain the signicant increase in supply, especially in the
current market situation. However, there are doubts that all the
projects will go through, and we assume that there will be fewer
additional rooms than anticipated.
Zoran Bacic
BELGIUM
SITUATION REPORT
Belgium is characterized as a country divided linguistically,
politically and economically. Geographically, the nation is
divided in three regions : the Dutch-speaking northern region
of Flanders, the French-speaking southern region of Wallonia
and the ofcially bilingual, central Brussels-Capital Region.
Due in part to this division, Belgium holds the European record
for the most costly political system, with 57 ministers and
state secretaries spread across six different governments,
seven parliaments and twelve provincial governments. The
complexities were also evident in the latest federal election,
which was held in June 2010 but was followed by 541 days
before a government was actually formed in December 2011.
The division of the country has also resulted in three separate
hotel markets. Flanders, which consists of approximately 45 %
of the land area, offers more than twice the number of hotel
rooms than the larger area of Wallonia. Flanders also has a
relatively higher classied hotel supply, with 33 % four- and ve-
star hotel rooms, against 25 % in Wallonia. Both, however, pale
in comparison to the Brussels-Capital region, which covers only
0.5 % of Belgiums area but accounts for 28 % of the total hotel
supply and 92 % of the ve-star hotel supply. Brussels also
features the highest occupancies and average room rates in the
country, resulting in a RevPAR that is 39 % higher than that in
Flanders, and 50 % higher than in Wallonia.
Facts & gures Belgium hospitality supply 2011
No. of lodging accommodations 3,635
No. of rooms/places in lodging accommodations 106,652
No. of hotels 1,776
No. of hotel rooms 57,514
Market share of hotels 54%
Growth, No. of rooms in lodging accommodations 2006-2011 +3 %
Growth, No. of hotel rooms 2006-2011 +11 %
Growth, market share of hotels 2008-2012 +4 %
45
44
HOTELyearbook2013
Like most western European countries, Belgium experienced
a decline in hotel occupancies and room rates as a result
of the economic crisis, reaching a low point in 2009. After a
modest recovery in 2010, the results in 2011 remained relatively
stable, with only a slight increase in both occupancies and
average room rates. However, there was a clear shift in the
market segmentation. In 2006, before the crisis, the business
individual segment supplied 48 % of all room nights in Belgium.
In 2011, this was down to 38 %. The tourist individual segment,
meanwhile, increased from 24 % to 33 %. This shift helps
explain why the average room rates have not recovered, as
the tourist rates are traditionally lower than those paid by
business travellers.
At the start of 2012, most hoteliers forecasted a continued
modest increase in occupancies and average room rates.
However, at the end of the rst half year of 2012, more than half
of the hoteliers indicated that the actual results were worse, or
much worse, than expected. By October, year-to-date gures
indicate a decrease in occupancies of 0.7 percentage points,
while the average room rates remained stable.
In Brussels, however, both occupancies and average room rates
have decreased compared to last year, resulting in a 3 % drop
in RevPAR.
Facts & gures: Belgium
hospitality demand
2008 2009 2010 2011 Growth
Overnight stays (in M) 30.0 29.3 30.3 31.4 +5 %
Overnight stays in hotels
(in M)
15.2 14.8 15.9 17.2 +13 %
International overnight stays
(in M)
16.4 15.5 16.2 16.7 +2 %
Business overnight stays in
hotels (in M)
7.3 6.7 7.3 7.8 +7 %
Occupancy 3-, 4- and 5*
hotels (in %)
70.0 63.1 68.1 69.3 -1 %
Average room rate 3-, 4- and 5*
hotels (in )
95 84 90 91 -4 %
Revenue per available room 3-,
4- and 5* hotels (in )
67 53 61 63 -6 %
OUTLOOK FOR 2013
The outlook for 2013 remains clouded in Belgium. The Belgian
economy appears to have stalled after the summer of 2012. The
7 %
13 %
39 %
33 %
7 %
A full recovery is not
expected before 2015,
and may be as far off as
2017 or 2018
5*
1*
2*
3*
4*
2007 2008 2009 2010 2011
0
10
20
30
40
50
Business group segment
Business individual segment Tourism group segment
Tourism individual segment Other Segments
%

o
f

t
o
t
a
l

d
e
m
a
n
d
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
Economist Intelligence Unit projects that, following a negative
economic growth of -0.2 % in 2012, the Belgian economy
will experience 0 % growth in 2013. As such, it is expected
to do slightly better than the average of the European Union.
However, the economic stability will depend on the stability of
the new government and in fact of the nation itself, as calls for a
separatist Flanders continue to increase.
The outlook for the hotel market is even less optimistic. 55 % of
Belgium hoteliers expect a decrease in revenues in the second
half of 2012, and this trend seems likely to continue in 2013.
Only the leisure segment appears to give reason for optimism,
as decreases are expected in both the business individual
and MICE segments. Negative impact is expected from the
developments in the stock market as well as the local and
global economy. Another negative impact is expected from the
increase in the hotel supply, which will continue in 2013. As a
result, negative RevPAR growth of -2 % has been forecasted for
2013. A full recovery is not expected before 2015, and may be
as far off as 2017 or 2018.
Marco van Bruggen
47
46
U K T R E N D S
General business opinion on the current economic climate in
hospitality still tends to agree that we remain in tough times, but
the nal few months of 2012 is witnessing a bounce in terms
of activity across most sectors. September and October of this
year have seen generally solid projections, and the question on
most peoples minds is whether such a trend is indicative of a
longer-term recovery. At this stage the jury is out ; however, the
impact of the Euro crisis in Spain and Greece, in particular, is
perceived to be an issue, given that any major exacerbations
arising from this tend to impact directly on business levels.
In the current market, one of the more fundamental evolutions
that needs to be recognized in the overall economic recovery is
how consumer demands are changing. Communications is one
major dynamic in considering this question, as many companies
are struggling to understand how to effectively position
themselves, and the truth is that this is a game-changer. An
effective communications strategy is becoming far more subtle
and based on engagement.
In addition to this issue, in the hospitality industry SMEs and
entrepreneurial ventures are an important dimension, and
activity amongst these is currently growing. This is a positive
trend, as it is these businesses which will help to lead the
UK out of recession and, while they are facing barriers to
growth due to the funding gap, the nature of these companies
illustrates how consumer demand is changing. Some of these
concerns are already generating prot, from a low base, and are
simply looking to grow, proving how the market is adapting.
So what are these core trends ?
BRAND V. INDIVIDUAL
One of the most signicant shifts in consumer dynamics is the
need to feel personally engaged with a brand, placing pressure
on brand names to adapt their communications approach. In
short, it is no longer enough to hide behind a brand or brand
values, and organizations must provide a local and human
touch to their businesses in order to perform effectively. This
is a challenge, especially for large companies, and more so
for publicly listed companies who must address the regulatory
requirements attached to their status. However, the pressure
of social media outlets is a major catalyst for organizations
to consider this issue, as is the need to engage with local
consumers. Some examples of companies who have sought to
adapt to meet this trend are :
Starbucks the coffee company introduced the simple
concept of putting customers names on cups as part of the
ordering process, and this has worked very well for allowing
another level of personal engagement at a local level.
Speakeasy Espresso & Brew Bar a coffee shop located off
Carnaby Street in London, this concept is seeking to represent
the values of a local community caf in the West End.
HEALTHY, ETHICAL & SUSTAINABLE PRODUCTS
Among the new concepts looking to expand in the market in
2013, there is a trend to focus on a healthy and sustainable
product or service, and these are often underpinned by very
passionate and dedicated entrepreneurs, some of whom have
exited corporate life in preference for a form of dedicated self-
expression. Some examples of these are :
Jax Coco a high-end, 100 % natural coconut water which is
naturally isotonic and has the same level of electrolyte balance
as in blood. This product is seen to be an alternative to other
major coconut water brands, many of which have added
sugars and are not 100 % pure, to meet the rapidly growing
New attitudes will shape
the playing field
AS THE EDITOR OF BRITAINS EP BUSINESS IN HOSPITALITY MAGAZINE, HEATHER GIBSON HAS HER FINGER ON
THE PULSE OF THE UKS HOTEL INDUSTRY. WE ASKED HER FOR A QUICK TAKE ON THE KEY CONSUMER TRENDS AND
DEVELOPMENTS EXPECTED TO CHARACTERIZE THE HOTEL BUSINESS LANDSCAPE IN 2013.
demand for the product across the world, including China.
Detox Kitchen a detox program developed by a young
professional who has a number of celebrity clients and is now
looking for wider expansion into the retail market ; the business
is already protable and has great potential to develop.
Get Smarter Energy Ltd an energy demand reduction
concept aimed at organizations with utility spend exceeding
200,000. It can reduce costs by 20 % and above over a
dened period. This business is seeking to reinvest part of its
prots into other sustainable products.
QUALITY
While consumer condence does remain a concern in the
hospitality industry, there is a growing recognition that
customers will pay more for quality. There are examples of
companies in the hospitality industry who have delivered
solid performances during the past four years because their
product is perceived to be exceptional. The challenge is for
others to increase their own offer, despite the current economic
challenges, as this will be a major buying point for consumers
as the UK emerges from recession.
INNOVATION
Innovation is a major demand for all businesses in the
hospitality sector, especially in terms of evolving the product
offer. Creatively led roles in organizations, such as Innovation
Director, are one example of how some companies are seeking
to publicly express this awareness ; however, it can be difcult
for larger companies to innovate, so this trend may lead to
increasing collaborations or joint ventures with smaller start-
ups.
MINDSET : RETAIL VS. TRADITIONAL
The hotel market is perceived to have undergone a number
of evolutionary shifts over the past 40 years as it has
professionalized its skill base and increased the quality of
product. More recently, this sector has been seen to become
more retail focused, as commercialization of management
thinking was required, driven partly by the increasing
complexities of modern hotel ownership. In turn this has led
to a more retail orientated mindset becoming a desirable
quality. However, this is changing. Traditional values, especially
excellence in customer service and the guest experience, is
now a major driver for this market. By its nature this involves an
extremely high attention to numerous details and associated
investment in appropriate training.
INFLUENCE OF SOCIAL MEDIA AND MOBILE TECHNOLOGY
As referenced above, communications are changing and
this has been driven by social media and the increasing
proliferation of mobile technology. In particular, the increased
use of tablet-based technology is a major threat to traditional
communications messaging. Thus, the impact of the written
word in communications needs to be weighed against the
power of visually engaging stories, coupled with personal
engagement. In short, organizations must begin to write
new stories and take some risks in terms of projecting their
messages to the market.
The trends highlighted in this article are very pertinent to the
shape of the hospitality industry next year and its emergence
from a recessionary market. The world is changing at speed
and the one we live in ten years from now will be very different.
These shifts are the driving forces behind such changes, and
will shape the industry of the future, continuing to make a very
diverse, vibrant and dynamic sector that is a major contributor
to overall UK economic performance.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

E
U
R
O
P
E
49
48
Promising !
THATS THE GENERAL PROGNOSIS FOR ASIAN HOTEL MARKETS, JUDGING FROM THE TEN COUNTRY REPORTS WE
RECEIVED FROM OUR FRIENDS AT HORWATH HTLS OFFICES AROUND THE REGION.
R E G I O N A L O U T L O O K : A S I A
HOTELyearbook2013
CHINA
Chinas hotel industry faces the following issues in the next
several years :
HUGE SUPPLY SOME EASING, SOME NOT
The huge amount of new supply entering many markets in
China is well known. There are several markets where the
pipeline of new properties shows no signs of stopping, and
these are going to experience distress and most likely increased
disputes between owners and operators ! However, for a
number of cities, the supply onslaught is reaching its peak and
as it gradually recedes, the substantial demand growth that
Chinas hotel sector exhibits should lead to quite quick market
recoveries over a 2 to 5 year period.
TIME FOR ADR INCREASES
A historic challenge for Chinas hotel industry has been its
low average daily room rates relative to other international
markets and the quality of the product being sold. However,
the government is now trying to shift the economy to a more
consumption-led model, and this encompasses efforts to
increase wages. At the same time, vast sections of Chinas
middle class are reaching a point where they have acquired
apartments, electronics, cars and other tangible goods so
spending is likely to move to more intangible items such as
travel and leisure. Over time, these transformations can
support average rate increases that could dramatically boost
the protability of the sector.
HIGHER WAGES BUT FEWER STAFF
Of course, many operators are also concerned about the
impact of wage increases on protability levels, but in our view
these worries are exaggerated. Stafng levels in China are well
above more developed markets, and there is huge scope for
reductions. As a whole, we expect fewer, but better-paid staff
to actually benet hotels bottoms lines as well as the
customer experience.
NOT JUST ROOMS
The hotel business in China is not just rooms. Several
international and domestic operators are strategically focusing
on the food & beverage side of the business and managing to
generate very signicant revenue levels, which often exceed
rooms, as well as healthy operating margins. Other groups
are increasingly focusing very successfully on hot spring and
spa revenues, while another just emerging trend is to put
considerable resources behind recreational and entertainment
facilities targeted towards local residents.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
CRAVING FOR TRAVEL BUT GOLDEN WEEK HINDRANCE
The Chinese traveller continues to show an insatiable appetite,
and this will continue to present compelling opportunities in the
resort sector. However, the biggest obstacle so far has been the
golden weeks policy that forces almost the entire population
to vacation during the exact same weeks of the year. This is
increasingly causing chaos and strain on hotels and travel
infrastructure (not to mention the poor travelers themselves),
so it is not unreasonable to expect that there will ultimately
be a change to allow people to holiday whenever they choose
throughout the year. When this occurs, the boost in demand for
resort hotels will be staggering.
THE CITIES OF ONE MILLION PEOPLE
While many rst tier, second tier and even third tier cities are
becoming saturated with hotels, there are still many lower tier
cities that offer development opportunities. These markets,
however, are not suitable for luxury products, despite the
wishes of local governments !
TIME FOR CHINA BRANDS
International brands have to a large degree dominated the third
party management space for around two decades but various
domestic groups are now making a competent push to gain
ground, especially private companies. New China brands will
become much more visible in the next couple of years.
Damien Little
SINGAPORE
SITUATION REPORT
2012 continues to be a fruitful year for Singapore in terms of
tourism. As of YTD May 2012, visitor arrivals were up 12 % YoY,
on track to smash the record of 13 million arrivals set in 2011.
Sources of visitor growth were mostly from regional countries
such as China (+ 31 %), Taiwan (+ 33 %), ASEAN (+ 10 %) and
interestingly, Europe (+ 15 %). The Euro crisis has so far had
limited impact on the industry, suggesting Singapore can
potentially weather a downturn given its wide spectrum of
tourism offerings allowing it to target diverse business segments.
Even after operating for more than 2 years, the two integrated
resorts are still generating incremental arrivals from their
casinos, MICE facilities, retail malls, theatres and the Universal
Studios theme park. Events such as the Singapore Air Show
and Formula 1 Night Race have also been pivotal in boosting
arrivals. In addition, as a regional nancial hub, Singapore
continues to benet from the improving economies of its ASEAN
neighbors, encouraging corporate and MICE related travel to
the country.
Source : Singapore Tourism Board
0
2
4
6
12
10
8
14
2005 2007 2003
-30
-20
-10
0
10
20
30
40
1999 2001 2009 2011F
Growth (%) Visitor Arrivals (in millions)
A
r
r
i
v
a
l
s
G
r
o
w
t
h
51
50
HOTELyearbook2013
The hotel market also benetted from the strong output from
visitor arrivals. As of YTD August 2012, market occupancy
improved to 87 %, up by 1percentage point YoY, while ADR rose
by 8 % to SGD 259. As a result, RevPAR grew by 9 % YoY.
With the exception of economy hotels, all hotel product
categories showed good RevPAR growth as of YTD August
2012, albeit at a slower rate compared to 2010-2011. However,
RevPAR growth was driven more by ADR with occupancy
already at close to maximum given seasonality constraints.
Source : Singapore Tourism Board
OUTLOOK FOR 2013
With so many macro level uncertainties such as the Eurozone
crisis, the slowdown in Chinas economy and the still weak US
economy, a cautious outlook for 2013 is necessary. However,
given the upbeat performances to date and the absence of any
immediate indications of downturn, prospects for a solid market
performance in 2013 remain intact.
The following are additional considerations supporting a positive
outlook :
The integrated resorts will continue to induce demand with the
opening of new attractions including the Maritime Experential
Museum and the Marine Life Park.
The opening of the new $500 million Marina Bay Cruise
Center cruise terminal and attractions such as Gardens by the
Bay and the River Safari (at the Singapore Zoo) should further
induce visitors.
Further strengthening of Singapores status as a regional hub
for nance, research and development, medical tourism and
MNC operations.
Continued hosting of the Singapore F1 night race (a ve
year extension to 2017 was announced at the outset of the
2012 race).
Although bullish about the Singapore Hotel industry outlook for
2013, we expect growth to moderate given the limited catalysts
for signicant incremental growth such as what occurred
with the opening of the integrated resorts. As well, although
expected to be relatively quickly absorbed, the addition of
new hotel supply in 2013 will still put competitive pressure
suppressing rate growth.
Overall, Singapore is still considered one of Asias hottest
destinations and remains one of the most sought-after markets
for hotel developers and investors.
Jerome Siy
JAPAN
SITUATION REPORT
Japanese hotel performance has recovered to pre-crisis level.
As summarized in the table below, the average RevPAR for 12
months to August 2012 has increased by 9.4 % compared to
the same period to August 2011 and just below 0.9 % compared
to the same period to August 2010, which well represents
performance under the pre-crisis market conditions.
100
150
200
250
2005 2006 2008 2007
0
60
80
20
40
100
2009 2010 2011F
ADR RevPAR Occupancy
A
D
R
/

R
e
v
P
A
R

(
S
G
D
)
O
c
c
u
p
a
n
c
y

(
%
)
Promising ! cont.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
MAJOR REVENUE KPI'S FOR JAPANESE HOTEL MARKET

Sep.2009
to Aug. 2010
Sep.2009
to Aug. 2010
Latest 12mths
to Aug.2012
OCC 75.9 % 73.5 % 79.1 %
ADR JPY 12,099 JPY 11,272 JPY 11,506
RevPAR JPY 8,201 JPY 8,333 JPY 9,117
Source : STR Global
The graph above shows a recent trend of major revenue key
performance indicators, namely occupancy, ADR, and RevPAR,
for the Japanese hotel market for the past two years. It is
clear that the occupancy rate was on an increasing trend until
March 2012, and then suffered from low performance after the
East Japan Earthquake, bouncing back in spring 2012. ADR
performance has also started to pick up in spring 2012. At the
moment, both Occupancy and ADR are on an increasing trend,
which has led to steady RevPAR growth since February 2012.
JAPANESE HOTEL MARKET PERFORMANCE
(12-MONTH MOVING AVERAGE, AUG. 2010-AUG. 2012)
Source : STR Global
The main driving force for the great recovery was the recovery
of the occupancy rate in the Tokyo market. Accommodation
demand in Tokyo was generated by continuous business
activities in the capital city, combined with the recovery in the
number of international arrivals, which had dropped 27.8 % in
2011 from the year before and quickly bounced back to almost
the pre-crisis level of 2010, in August 2012 year-to-date. An
increase in the number of domestic leisure tourists, driven by
new attractive destinations in Tokyo such as the new opening
of Tokyo Skytree and several large scale shopping malls, also
increased the accommodation demand.
In 2011, the total number of accommodation guests (both
domestic and international) in the capital was approximately
41 million, representing about 10 % of the total number
of accommodation guests in Japan, 417.2 million people.
Therefore, market performance in Tokyo has a large impact on
the nation-wide performance results.
A
u
g
-
1
0
O
c
t
-
1
0
D
e
c
-
1
0
F
e
b
-
1
1
A
p
r
-
1
1
J
u
n
-
1
1
A
u
g
-
1
1
O
c
t
-
1
1
D
e
c
-
1
1
F
e
b
-
1
2
A
p
r
-
1
2
J
u
n
-
1
2
A
u
g
-
1
2
ADR (JPY) RevPAR (JPY)
0
30
60
90
120
150
78
70
72
74
76
80
OCC (%)
A
D
R
/

R
e
v
P
A
R
O
c
c
u
p
a
n
c
y
The Gate Hotel, Asakusa (Tokyo)
53
52
HOTELyearbook2013
OUTLOOK FOR 2013
A quick recovery after the earthquake has proved that
the Japanese market is resilient to a challenging macro
environment. At the time of writing, it is safe to say that the
market has returned to normal levels, with occupancy and ADR
showing positive signs of growth. In 2013, it is reasonable to
anticipate the RevPAR growth to continue.
By market segment, an increase in the inbound visitor arrivals
is expected in the mid- to long-term future. In 2010, the
Japanese government launched Visit Japan Project to
promote Japan as a tourist destination and set a goal of
15 million visitors by 2013 and 30 million visitors in the long
term. This project includes several government initiatives
such as proactive promotional activities outside of Japan and
deregulation of visa requirements.
Another supporting factor for the Japanese hotel market is
the establishment of low cost carriers (LCCs) in Japan. Having
LCCs means a wider choice of transportation for travelers,
which will potentially increase the volume of leisure tourism for
both domestic and international segments.
Looking into the hotel investment market, it has been rather
active since the second half of 2011, despite the low market
performance. We conrmed 31 transactions in August 2012
year to date, which is a 20 % increase from the year before. We
project at least 50 hotel transactions in total this year and even
more deals in 2013.
All in all, the 2013 outlook for the Japanese hotel market is
optimistic. The increased level of transactional activity indicates
rising investor condence, and we believe the RevPAR growth
which has currently been centered in Tokyo will spread out to
other major cities within six to twelve months, based on our
past market experience.
Koji Takabayashi and Sachiko Matsuda
MALAYSIA
SITUATION REPORT
Malaysias gross domestic product (GDP) for the third quarter
ended Sept. 30 expanded 5.2 % year-on-year, supported
by strong domestic demand and investment activities. The
expansion in GDP beat economists expectations of 4.8 %.
For the second quarter of 2012, GDP growth was revised
upwards to 5.6 % from 5.4 %. Moving forward, the central bank
maintained the GDP growth trend in the fourth quarter of 2012,
and it would likely continue very much like the third quarter,
but there uncertainties exisit in the export sector on the back
of uneven economic growth in the USA and recession looming
in Europe the fallout of the prevailing debt crisis. The central
bank is condent that GDP growth for 2012 will come at the
projected 5 % or better. In 2011, GDP growth was 5.1 %.
In 2011, Malaysia recorded the lowest increase in foreign
arrivals at 0.6 % (3.9 % in 2010) to 24.7 million (24.6 million in
2010). For the rst 5 months of 2012, total arrivals increased
by almost 2 % to 9.4 million from 9.3 for the same period in
2011. The low increase suggests strong competition from
neighboring countries such as Singapore, Indonesia and
Thailand. Decreasing air access to Malaysia is due to cutbacks
by Malaysia Airlines and Air Asia on routes from Europe, Middle
East and the Indian subcontinent in 2011 and early 2012,
when both airlines restructured their routes on the back of
falling yields.
OUTLOOK FOR 2013
The outlook for 2013 for the countrys airline industry looks
promising as Malaysia Airlines joins the One World alliance
in February 2013 and will also seek closer cooperation with
Qantas Airways. In addition, Qantas and British Airways, as well
as Air France, are resuming ights to KL by mid-2013. A new
KL-based low-cost carrier, Malindo Air, will take to the skies by
the second quarter of 2013.
The opening of the 455-room Grand Hyatt in August 2012 and
the 300-room Majestic Hotel, a YTL hotel, in December 2012
is not expected to impact the occupancy level of the Kuala
Promising ! cont.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
Lumpur hotel market in 2012. The average occupancy level
of the hotel market in Kuala Lumpur for 2012 is expected to
improve slightly by 1 percentage point to 73 %. Based on 8
months performance to date, the ADR of the hotel market is
projected to register an increase of not more than 3 % to RM
275 (US$ 90). Looking to 2013, the permanent closure of the
565-room Crowne Plaza on January 2, 2013 and the opening of
the 482-room Aloft in KL Sentral in March 2013 is not expected
to impact signicantly the average market occupancy where we
expect the Kuala Lumpur hotel market occupancy at between
73 % and 75 % for 2013. However, with their ADR positioning of
the Grand Hyatt and the Majestic Hotel at the higher end of the
market, the market ADR is projected to increase between 4 %
and 5 % for 2013.
The outlook for the islands of Penang and Langkawi are mixed,
with the former continuing to enjoy increasing tourist arrivals
and strong hotel performance, while the latters hotel market
performance is experiencing a decline. While the supply of new
hotels in Penang is increasing over the next 3 years to cope with
increasing demand, the supply of hotels on the premier tourist
island of Langkawi over the last 5 years has stagnated. The
outlook for the next 2 years for Langkawi is expected to remain
unchanged. With the hotel market having the highest ADR in
the country (US$ 235 in 2012), the lack of new supply to add to
the present mix of hotels, thereby increasing product offering
(unlike those in Phuket, Bali and Ko Samui), is not expected to
generate any increase in ADR in 2013 for the premier island.
Since its launch in Nov 2006, Iskandar Malaysia in the state
of Johor has recorded a total cumulative investment of RM
100 billion (US$ 33 billion) as at Sept 2012. The state capital,
Johor Bahru, is experiencing a spurt of new hotel development
over the last two years in anticipation of increasing corporate
and leisure demand. New supply, such as the DoubleTree,
Renaissance, Traders, and the Somerset, is expected to
commence business by 2014. While the market ADR is still
below RM 200 with occupancy levels in the high 60 %, the
outlook for 2013 is expected to be optimistic on volume
especially, as demand generated by the theme parks of
Legoland and the soon-to-be-opened family indoor theme park
in Nusajaya, as well as spill-over demand from the integrated
resorts in Singapore, is projected to contribute to healthy
growth in market occupancy levels in Johor Bahru. With the
Iskandar and the ongoing re-development of Desaru on the
eastern coast of Johor into a destination resort (a Sheraton,
Datai and an Amanresort property are being planned) the state
of Johor is primed to be positioned as a new hotspot for hotel
development in Malaysia over the next decade.
Over in East Malaysia, in the state of Sabah, the healthy growth
of visitor arrivals to the state of close to 14 % in 2011 over 2010,
55
54
HOTELyearbook2013
underlines the popularity of the state as a destination. With the
re-instatement of air access between Kota Kinabalu and the
main gateway cities of northeast Asia (which was rescinded
in 2011), the tourism outlook for Sabah is positive. The mix of
hotel products on offer in Kota Kinabalu was given a boost in
2012 with the opening of the luxurious 120-villa Gaya Island
Resort (a YTL property) and the potential Marriott at the citys
waterfront mixed-use project, targeted to open by 2014. The
pending opening of another luxury YTL all-villa property on
Pulau Tiga off the coast of Kota Kinabalu in 2013, is expected to
enhance Malaysias position as one of the most popular tourist
destinations in Asia.
Sen Soon-Mun
INDONESIA
SITUATION REPORT
Jakarta
Jakarta
2010 YTD Dec.
Occ ADR RevPAR
2011 YTD Dec.
Occ ADR RevPAR
2012 YTD Sep.
Occ ADR RevPAR
Top Tier 66% $86 $56 68% $93 $63 67% $108 $73
Mid Tier 75% $56 $42 74% $61 $45 71% $65 $46
Combined 70% $72 $50 71% $78 $55 69% $89 $61
Source : JIHA, Horwath HTL
2011 represents another great year for the Jakarta hotel market,
with a continuing upward trend that started in 2010 after the
GFC, with particularly strong growth shown in ADR. Some say
it is the best ADR the city has seen in 15 years. Combined top-
tier & mid-tier hotels recorded 8+ % growth in 2011 compared
to 2010, led by the mid-tier market, which recorded a 9+ %
growth. Occupancy growth is not nearly as strong as ADR
growth, only about 2 %, with the mid-tier segment registering
a decline compared to last years performance. 2012 up to
September is showing attening occupancy and continued
strong increases in ADR.
On the socio-political front, residents of Jakarta are more
optimistic after the election for governor concluded smoothly
recently, resulting in a landslide victory of the popular
candidates replacing the unpopular incumbent who has just
completed only one term in ofce. Most believe that the new
governor has got what Jakarta needs to take care of its chronic
problems, like the trafc and ooding.
After a long period of hotel development hiatus in Jakarta,
especially for high end products, new hotels began to be built
again beginning in 2011, with at least 10 hotels of various tiers
soon to be opened around Jakarta. Most of these, however, are
mid-tier and limited service hotels. High land costs, reasonable
construction costs and ease of access to supporting facilities
like restaurants and bars in nearby shopping malls, are some
of the many reasons why the developers are attracted to build
mid-tier and limited service hotels.
Accor has already opened four new properties recently in
Jakarta, while the home grown chain Santika also opened four
new Amaris, their limited service hotel brand. Aston also just
opened two more hotels using Aston as well as their limited
service Fave brand. InterContinental with their Holiday Inn and
Holiday Inn Express brands have a number of projects in the
pipeline in Jakarta as well, while Best Western is preparing their
second property in Jakarta, which should come on line in 2013.
Higher end hotels are also expected to come on line from this
year onward, including the Rafes and the W at the Ciputra
World, Keraton (the Luxury Collection), which just opened,
Pullman, Mercure, Novotel, and St Regis. Going forward,
the Jakarta hotel market promises to be more active with
development and should help refresh the landscape with new
hotels after a long period of stagnancy. Other brands rumored
to be on the lookout, or closing in on deals, include, Rosewood,
MGM Grand, Nikko, Hilton, Sotel and Westin.
The following chart shows the recent increase in hotel room
supply in Jakarta.
Promising ! cont.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
JAKARTA SUPPLY
Source : JIHA, Horwath HTL
Bali
Bali
2010 YTD Dec.
Occ ADR RevPAR
2011 YTD Dec.
Occ ADR RevPAR
2012 YTD Sep.
Occ ADR RevPAR
Upper
Luxury
52% $494 $256 57% $528 $303 55% $544 $299
Luxury 74% $247 $182 75% $274 $205 78% $282 $220
Top Tier 75% $134 $100 78% $145 $113 72% $143 $103
Mid Tier 82% $77 $63 78% $91 $71 74% $82 $61
Combined 75% $127 $95 76% $140 $106 71% $146 $104
Source : BHA, Horwath HTL
Bali hotels seem to be holding on to their rate levels after the
market recovered in a big way in the past few years after the
GFC. This can be seen by the strong ADR, which continues to
climb in 2012, albeit at a slower rate than before. ADR growth
is recorded in almost every segment of the market. The mid-
tier market grew by a whopping 19 % compared to last years
performance, while the luxury market showed the smallest
growth compared to the others, with only a 7 % increase over
2010 performance. Combined market performance is showing a
growth rate of about 10 %. As for the occupancy performance,
the luxury segment led the way with 11 % growth while mid-tier
segment declined by about 6 % compared to the same period
last year. An example of hoteliers sacricing occupancy to
maintain the hard earned rates. Even though it is not as strong
as the ADR growth, the occupancy performance still recorded a
marginal positive growth of about 1 % year on year.
The 2012 year-end outlook is predicted at about the same level
as 2011 for most segments. While there is upward pressure
continuing in 2012, all in all, the year will end as strong if not
slightly stronger than last year. ADR growth seems to be
continuing, although not nearly as phenomenally as in 2011.
Occupancy, on the other hand, has stabilized and is staying at
when compared to last year.
Bali visitor arrivals continue to be strong, recording about 10 %
growth between 2010 and 2011, with 2.76 million arrivals at the
end of 2011. Australians still dominate the Bali hotel market with
about 29 % of total arrivals. However, this upward trend has
slowed down in 2012 when compared to 2011. The number of
foreign visitor arrivals increased only by about 5 % compared
to the same period last year. The domestic market keeps going
strong, with an average growth rate for the past 5 years (2007
2011) of about 23 %. The greatest increase was recorded in
2010 : 32 % compared to 2009. In 2011, the growth rate is 22 %,
with 5.68 million domestic arrivals to Bali.
Continued strong demand in Bali, both domestic and
international, is keeping the developers encouraged to build
more hotels in Bali, despite the infrastructure deciencies
that have been highlighted in recent articles about the resort
island. While the airport is being renovated and new roads built,
the provincial government is also trying to put a brake on the
5 star 4 star
2011 2013
0
3000
6000
9000
12000
15000
2012
R
o
o
m
s
Promising ! cont.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
development in South Bali, where it is most densely populated
by resorts, and trying to encourage developers to look more
into the east, west and north of the island.
At the moment, limited service hotels seem to be the sweet spot
for everybody in Bali, as it is in most parts of Indonesia. Accor,
InterContinental, Aston, Santika and Tauzia are rushing to enter
this segment with their own brands. Less densely populated
areas on the east and west coasts, with lower land prices,
seem to be the recent targets for the higher end hotel products.
The sense of Bali becoming a bit overbuilt is becoming quite
apparent, especially in south Bali where trafc congestion is
much more common than before.
The following chart illustrates the hotel room supply trend in the
past three years.
BALI SUPPLY
Source : BHA, Horwath HTL
OUTLOOK FOR 2013
Continuing economic uncertainties in Europe and the US, which
is now seen to affect China and Japan, are starting to affect
Indonesia in 2012 in terms of its export growth. However, the
buoyant domestic market, with a population of 237 million, and
the rapidly growing middle class at about 134 million now, are
still holding Indonesias economic growth at a very respectable
level, especially compared to the rest of the world. Recently,
the World Bank reported that the middle class in Indonesia is
growing by about 8 to 9 million per year.
Indonesias economic growth in 2011 was about 6.5 %, which
was one of the strongest in Asia. Early in 2012, the Indonesian
government was very optimistic and believed that 7 % growth
for 2012 was reasonable and attainable. However, a myriad of
challenges, both domestic and international, have made the
government revise its target to about 6.3 % for year-end 2012,
which is still very respectable compared to the rest of the region
and the world.
The Minister of the newly formed Ministry of Tourism and
Creative Economy is endeavoring to spread the tourism related
development throughout the archipelago by encouraging
secondary cities in Indonesia to catch up with the more
developed destinations like Jakarta, Bali and Surabaya. It seems
to be her belief that the domestic market is the biggest potential
in the country for newly developed destinations, and has started
to campaign for domestic travel rather than travelling regionally
or internationally. One alternative to Bali, which has been
promoted by the government recently, is Lombok.
Domestic travels contributed a whopping US$ 17 billion in 2011,
nearly double compared to foreign travelers, who contributed
about US$ 9 billion. With about 236 million trips made all over
the country, thanks to LCC, the government believes that the
domestic market has the potential to drive Indonesian tourism
forward. The government set about a 4 % growth rate in 2012
for domestic travelers.
Rio Kondo
5 star 4 star 3 star
2011 2013
0
5000
10000
15000
20000
2012
R
o
o
m
s
59
58
THAILAND
SITUATION REPORT
Thailand experienced an upswing in 2012 in recovery from years
of struggle with the global economy crisis, internal political
and security strain and natural disasters. However, while 2012
was encouraging (GDP growth of 4.2 % for the 2nd quarter),
challenges still remain. The political situation, although currently
stable, is still highly factional and complicated, while unrest in
the south continues to be unresolved.
Nevertheless, tourist arrivals continue to grow, with 15 million
international arrivals as of YTD September 2012, a YoY increase
of 8 %. For full-year 2012, arrivals are expected to exceed the
government target of 20 million visitor arrivals, well above the
previous high of 19 million achieved in 2011. Based on August
YTD 2012 gures, the key countries contributing visitor growth
include China (+35 %), Japan (+10 %), Russia (+20 %), India
(+8 %), Australia (+15 %) and Singapore (+18 %).
Hotel occupancy and average daily rate (ADR) performance
has mirrored the countrys economic and tourist arrival growth.
As reported by STR Global, Thailand recorded YoY growth of
5.8 % in occupancy and 3 % in ADR as of YTD September 2012,
combining to a signicant 9 % growth in RevPAR at THB 2,124.
Key destinations, Bangkok and Phuket, have increased similarly
in overall performance over the same period. While occupancy
levels have recovered to a level similar or higher to the 2008
pre-crisis period, ADRs are still struggling.
THAILAND YTD SEP
BANGKOK YTD SEP
Promising ! cont.
2008 2009 2010 2011 2012
1500
2000
2500
3000
3500
Occ %
A
D
R
/
R
e
v
P
A
R
O
c
c
u
p
a
n
c
y

%
ADR (THB) RevPAR (THB)
0
10
20
30
40
50
60
70
80
2008 2009 2010 2011 2012
1500
2000
2500
3000
3500
4000
Occ %
A
D
R
/
R
e
v
P
A
R
O
c
c
u
p
a
n
c
y

%
0
10
20
30
40
50
60
70
80
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
PHUKET YTD SEP
Source : STR Global
OUTLOOK FOR 2013
While 2012 was a relatively stable year, a cautious outlook
for 2013 is required, as the outlook for the global economy
and Thailands political situation remain unclear.
A potential meltdown in the European economy, a double-
dip US recession, economic slowdown in China and/or
intensication in Thailands political arena carry risks affecting
Thailands hotel market. However, as shown in the historical
performance levels, Thailand is always resilient as a leisure and
business destination.
A more pressing factor expected to impact Thailands 2013
performance outlook is the anticipated increase in new supply
across the country. According to STR Globals Market Pipeline
Report for Thailand, the country is preparing to add about
49 new hotels between December 2012 to December 2013,
representing 5 % growth in hotel room capacity. About 67 %
of the new properties are of upper mid-scale positioning
and above and will be located in Bangkok. As demand is not
expected to increase in parallel with the supply immediately,
this will negatively impact occupancy levels and put downward
pressure on ADR as competitiveness intensies.
However, with continual support from the government and
the strong fundamentals of Thailands tourism industry, the
outlook for the country is still positive. Comprising 16.3 %
of the countrys GDP in 2011, the Travel & Tourism industry
is a key contributor to the economy, expected to grow by
2.1 % in 2012 and 6.4 % per annum from 2013 to 2016. Such
growth expectations are supported by the Tourism Authority
of Thailands (TAT) strategies and programs designed to boost
the countrys reputation and prole. Accordingly, the TATs
target for visitor arrivals in 2013 has been set at 22 million, 10 %
annualized growth.
As part of the TATs efforts to promote Thailands tourism, a
2013 Tourism Action Plan has been constructed. Key highlights
for the 2013 Action Plan include an increase in charter and
low-cost ights from markets previously lacking direct access,
increased marketing efforts such as trade shows and celebrity
ambassadors, special focus on new digital media, and an
emphasis on tourism intelligence and crisis management.
On the whole, with Thailand established as one of Asias most
popular tourist destinations, its proven resilience from negative
shocks, and the government and commercial sectors efforts
in enhancing the countrys appeal, condence is high for
improving hotel industry performance in 2013.
Clare Fu
SRI LANKA
SITUATION REPORT
Sri Lankas eventful history has the world intrigued. Following
its independence in 1948 and up until the start of the civil war in
1983, the country attracted a steady increase in tourism arrivals.
Between 1960 and 1983, visitor arrivals grew at an average
annual rate of 21 %. Twenty-ve years of constrained arrival
numbers followed, uctuating with the intensity of hostilities
and terrorists events, including a prematurely hopeful ceasere
period between 2003 and 2006, which saw arrivals exceed the
500,000 mark before falling back in 2007.
2008 2009 2010 2011 2012
1000
2000
3000
4000
5000
Occ %
A
D
R
/
R
e
v
P
A
R
O
c
c
u
p
a
n
c
y

%
0
10
20
30
40
50
60
70
80
61
60
HOTELyearbook2013
With the civil war nally placated in 2009, pent up demand
quickly drove arrivals up by 46 % in 2010, a new high and a
welcome surprise to existing hotel owners used to half empty
properties. Further arrivals growth of some 30 % in 2011 helped
push market occupancy to 70 % for the year, with particularly
tight conditions existing during the peak European Winter
season. New hotel development is underway, but will still be a
few years away from addressing the short-term room demand
needs during peak seasons. As of YTD September 2012,
arrivals were up a further 16 % YoY, indicating the one million
arrivals mark could be reached by year-end.
Source : Sri Lanka Department of Tourism
As of 2011, India was the largest feeder market for Sri Lanka,
accounting for 20 % of total arrivals. The United Kingdom,
previously the largest arrivals source due to the historical
relationship between the two nations, is the second largest
source market. Of the top feeder markets, Russia has grown the
fastest with double-digit average annual growth over the past
decade. However, as of YTD September 2012, China entered
the ranks of the top 11, surpassing Russia. Nonetheless, as the
last quarter of the year tends to be a particularly peak period for
arrivals from Europe, including Russia, a reshufe in the source
market rankings for the full year 2012 is expected.
Surprisingly, the strong growth in arrivals in 2012 did not
translate into strong occupancy growth for the Sri Lanka hotel
market. According to STR Global, September YTD occupancy
for the country recorded a decrease of about 2 % YoY, with
Promising ! cont.
1
9
7
0
1
9
7
2
1
9
7
4
1
9
7
6
1
9
7
8
1
9
8
0
1
9
8
2
1
9
8
4
1
9
8
6
1
9
8
8
1
9
9
0
1
9
9
2
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
S
e
p

Y
T
D

2
0
1
2
0
200
100
400
300
600
500
800
700
900
Years without insurgence Years with insurgence
September YTD 2012
A
r
r
i
v
a
l
s

(
1
0
0
0
s
)
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
the lowest YoY drop in July at 18 %. The sharp drop in July
corresponded with a sharp decrease in Indian arrivals due
to political tension stirred up during the year between the
two countries. Drops in occupancy were especially evident
in the upper-tier in Colombo, which can be linked to reduced
business travel associated with disruptions to the countrys
economic growth related to government mis-management
resulting in stock market values declining, high ination and
increased cost of local debt. Compounding the situation in the
Colombo hotel market is a government mandate concerning
minimum rates to be charged by 5-star hotels. By comparison,
lower-tier hotels continued to do well over the same period as
minimum rate restrictions were not applied to hotels below the
5-star level.
Reective of the market conditions and inuencing government
mandate, market ADR grew to US$ 120 as of YTD September
2012, representing 7 % YoY growth. As a result, RevPar growth
was 5 % growth as of YTD September 2012.
Source : STR Global
Stemming from the closed economy and limited investment
opportunities for foreign companies during the Civil War
period, the hotel market is dominated by local players involved
in inbound tour operations as well as hotel ownership/
management. Such players include John Keells Hotels Group,
Aitken Spence Hotels and Jetwing Hotels. International
operators in the country to-date have been limited to Hilton,
Aman and Taj. However, since 2009, regional and international
hotel brands and operators have been entering the market with
new deals and greater pace including Anantara, Starwood,
Marriott, Shangri-La, Onyx, and Hyatt. While most of the
2008 2006 2007 2009 2010 2011 SepYTD
2011
SepYTD
2012
30
60
90
120
150
A
D
R
/
R
e
v
P
A
R

(
U
S
D
)
O
c
c
u
p
a
n
c
y

%
Occupancy ADR RevPAR
0
10
20
30
40
50
60
70
80
63
62
HOTELyearbook2013
interest still lies in the capital city, Colombo, and established
resort destination, Galle, the government is trying to develop
and promote other areas of the country by improving
transportation infrastructure and promoting investment
opportunities for external supporting facilities such as golf
courses, convention centers and shopping malls. Drawing
upon tax holiday schemes and other investment incentives, the
SLTDA aims to increase registered room capacity in the country
by a signicant 230 % by 2016 to 49,800 rooms from the current
15,079 rooms (as of July 2012).
OUTLOOK FOR 2013
Still in an early developing juncture, Sri Lanka is poised for
positive long-term tourism growth. Condence in the market
is noted to be strong, indicated by the numerous mentions
received during the recent 23rd annual Hotel Investment
Conference Asia Pacic (HICAP) in October 2012, identifying
Sri Lanka as one of the top emerging hotel markets in Asia.
Other factors supporting the positive outlook include the
implementation of a new visa-on-arrival scheme for more than
80 countries, increasing ights and routes, airport expansion
and new development, improving roads and other critical
infrastructure, increasing foreign investment and the entry of
new international branded hotels inducing additional demand.
However, short-term growth is expected to be somewhat
constrained, as most of the abovementioned points will require
several years to come to fruition. As a result, some caution is
required relative to the generally positive outlook due to the
following factors :
The existing infrastructure in the country is not sufcient
to support the short-term boom in visitor arrivals. While
improvements are currently being made, there will be a lag
in many areas such hotel room supply and transportation
infrastructure.
The struggling economy indicated by a drop in exports,
increased debt and slowed GDP growth.
The current shortage of local capital for investment, high
cost of debt and the related impacts on the realization of
foreign investment projects counted on for introducing new
generation hotel products to the market.
On balance, market growth will likely be constrained for the next
few years as the country adapts to its post Civil War political
environment and the sudden boom in arrivals and foreign
investment interest, which will require improved government
management of the economy.
Clare Fu
UNITED ARAB EMIRATES
SITUATION REPORT
Despite the political and social unrest, which substantially
affected the hotel market in parts of the Middle East in 2011-12,
the United Arab Emirates (UAE) hospitality market rebounded,
clearly beneting from the redirected demand from the Arab
Spring. The country is politically and social stable and as a
result, international and regional tourists diverted their travel
plans to the safer destinations of the UAE.
The tourism infrastructure in the UAE is very well developed,
particularly in the Emirates of Dubai and Abu Dhabi, and repeat
travelers continue to be attracted by the high quality hotels,
leisure and shopping facilities and the excellent airlift to both
of the destinations. Demand from GCC nationals was a major
factor in increased business levels, with Dubai experiencing a
large inux of regional tourists during the summer months and
traditional holiday periods.
Year to date in 2012, the hospitality market in the UAE is again
ourishing and showed continued growth, despite the typical drop in
demand during Ramadan and the summer season, which coincided
this year. In comparison to 2011, room occupancy grew by 3.2 %
to hit 71 % (as of August 2012), along with an upswing of 5.5 % in
average daily rates (ADR) to US$ 199, resulting in an increase of
8.9 % in revenue per available room (RevPAR) to US$ 141.
Promising ! cont.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
However, a closer look at the key cities in the UAE reveals
signicant differences in their market performance. Our situation
report this year evaluates the Emirates of Abu Dhabi and Dubai
separately, in order to get a clear picture of their respective
trading performance.
In Dubai, occupancy increased to 76.4 % for the last 8 months.
The Abu Dhabi Tourism and Culture Authority reported that in
September 2012 there was a 15 % increase in tourist arrivals,
but taking the data until August into account, an occupancy of
57.8 % was recorded, down 9.1 % compared to last year.
OCCUPANCY ABU DHABI
OCCUPANCY DUBAI
There was a also new record level of hotel nights in Abu Dhabi,
which grew by 10 % in the last 9 months in comparison to
last year, but the additional supply which came to the market
put severe pressure on the rates. This situation created stiff
competition between hotels and led to a price war among
them, severely impacting the ADR, which decreased by 8 %
to US$ 146.
This stands in stark contrast to the Emirate of Dubai, which
recorded a positive growth of 9.6 % in ADR to US$ 226.
ADR ABU DHABI
ADR DUBAI
Sep
09
Dec
09
Jun
10
Sep
10
Dec
10
Mar
11
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Aug
12
50%
60%
70%
80%
Sep
09
Dec
09
Jun
10
Sep
10
Dec
10
Mar
11
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Aug
12
60%
70%
80%
90%
Sep
09
USD
Dec
09
Jun
10
Sep
10
Dec
10
Mar
11
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Aug
12
100
150
200
250
300
Sep
09
USD
Dec
09
Jun
10
Sep
10
Dec
10
Mar
11
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Aug
12
200
215
230
245
260
275
THE HEART OF
HOSPITALITY
Discover...
I N DUBAI
www.emiratesacademy.edu
Study in Dubais Premier Hotel School
a part of the Dubai-based
luxury hospitality company
www.emiratesacademy.edu | info@emiratesacademy.edu | +917 4 315 5555 | The Emirates Academy of Hospitality Management
Which city in the world has the most
hotel openings in 2013?
Which city in the world has the highest
density of 5 star hotels?
Which city in the world should I choose
to study Hotel Management?
Answer: Dubai
Answer: Dubai
Answer: Dubai
THE HEART OF
HOSPITALITY
Discover...
I N DUBAI
Answer: Dubai
Answer: Dubai
Answer: Dubai
THE HEART OF
HOSPITALITY
Discover...
I N DUBAI
Answer: Dubai
Answer: Dubai
Answer: Dubai
65
64
HOTELyearbook2013
Due to the severe competition in the hospitality market in Abu
Dhabi, the prot margin was down by more than 16.3 % in
comparison to last year, resulting in a RevPAR for the 8 months
to August 2012 of only US$ 84.37, having dropped 16.3 % below
the same period last year.
The Dubai hotel market is the regions success story, having
developed into an all-encompassing destination, attracting
demand in all segments, including leisure, corporate and MICE
travelers. The leisure market remains the dominant sector,
contributing over 40 % of the total room nights. However, business
demand is increasing due to the improvement in business
sentiment in the region. Dubai has also become the preferred
MICE destination in the region, hosting large international and
regional events, including Arab Health, World Economic Forum,
Cityscape and the Dubai Air Show. These events each attract
upwards of 80,000 attendees over a period of 2-3 days each.
This has resulted in an uplift of the RevPAR to US$ 172 for
the 8 months to August 2012, which represents a growth of
more than 15.5 % over the same period last year. The trading
performance of Dubai is currently among the highest in the
region, and benchmarks favorably with key cities around the
globe such as New York, London and Hong Kong.
REVPAR ABU DHABI
REVPAR DUBAI
In Dubai in 2012, growth in the supply of new hotel rooms
slowed mainly as an after-effect of the widespread construction
delays over the last two to three years following the credit
crisis. However, the recent recovery in Dubais tourism and
hotel demand, and renewed condence in its real estate,
is encouraging developers to restart planned or stalled
developments, including some landmark tourism and hospitality
projects in Dubailand, Palm Jumeirah and Business Bay.
The inux of new room supply in Abu Dhabi over the last
three or four years has caused an oversupply in the market,
mainly in the ve-star segment. Total rooms supply increased
substantially from +/- 13,000 in 2008 to about 22,000 in the
rst half of 2012, according to government estimates. The
upscale hotels decision to cut rates in response to the growing
competition to shore up occupancies has caused a ripple effect
across the market as other segments followed suit to maintain
market share, affecting room rates across the market.
SENTIMENT OF THE WORLDWIDE HOTEL INDUSTRY
The Horwath HTL Hotel Market Sentiment Survey has been
designed to provide a quick assessment of the future market
outlook for the worldwide hotel industry. This global initiative
Promising ! cont.
50
100
150
200
250
Sep
09
Dec
09
Jun
10
Sep
10
Dec
10
Mar
11
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Aug
12
USD
100
150
200
250
Sep
09
Dec
09
Jun
10
Sep
10
Dec
10
Mar
11
Mar
11
Jun
11
Sep
11
Dec
11
Mar
12
Jun
12
Aug
12
USD
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
gathered responses from 1,557 respondents across
41 countries.
This report summarizes the result of selected hotels and
hotel management companies, including those in Dubai and
Abu Dhabi. By star classication, 62 % of the respondents
were 5-star hotels, 4 % were 4-star hotels, 13 % were 3-star
properties and 21 % hold a mixed portfolio or made no further
specication in this regard.
According to the Horwath HTL Global Hotel Market Sentiment
Survey, Africa & the Middle East recorded the highest sentiment
score on a global level, at a level of 41 points in February 2012
and 29 points in July 2012, being the highest worldwide and
well above the global average of 24 and 1 respectively. Despite
ongoing global economic and geo-political uncertainties in
certain countries, the sentiment in Africa & the Middle East
remains optimistic.
BY REGION
SCORE
Jan
2010
Jan
2010
Jan
2010
Jan
2010
Jan
2010
Jan
2010
Asia 48 46 52 22 37 10
Oceania 41 52 58 38 35 -12
Europe 4 15 34 16 14 -8
Americas 21 8 37 9 17 28
Africa / Middle East 43 7 9 -6 41 29
Global Average 27 29 42 16 24 1
In response to the outlook on market-wide occupancy
performance, a majority of 75 % of hoteliers replied that
occupancy was better or much better than expected, while only
12 % of hoteliers felt that occupancy performance was worse
than originally anticipated.
Approximately 62 % of respondents stated that they expect
performance in all three metrics to perform better or much
better than in the second half of the year when compared to last
years market performance. Almost two thirds of hoteliers are
looking ahead with condence and optimism.
Another indicator substantiates the positive sentiment of the
UAE market in general, by comparing the impact of the nancial
crisis between the country and the rest of the world, and
reveals a signicant difference. While the global average records
negative 8 points, the UAE registered a positive score of 59.
Despite ongoing global
economic, the sentiment
in Africa & the Middle East
remains optimistic
SCORE
Asia 10
Oceania -12
Europe -8
Americas 28
United Arab Emirates 29
Global Average 1
When asked if the continued global economic uncertainty had
impacted hotel demand as much as they had expected, only
8 % of hoteliers responded that demand was still affected more
or much more than expected, as shown in the chart below :
The overall sentiment for total revenue reects the optimism
registered for occupancy and rate growth, with 82 % of the
participating hoteliers indicating that continued global economic
uncertainty impacted demand less than expected, indicating
they expect a growth in revenue.
This can be seen as an indicator, which shows that the global
economic crisis has notably less direct impact on hotel markets
in the UAE than in other parts of the world.
OUTLOOK FOR 2013
The hotel market performance in the United Arab Emirates in
2012 was mixed, with Dubai reporting a strong growth in all
three key performance indicators, while the hospitality market
in Abu Dhabi is suffering from hotel room oversupply.
Although the UAE government has taken some measures
to control new hotel developments, it will need a consensus
among the hotel operators to maintain an appropriate rate
structure.
Against this backdrop, the outlook for both Emirates in 2013 is
also different :
The hotel and tourism industry in Dubai has recovered very well,
recording strong leisure, MICE and business demand, which
stimulated developers to re-start projects that had previously
been stalled. Although there are still challenges to obtain
construction nance at suitable terms and conditions, the sky
is slowly clearing over the Emirate of Dubai. There is untapped
potential to diversify the hotel and tourism offerings, for example
by focusing on the budget/mid-market segment and through
providing special products which appeal to specic travelers,
such as boutique hotels or the all-inclusive hospitality concept.
Looking forward, in Dubai there are a number of hotel openings
expected in late 2012 into 2013, including high prole projects
such as JW Marriott Marquis, which will be the worlds tallest
dedicated hotel when opened, and the Palazzo Versace Hotel.
In summary, the outlook for hotels in Dubai into 2013 appears to
be buoyant, albeit with a relatively stable or marginally reduced
occupancy levels due to the anticipated increase in supply.
Given the positive market sentiment, double digit revenue
growth is expected in 2013 for the Emirate of Dubai.
The outlook for the Emirate of Abu Dhabi is however cast with
shadows as several challenges are shackling the hotel industry.
The high number of new hotels, which came to the market
recently, exacerbated an already existing oversupply and put
severe pressure on the performance of the existing hotels. In the
light of the announced new properties, to a level where the current
inventory of available rooms will almost double, there will be a
further decline and tightening of the future market environment.
Much More, 4 %
More, 4 %
Same, 13 %
Less, 66 %
Much Less, 13 %
67
66
HOTELyearbook2013
Promising ! cont.
The new supply is coming faster than the demand and the
market cannot absorb it. The government needs to continuously
market the destination and continue with the development of
the infrastructure and tourist attractions to increase demand.
Although the Abu Dhabi Tourism & Culture Authority (ADTCA)
announced they are to freeze the issuance of new hotel
licenses, a ercely contested market and a further decrease in
the main performance metrics in expected in 2013.
The Abu Dhabi Tourism Authority is implementing a demand
diversication plan for the tourism sector as part of the
larger Plan Abu Dhabi 2030, focusing on the development
of MICE and leisure-related infrastructure in the Emirate. Key
development projects on Yas and Saadiyat Islands, such as the
Yas Waterpark and the Louvre and Guggenheim Museums, are
seen as a positive step forward as they will increase leisure-
related demand. These attractions should develop Abu Dhabi
as an all-inclusive destination providing greater stability in
the future as it diversies demand away from the traditional
markets such as corporate and government demand. However,
the consensus of hoteliers in the Emirate is that material
improvements in the key performance parameters are not likely
to occur until 2014/15.
In this context, it is important to highlight that the ongoing
uncertainties and a potential slowdown of the economies in a
number of the countries in the Euro-zone could pose a downside
risk on arrivals from Europe, which represents one of the most
important feeder markets for inbound tourists for the UAE.
However, the UAE has cemented its position as a safe oasis
within a turbulent region and continues to be considered one of
the preferred places in MENA for leisure and business.
Hannes Schied
VIETNAM
SITUATION REPORT
2012 was a tough year for Vietnam, albeit an improvement over
the sky-high ination endured in 2011 (reaching 23 % at its peak
in August). GDP growth for the rst three quarters of 2012 was
4.73 %, down by one percentage point YoY, due to slowdowns
in manufacturing, business transactions and consumption.
Such growth was below the governments target of 5.5 % for
the year. However, success was achieved in slowing ination by
almost half, though not quite reaching the goal of single digits.
The hotel and tourism sector was negatively affected by the
poor economic conditions. According to STR Global, for the
rst nine months of 2012, the Vietnam hotel market recorded
decreases in both occupancy (by 0.7 %) and rate (by 4.7 %),
resulting in a RevPAR decrease of 5.4 % YoY.
The Ho Chi Minh City (HCMC) market followed the national trend
with negative growth in all aspects, mainly due to the opening
of 3 new hotels : StarCity, Nikko Saigon and the Novotel Saigon.
In contrast, the Hanoi market recorded a growth rate of 6.3 % in
occupancy, resulting in RevPAR growth of 4.4 % YoY.
TOP-TIER VERSUS UPPER-TIER HOTEL MARKETS IN HCMC
AND HANOI
Source : STR Global, 2012
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
2007 2006
A
D
R
2008 2009 2010 2011 Sep YTD
2012
50
100
150
200
250
Hanoi Upper-tier HCMC Top-tier
HCMC Upper-tier Hanoi Top-tier
From 2006 to 2009, the gap in ADR between the top-tier hotel
market in HCMC and Hanoi ranged between US$ 15 and
US$ 41, mainly because the top-tier hotel market in HCMC
developed earlier than in Hanoi, while the opening of the
Park Hyatt Saigon contributed to the rate surge. From 2010
to September YTD 2012, with Vietnams economy on the
skids, the top-tier market in HCMC experienced a decrease in
business travellers, resulting in a decreasing rate gap of about
US$ 24-27.
In contrast, the Hanoi upper-tier hotel market prior to 2009
achieved higher ADR than in HCMC. However, since that time,
a large inux of new upper tier supply in Hanoi, such as the
Crowne Plaza West, Grand Plaza Hotel, Hotel De LOpera, and
the Mercure La Gare, has negatively impacted room rates as a
result of competitive rate discounting.
OCCUPANCY (%)
HOTELyearbook2013
Promising ! cont.
2007 2006 2008 2009 2010 2011 Sep YTD
2012
40
60
80
100
Occupancy rates across the top and upper tier markets
follow a similar trend from 2006 through 2012, with the peak
experienced in 2007, and the dip in 2009, in the immediate
aftermath of the GFC. Occupancy rates have generally improved
since 2009, except for Hanois upper-tier market, due to the
inux of new supply. By September 2012, the top and upper tier
markets converged around the 62 % mark.
REVPAR
NEW SUPPLY
An emerging trend in 2012 was the expansion of local
investment in the top and upper tier segments of the market
with acquisitions of Victoria Hotels & Resorts and new
development by the Vin Group. At the time, the addition of new
and high quality hotels with international branded hotels, such
as the Pullman in HCMC, Hyatt Regency and InterContinental in
Da Nang and MGallery in Hanoi, is helping to enliven Vietnams
hotel product offerings and inducing new arrivals.
VISITOR ARRIVALS
Source : General Statistics Ofce of Vietnam
Chinese tourists continued to dominate international arrivals in
2012, accounting for nearly 1 million arrivals, or 21 % of total arrivals
(as of September YTD 2012). South Korea and Japan were the
second and third top source markets comprising 11 % and 9 % of
total arrivals, respectively. In terms of YoY growth, however, China
remained unchanged, while Japan and South Korea recorded
increases of 26 % to 40 %, mostly associated with the continuous
growth in investment in Vietnam from these two countries.
OUTLOOK FOR 2013
With the opening of Myanmar and the expansion of low cost
carrier routes around the region, including such additional
emerging markets as Cambodia and Laos, the attractiveness of
Vietnam as an authentic and cultural Southeast Asian country
has been affected. In addition, the repeat factor for Vietnam is
much lower compared to Thailand, Malaysia, and Singapore.
Without more incentives and promotion from the government
and tourism authorities, it will be challenging to increase the
number of leisure travellers over the near term.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
2007 2006 2008 2009 2010 2011 Sep YTD
2012
30
60
90
120
150
0
1000
2000
3000
4000
5000
6000
7000
1
9
9
5
1
9
9
7
1
9
9
9
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
2
0
1
1
-20
10
20
-10
0
30
40 %
Growth (%) Foreign arrivals
At the same time, increases in corporate travellers will largely
be contingent on improvement of the economy, especially lower
ination, and regaining investor condence. Curbing ination and
stabilizing the economy are the governments top priorities for
2013, with economic growth and ination both targeted at 6 %.
With economic recovery far from guaranteed, the number of
new hotel openings in 2013 is expected to strain occupancy and
rate performance further. Such new hotels entering the market
in 2013 include the InterContinental Landmark (359 rooms),
JW Marriott (450 rooms), Hilton Garden Inn (86 rooms), Novotel
Ciputra (250 rooms), Mercure Hado (380 rooms) and Holiday Inn
Dong Da (300 rooms) in Hanoi ; and Le Meridien (350 rooms)
and Pullman Saigon Centre (300 rooms) in HCMC.
Overall, Vietnam is facing an arduous year ahead in 2013.
However, on the ip side, more international branded and high
quality hotel products are expected to help induce tourist arrival
growth, while providing important infrastructure for supporting
the countrys tourism growth going forward. If the rest of the
countrys infrastructure development (transport and utilities)
can keep pace, Vietnam will be well placed to utilize its tourism
resources as a driver for economic recovery.
Van Phan
PHILIPPINES
SITUATION REPORT
2011 turned out to be another milestone year for tourism in
Philippines. Visitor arrivals to the country totalled 3.9 million,
breaking the record 3.5 million set in 2010 and surpassing the
3.7 million target set by the Department of Tourism. Korea was
the largest source market (24 %), followed by the US (16 %).
Other major source markets include China (6 %), Taiwan (5 %)
and Australia (4 %).
The buoyant performance can be attributed in part to strong
corporate travel, driven by domestic and foreign investments
following the improved political and economic environment.
Much to the delight of investors, the governments concerted
efforts to eliminate corruption and improve scal management
earned the country a credit rating upgrade from S&P from BB to
BB+ (one spot below investment grade). Remittances of Filipino
foreign workers were also pivotal in boosting consumption and
encouraging domestic travel.
Not surprisingly, the robust visitor arrivals performance
translated to a better hotel market. According to STR Global,
ADR grew by 4 % (PHP 5,715) while occupancy improved by
1 percentage point (to 71 %). As a result, RevPAR grew by a
reasonable 5 % (PHP 4,070) in 2011, while as of YTD September
2012, RevPAR is up a further 2.5 % YoY.
Other than the limited supply of international class hotel
products, tourism infrastructure remains a major hindrance to
growth. The international airport in Manila, the main gateway
to the country, is operating at full capacity. Although several
alternatives are being considered to ease congestion at
the airport, including transferring some ights to Diosdado
Macapagal International Airport in Clark and building a
new airport, there are no denite solutions in the works at
the moment.
OUTLOOK FOR 2013
While caution on the outlook is warranted due to global
economic uncertainties and Metro Manilas outdated tourism
infrastructure, no signs of an impending slowdown are currently
evident. As of YTD August 2012, visitor arrivals reached 2.9
million, eclipsing the previous years gures by almost 10 %,
with the majority of source markets posting positive growth.
Although market RevPAR growth YTD is moderate, RevPAR
71
70
HOTELyearbook2013
Promising ! cont.
There has been a drought
in new big name hotel
supply in Metro Manila
for some time
growth among the upper upscale and luxury hotel segments is
trending higher.
There has been a drought in new big name hotel supply in
Metro Manila for some time. The last time a major international
chain hotel entered the market was in 2009 (with the opening of
the Marriott). However, a number of strong players are expected
to enter the market, including Fairmont (2013), Holiday Inn
(2013), Shangri-La (2014) and Grand Hyatt (2015).
Additional considerations supporting a positive outlook include :
The Pagcor Entertainment City, an ambitious integrated
casino project in Manila Bay consisting of numerous hotels,
casinos and entertainment facilities, is nally under way.
Solaire and Belle Grande Manila, two of the four companies
authorized to develop hotels and casinos may open their
casinos as early as 2013.
The Department of Tourism has launched a new branding and
destination marketing campaign which is so far generating a
consistently positive response.
The current administrations continued efforts towards
eliminating corruption and creating a more attractive
environment for foreign direct investment.
Overall, the outlook for the market remains positive as the
Philippines, especially Metro Manila, appears to have the
fundamentals to propel the industry to another record year
despite all the uncertainties surrounding the global economy.
Jerome Siy
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
S
I
A
-
P
A
C
73
72
On the upswing ?
OUR REGIONAL OUTLOOK CONTINUES WITH A LOOK AT KEY MARKETS IN THE WESTERN HEMISPHERE. HORWATH HTL
HAS PROVIDED AN IN-DEPTH LOOK AT THE PROSPECTS FOR 2013 IN THE USA, BRAZIL AND THE CARIBBEAN.
R E G I O N A L O U T L O O K : T H E A M E R I C A S
HOTELyearbook2013
USA
SITUATION REPORT
As the worlds largest economy, much of what happens in the
United States is felt worldwide. This is why there is great concern
both in the US and elsewhere over the expanding size of this
countrys national debt, which has now topped US$ 16 trillion and
is currently expected to climb higher. Given the recent election
results, it appears that much of the gridlock experienced in
Washington will continue. The looming scal cliff, so often
discussed these days, does not appear to be going away but
rather becoming a reality if Congress does not act before the
end of 2012 to avert a potential double-dip recession. Genuine
concerns remain on the part of most economists that action
needs to be taken quickly to cut the decit spending and/or
increase revenues, or the country could indeed experience a
second recession, which may in fact be more severe than the last.
While the national debt situation appears to be dire, there does
appear to be some positives in the economy. Current annual
real GDP the overall output of good and services produced by
labor and property in the USA increased at an annual rate of
2 % as of the third quarter of 2012, according to the Commerce
Departments Bureau of Economic Analysis. This represents an
increase over the annual estimate in the third quarter of 2011,
which was 1.6 %. Also the national unemployment rate which had
been hovering close to 9 % for much of the past 3 years is currently
just below 8 %. While a positive sign, it is still nowhere near the 4 to
5 % the country needs for a return to a healthy economy.
All in all, given the rather poor economic environment prevalent
throughout the USA, 2012 has not been all that bad of a year
for the lodging industry. Hotels may still end up outperforming
other forms of real estate investments including ofce, retail and
industrial sectors. Increases to the standard lodging metrics of
occupancy, ADR and RevPAR for the year can be attributed in
large part to increased business travel. Certain regions and/or
states have been enjoying better than average business due to
better than expected economic conditions experienced in these
areas. These include states like North Dakota, South Dakota
and Oklahoma, which are developing newly discovered energy
sources, and the Midwestern section of the country which has
seen a reemergence of its manufacturing sector.
Any growth in rooms demand registers as signicant due to
the fact that there are minimal hospitality developments in the
supply pipeline. Regardless of demand growth, the relatively low
increases to supply will aid owners and operators in driving up
ADRs at their properties, which have been severely depressed
since the beginning of the economic downturn in 2009.
While there have been some gains in hotel transactions, they
have not been substantial and are nowhere near pre-recession
levels. Buyers and sellers have come together somewhat, at
least to a point where there have been more sellers willing to
place their properties on the market. Investors continue to seek
upscale hotels as well as select service properties with major
brand afliations located in primary markets. Financing for
these projects remains available at what could be considered
attractive terms by historical comparison. Loans can presently
be obtained with 10 year terms, amortized over 20-25 year
periods with interest rates in the 5 % range. Loan-to-value ratios
are in the 70 to 75 % range which requires a rather sizeable
equity investment. Smaller transactions of under $10 million are
still being nanced by the Small Business Administration, also at
generally acceptable terms.
OUTLOOK FOR 2013
Supply will remain a non-issue for 2013 as very few projects
have come to fruition in the past year and projects on the
drawing board are substantially less than a year ago.
Assuming another recession can be avoided, occupancy is
expected to improve, albeit at a slower pace than in 2012,
resulting in a projected increase of less than 0.5 %. Due to
the low growth of supply, ADRs are expected to strengthen in
2013 by less than 5 %, leading to an estimated RevPAR growth
of approximately 5 %. The majority of this RevPAR growth
is expected to occur in the primary cities, with only minimal
growth in secondary and tertiary markets.
Mark S. Beadle, CHA and Joel W. Hiser
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
M
E
R
I
C
A
S
Boca Raton Resort & Beach Club
Courtesy Richmond International
BRAZIL FDI IN 2000/2011 (US$ BILLIONS)
Source : Brazil Central Bank
International tourism demand continued to grow steadily in
2011, and it is expected that Brazil will reach a total of 6.2
million international tourists by the end of 2012. Despite the fact
that international tourism demand shows a constant growth
over the last years (except for 2009), Brazils tourism and hotel
industry relies mainly on the domestic market. As for the cities,
BRAZIL
SITUATION REPORT
Macroeconomic projections for Brazil and other countries in the
Region seemed optimistic at the beginning of 2012. However,
these expectations were not reached throughout the rst
semester. The national GDP growth was modest : 0.8 % for the
rst and 0.5 % for the second semester.
However, the limited growth of the economy did not hit
investment in the hotel and tourism sector. The resources
arranged by the federal banks for the tourism industry
presented a 13.3 % increase during the rst semester of 2012
in relation to 2011. Financial institutions spent a total of R$ 2.02
billion to fund retrot, modernization and implantation of
tourism projects.
Moreover, Foreign Direct Investment in the country (FDI)
continues to grow signicantly. In 2011, a total of US$ 75.95
billion was invested in Brazil by foreign companies, accounting
for 2.7 % of the countrys GDP.
USD billions % of GDP
10
0
20
30
40
50
60
70
80 6
5
4
3
2
1
0
2000 2002 2004 2006 2008 2010
% USD
75
74
HOTELyearbook2013
Rio de Janeiro remains the top international tourism destination,
while So Paulo attracts more than 50 % of the international
tourists in the business and MICE segments.
INTERNATIONAL TOURIST ARRIVALS TO BRAZIL
INTERNATIONAL TOURISM
MAIN LEISURE DESTINATIONS 2011
INTERNATIONAL TOURISM
MAIN BUSINESS AND MICE DESTINATIONS 2011
Source : Brazil Ministry of Tourism / INFRAERO
0
1
2
3
4
5
6
7
2006 2004 2002
M
i
l
l
i
o
n
s

o
f

t
o
u
r
i
s
t
s
* Forecast
2008 2010 2012*
Rio de Janeiro, 26 %
Foz do Iguau, 20 %
Florianpolis, 20 %
So Paulo, 11 %
Salvador, 7 %
Other destinations, 16 %
So Paulo, 52 %
Rio de Janeiro, 24 %
Curitiba, 5 %
Belo Horizonte, 4 %
Porto Alegre, 4 %
Other destinations, 11 %
On the upswing ? cont.
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
M
E
R
I
C
A
S
The hotel sector is experiencing a good period, maintaining
an adequate level of occupancy rates (around 65 %) and an
escalating ADR, resulting in a rm growth of RevPAR over the
last years.
OCCUPANCY RATE, ADR AND REVPAR MAIN SOUTH
AMERICAN MARKETS YTD (YEAR TO DATE AUGUST 2012)
Source: STR Reserach
Occupancy rates are showing a slight slowdown (-2.6 %)
compared to 2011, though the 2012 numbers could grow,
considering that the second half of the year tends to present
higher occupancy rates in most of the markets. However, the
signicant increase of ADR during the rst half of 2012 (over
12 % when compared with 2011, and 17.6 % when compared
to the rst half of 2011 ) represents an increase of almost 7 %
in RevPAR compared to last year and 13.6 % in relation to the
same period (January-June) in 2011.
OCCUPANCY RATE, ADR AND REVPAR BRAZIL 2007-2012
YTD (YEAR TO DATE JUNE 2012)
Source : STR Research / FOHB (Brazilian Hotel Operators Forum)
In general terms, the hotel market in Brazil is going through
a growing and consolidation phase that comprises diverse
processes including :
The increasing participation of foreign capital/investors
in the hotel industry. Major players, mainly from the United
States and Europe, are starting to establish alliances and
business platforms with local partners (developers, hotel
chains, real estate companies, etc.) to enter into the hotel
industry through the development of portfolios oriented to
urban midscale and budget hotels.
Development of international hotel chains. Seeking
opportunities in major capital and primary cities to develop
upscale and luxury brands that are still not present in Brazil,
and in secondary and tertiary cities to develop their budget
and/or limited services brands. Secondary and tertiary
markets also might result in interesting options to develop the
Argentina Brazil Colombia Chile Peru
Average daily rate (US$) RevPAR (US$)
0
50
100
150
200
70%
0%
10%
20%
30%
40%
50%
60%
80%
90%
Room occupancy
A
D
R
/
R
e
v
P
A
R
O
c
c
u
p
a
n
c
y
0 0
10
20
30
40
50
50
100
150
200
250
60
70
2009 2007 2008 2010 2011 2012*
RevPAR (R$ - local currency) ADR (R$ - local currency)
A
D
R
/
R
e
v
P
A
R
O
c
c
u
p
a
n
c
y
Occupancy (%)
77
76
HOTELyearbook2013
hotel chain portfolio of brands through franchise agreements.
Expansion of Brazilian hotel chains. Considering the
relevance of the domestic market, local hotel chains have
achieved signicant growth, understanding the needs of
Brazilian guests and being exible and fast in developing long-
term and territorially-based partnerships with local developers
and real estate companies.
Management and commercialization professionalization.
Though there is a long way to go in this aspect, the
development of the international and national hotel chains is
pushing the market (including the independent hotels) to
standardize processes and establish professional parameters
to deal with sales, reservations, management and other
operational issues.
Real estate business as a funding option. Despite some
credit lines offered by federal banks and the incipient entrance
of capital funds in the market, many hotel properties in Brazil
are developed through the condo-hotel nance structuring.
This means that hotels compete with other real estate
products in the market, such as ofces, residences or retail,
and become part of mixed use projects including two or more
real estate products.
OUTLOOK FOR 2013
The Brazilian economy is expected to grow at higher rates over
the next year. Within this growth, investment and development of
the hotel sector will continue their consolidation process regarding
the arrival of new products and brands to the markets and an
increasing volume of international and domestic tourism demand.
Occupancy rates should maintain an adequate level, considering
the growth of the market and the projected addition of rooms
in most of the primary, secondary and even tertiary cities. As
for ADR and RevPAR, the market demand and the upcoming
major sports events (FIFA World Cup 2014 and Rio de Janeiro
Olympics in 2016) will keep pushing the rates. The incidence of
these events will be higher in primary and capital cities, whereas
the general growth of regional and local economies will have a
larger impact in secondary (500,000 to 2,000,000 inhabitants)
and tertiary cities (200,000 to 500,000 inhabitants).
Taking into consideration the main segments of the hotel
demand, we could expect the following :
Business. This will remain as the most important segment
for hotel demand in most of the primary (excluding Rio de
Janeiro) and secondary cities, considering Brazils economic
growth, infrastructure development and other general aspects
that will continue boosting lodging demand.
MICE. This is expected to be the most dynamic segment of
the demand. Along with the increasing number of international
events hosted in the country, Brazil has a signicant domestic
market that generates an important inux of guests in some
cities that have developed adequate infrastructure and
transport connectivity.
COUNTRY RANKING HOSTING OF INTERNATIONAL
CONVENTIONS AND EVENTS 2011
Ranking Country
No. of
events
Ranking Country
No. of
events
1
United
States
759 11 Canada 255
2 Germany 577 12 Switzerland 240
3 Spain 463 13 Japan 233
4
United
Kingdom
434 14 Portugal 228
5 France 428 15
Korean
Republic
207
6 Italy 363 16 Australia 204
7 Brazil 304 17 Sweden 195
8 China 302 18 Argentina 186
9 Netherlands 291 19 Belgium 179
10 Austria 267 20 Mexico 175
Source : ICCA - International Congress & Convention Association
Leisure. Even though the increase of international tourists
could impact this segment, tourism demand linked to leisure
will remain mainly domestic. On the other hand, though the
local currency (the Brazilian Real) has experienced signicant
depreciation over the last year, some destinations still remain
expensive both for the foreign and the domestic tourist,
resulting in other leisure destinations possibly looking
more attractive.
Mariano Carrizo
THE CARIBBEAN
SITUATION REPORT
By the end of 2012, we estimate that tourist arrivals to the
Caribbean will be around 25 million, a growth rate of 5 % on
the previous year, as Caribbean tourist arrivals until the end of
September 2012 have increased by 5.11 % compared to the
same period last year. This is encouraging news for the region
as it approaches its high season of December-April, when the
majority of tourists come to the Caribbean to escape the cold
winters of North America and Europe.
For 2012, we estimate that the Caribbean will hold a tourist
arrivals market share of 2.3 % and annual tourism receipts
of US$ 24.2 billion, both higher than for other significantly
larger regions around the globe (i.e. Central America, North
Africa, Oceania and South Asia , as defined by the UNWTO),
demonstrating the strength of the Caribbean as a worldwide
tourist destination that has achieved consistent market shares
of between 2-3 % for the previous 30 years. This high market
share is important for the region as it holds the highest
tourism contribution to GDP than any other region around
the world, with an estimated total contribution to GDP of
13.9 % (US$ 47.1 billion) for 2012 and a total contribution to
employment of around 2 million jobs, representing 13 % of
the working population. Additionally, the Caribbean is currently
the 6th highest region in the world for receipts per tourist
arrival, which signifies a clear indication of the sustainability
of the tourism industry of the region and the spending power
of its visitors.
For 2012, the real GDP growth rate is expected to rise to
2.8 %, a slight increase on the previous years growth rate
of 2.7 % and a clear sign that the economy of the region is
H
O
T
E
L

M
A
R
K
E
T

O
V
E
R
V
I
E
W

:

A
M
E
R
I
C
A
S
79
78
HOTELyearbook2013
performing better while there are still some improvements to
be made, considering that the growth rate in 2010 was 3.4 %.
Estimated tourism arrivals for 2012, based on early indications,
show that the most visited tourist destinations in the Caribbean
will be the Dominican Republic (4.6 m visitors), Cuba (2.9 m
visitors), Jamaica (2.0m visitors), Puerto Rico (1.6 m visitors)
and Bahamas (1.4 m visitors). These ve countries will represent
around 68 % of the tourist arrivals to a region of 33 countries
and four European languages.
For the main market sources of tourist arrivals to the Caribbean,
we estimate by the end of 2012, the USA will provide 44 % of
all stopover arrivals. Europe will be the next largest contributor
of Caribbean arrivals, providing 19 %, with Canada just behind
with 15 %. This demonstrates how much inuence the North
American market has on the Caribbean tourism industry as it
consistently provides around 60 % of all arrivals to the region
each year.
PROJECTED CARIBBEAN MAIN MARKET TOURIST ARRIVALS 2012
The major destinations participating in the hotel room supply
in the Caribbean include the Dominican Republic with over
64,000 rooms, Cuba 46,000, Jamaica 32,000, Bahamas 15,000
and Puerto Rico with 14,000 rooms. Based on our analysis, we
also estimate an average hotel occupancy of 66 % for 2012 for
the Caribbean, representing an average increase of 3 % on the
previous year. The main hotel average occupancies,
as of September 2012, were Puerto Rico (76 %), Dominican
Republic (73 %), Bahamas (73 %), Cuba (56 %) and US Virgin
Islands (53 %).
THE OUTLOOK FOR 2013
The outlook for the Caribbean for next year is a cautiously
promising one with continuing opportunities for new tourism
developments. One example of continued growth in the region
is the development of the Baha Mar Resort & Casino in the
Bahamas partnered by the Bank of China, which is constructing
the regions largest casino and spa, as well as 2,250 rooms
spread over four internationally branded hotels to be opened in
late 2014. This Caribbean landmark is estimated to cost US$
3.5 billion and bring such a boost to the nations economy that
its GDP could increase by 10 %.
The majority of the new hotel developments in the Caribbean
are falling into the luxury, upper upscale category, indicating the
high investment levels of the Caribbean tourism industry and the
condence of the developers and promoters in the region.
However, there are some warning signs for the year ahead, as
the whole Caribbean is vulnerable to the developing Eurozone
crisis, and Caribbean governments are tackling scal decits
and mounting debt through further austerity measures. On the
positive side, Foreign Direct Investment (FDI) from regions that
suffered less from the economic crisis such as China, Canada
and Latin America is expected to increase, and as long as oil
prices remain relatively steady and the US economy continues
to recover, tourist arrivals from the main market of the US are
likely to improve into 2013.
The outlook for the Caribbean hotel and tourism industry shows
a picture of continuing strength and increasing investments and
opportunities for the near future.
Sotero Peralta
USA, 7,8 m, 44 %
Canada, 2,7 m, 15 %
Europe, 3,3 m, 19 %
Others, 3,7 m, 21 %
www.horwathhtl.com
Horwath HTL - the global
leader in hospitality consulting
Horwath HTL is the the worlds number one hospitality consulting firm and
are the industry choice; a global firm offering complete solutions, in markets
both local and international.
Over the last 20 years, and through involvement in thousands of projects,
we have amassed extensive, in-depth knowledge and understanding of
the needs of hotel and real estate companies and financial institutions.
With 50 offices across 39 countries - whatever your requirements,
large or small, national or global, Horwath HTL can help you succeed.
2011 Crowe Horwath International. All rights reserved. Horwath refers to Horwath International Association,
a Swiss Verein. Each member of the association is a separate and independent legal entity.
Horwath HTL Ad AW:Horwath HTL 22/11/10 12:31 Page 1
81
80
C H I N A
China marches on
HOTELyearbook2013
CHINAS HOSPITALITY INDUSTRY IS REAPING THE REWARDS OF THE CURRENT TOURISM BOOM. ANALYSTS ARE
REPORTING POSITIVE MARKET PERFORMANCE AND RECORD HOTEL CONSTRUCTION PIPELINES. IS THIS LEVEL OF
GROWTH SUSTAINABLE ? WE ASKED GIOVANNI ANGELINI, RETIRED CEO OF SHANGRI-LA, FOUNDER OF ANGELINI
HOSPITALITY AND VICE CHAIRMAN-ADVISOR TO DUSIT OVERSEAS COMPANY, FOR HIS SEASONED PERSPECTIVE.
Lets look at some facts. In 2010, China replaced Japan as the
second largest economy in the world, and over the next decade
is expected to overtake the USA as the largest economy in
purchasing power parity terms.
In March 2011, the National Peoples Congress approved
the 12th Five-Year Plan for National Economic and Social
Development, and one of its most remarkable features is the
lowering of the target growth rate from 7.5 % per annum to 7.0 %
per annum, at a time when the actual rate (i.e. the one in the
11th ve-year plan) was around 11 %. Another signicant feature
of the plan is to shift the economy from being export-oriented
to being domestic demand-oriented, encouraging investments
in all domestic sectors, from huge public infrastructure projects
(roads, high-speed rail systems, increasing the number of
airports from 175 to 225, ports, education, housing, etc.) to
local-daily consumption and that is positive for the hospitality
industry in general. Relevant features of the plan also include
boosting employment, raising minimum wages and encouraging
more spending. A gradual and continued appreciation of the
Renminbi is also expected. The World Bank forecasts that in
2012, Chinas growth will stand at 7.4 %, which is the lowest in
more than a decade but higher than the target of 7.0 % and
indications are that the slowdown is bottoming out.
China appetite for foreign goods and investment continues
to grow, in particular for natural resources and quality assets
around the world. As reported by the Wall Street Journal, $225
billion, or 3 % of the nations economic output last year, was
spent outside China. This is expected to continue in the future.
Hotel assets are also targets and in demand.
TOURISM
Outbound Chinese travelers are expected to number close to
80 million in 2012, reaching 100 million by 2017-18. Chinese
tourists have become a major target for destination marketing
groups and tourist organizations around the world. Chinese
consumers are eager to venture forth and to spend.
HOTEL PERFORMANCE 2012 VS. 2011
A recent survey shows that the overall sentiment remains
optimistic but with some caution. Little change is expected
in occupancy percentage by year-end as compared to the
previous year, while the ADR is anticipated to increase but not
by more than a single-digit rise. A similar situation is anticipated
for 2013. Overall there should be an increase on RevPARs.
NEW HOTEL DEVELOPMENT SUPPLY
Chinas hotel development is booming, and there are
continuous announcements of new projects and/or new
international groups/brands entering the country. With close to
350,000 new hotel rooms in planning, design and construction
stages as of mid-2012 throughout China, this puts additional
pressure on the existing supply. A good percentage of the new
supply comes from economy-rated local/China-based groups
like Home Inns, Jin Jiang Hotels, 7 Days Inn and others. Every
major hotel brand is claiming that it will double the number
of properties in the coming years. So far mostly mixed-use
hotel projects, sanctioned by the government, have been in
major cities, but the smaller cities represent a better business
opportunity in the near future. To be noted : while foreign hotel
brands are dominating the present operation of the rated (i.e.
4 & 5 star) hotels in China, it is expected that the worlds next
big hospitality brand success stories may come from Chinese
owned and operated hotels.
DEMAND
Fostered by a good education system, entrepreneurial
aspirations and increased business opportunities, Chinas
discretionary income has seen a dramatic increase, and the
tourism industry has been gaining momentum for the past
two decades. It is now ranked third in the UN World Tourism
Organizations list of most popular travel destinations, expecting
to attract 62 million incoming visitors in 2012. In addition,
one must take in consideration the enormous potential of the
domestic market, with its ever-growing middle class of over 300
million people, expected to grow to 800 million within 15 years.
Can anyone put a number on the room-nights per year that this
class will generate for the hotels ? (In 2012 there were 3.1 billion
domestic tourists, a 12.8 % increase over 2011, as reported by
the China Tourism Academy). The aggressive growth in supply
is expected to balance the growth in demand, and overall there
is optimism that demand will catch up, especially from the newly
afuent middle class.
LABOR AND TALENT
Employee productivity and retention are proving to be an
Increasing challenge. Labor costs have become the single
highest operating expense in a hotel. Optimizing organizational
structure, effective forecasting and planning for employees
needs have become critical for management/operators.
Knowledge of the labor sources and understanding how
to attract and retain qualied talent is a basic requirement.
Availability of qualied labor/talent is the most challenging
element for hotel operators in China at the present time.
CONCERNS FOR OPERATORS
One trend that international brands operating in China will nd
concerning is that local owners/developers are getting more
litigious and demanding, and they have no hesitation at all
to terminate management agreements without proper notice
and/or compensation. In 2013, operators without an equity
investment in their hotels will have to be on the watch to ensure
that their interests are protected and that they are compensated
in a termination situation. As Chinas economy and hotel market
evolve, developing a comprehensive and active strategy to
protect and enhance the hotel asset will become one of the key
focuses of the industry.
IMPORTANCE OF SOCIAL MEDIA
Online research has become very important for Chinese
consumers, including hotel users. However, ofine travel agents
are still the dominant distribution channel, even though online
channels are growing very fast. China has a huge appetite for
social media and is on the way to become the biggest social
media-savvy country in the world. Users have increased from
20 million in 2000 to 510 million in 2012 : this represents 25 %
of all the Internet users on earth. Here some useful websites
related to hospitality business :
Chinatraveltrends.com : a useful one-stop resource for
information on current tourism, consumer trends, social
media, digital marketing and important information on
outbound tourism travelling out of China. (site in English)
Dragontrail.com : for interactive marketing and social media
strategy
China-outbound.com : COTRI, the China Outbound Tourism
Research Institute, is a leading advisory and resource rm
assisting travel and tourism organizations cater to Chinese
tourists. (Site in English and publications/books available for sale)
Tripshow.com : travel social network platform
Tencent.com : most used Internet service portal (mobile)
Baidu : web search engine (Chinas equivalent of Google). It
has huge market share.
Renren and Kaixin001 : social networking services (the
equivalent of Facebook)
Sina Weibo : microblogging (the equivalent of Twitter)
Youku : video hosting service (the equivalent of YouTube)
Taobao.com : buying online
Popular Chinese Web sites attracting over 50 million as of
second part of 2012 include Qzone, PengYou, Taomee, 51.com,
Renren, Kaixin001, Sinaweibo, Tencentweibo and new ones fast
approaching this volume. (It is interesting to note that, despite
the censorship of Western social networks in China, there are
over 60 million users of Facebook and 35 million for Twitter
as reported by GlobalWebIndex. Apparently, those banned
networks can be accessed through virtual private networks.
The largest active OTAs in China are Ctrip, Qunar, Kuxun, 17u,
Trip TaoBao, Elong, and go.qq.com. (Note that Ctrip is also
active in booking hotels outside China.)
H
O
T
E
L

M
A
R
K
E
T
S
83
82
C H I N A
China marches on cont.
CENTRAL GOVERNMENT LEADERSHIP SUCCESSION
Under a solid central government and shrewd leadership,
China has seen a period of rapid economic expansion
and relative political stability. With its ef ficient collective
leadership, past dif ferences over power and policy have
been fought out behind a rigorously sustained public face
of leadership, unity and discipline. But, as expected (and as
encountered at every leadership succession, about every
10 years), signs of a power struggle within the members
of the Politburo and high of ficials representing the central
government have created unfavorable speculations, rumors
and public frustration about the partys culture of secrecy.
The recent, extensively reported downfall of a high-ranking
of ficial has added to the speculations. It is expected that all
this will be put behind us once the new, less authoritarian
leadership is fully in place, and this vast country of over
1,347 million people (over 50 % of them living in cities) will
continue its march toward growth, expansion, and prosperity
and become the largest economy in the world. With its
staggering trade surplus, monetary reserves and non-
reliance on foreign borrowing, it is anticipated that China will
be able to handle all its major economic issues, including
troubles in the banking sector and bad debts on the books of
regional government.
A RETURN TO CONFUCIAN DOCTRINE ?
This will be an interesting and important trend to watch in
2013. Born and centered in Qufu, Confucius is credited with
promoting a social hierarchy in which roles are strictly dened.
Students defer to teachers, children revere elders, wives serve
husbands, and citizens obey rulers unless they become
abusive. China needs something to ll its moral vacuum, and
indications are that government ofcials hope to make good
use of Confucianism but they also fear criticism for reviving it.
The governments critics are divided over the Confucius revival ;
others see the comeback as a mixed blessing, but overall
it is seen as a more positive than negative change. Ofcials
are hoping for a mix of nationalism and Confucianism to glue
together Chinas tattered social fabric.
WANT TO DO BUSINESS IN CHINA NEXT YEAR ?
Then you must consider the following :
Develop a local partnership that can assist with local issues. A
foreign entity alone will not succeed in China, especially at the
initial stage.
Get familiar with, and ready to cater to, the Chinese consumer
and plan accordingly.
Use the Internet, mobile and social media to market to the
local consumer. Website hosting in China is very important
and ensure that proper Mandarin language is used, not a
translation from English (this is a traditional mistake made by
most foreigners).
Develop relationships and participate in, and support,
industry-related organizations.
Understand and respond to fast-changing consumer trends.
Respect the local culture, rules and habits. Be accepted.
Develop and implement operating standards based on local
trends/needs, not only international trends.
Be prepared for, and budget for, continuous increases in labor
costs. You must train employees and compensate them well
with an objective to retain them, thanks to the shortage of labor.
Dont expect quick results : plant today and harvest in ve
years. Be patient and perseverant in China.
THE FUTURE
The biggest event of our time is the very strong re-emergence
of China and what it has achieved during the past three
decades. Given the huge importance of this event, a lot has
been written/commented, and it is interesting to observe two
parallel narratives, an Eastern one and a Western one.
The West maintains that China will not be able to support
its planned growth, and it will consequently face economic,
political and social difculties. The East believes that the new
leadership taking over in November will inject new drive and
dynamism in the country, creating reforms and a rule/bonus
system that is strong, durable and not vulnerable. This will have
a direct positive impact on the future of the country.
Who is right ? Where will you put your money ?
HOTELyearbook2013
85
84
SITUATION REPORT
International tourist arrivals in South Africa are estimated to have
increased by approximately 10.5 % in the rst seven months of
the year (Overseas : +16.4 % ; Africa : +8.5 %). Domestic tourism
is estimated to account for about 70 % of the total visitor
market and about 35 % of total tourism spend. Yet in spite of a
weaker domestic economic outlook and moderating domestic
visitor market, the South African hotel market has shown some
evidence of a recovery in 2012.
Year-to-date RevPAR has increased by an estimated 13 %, in
South African Rand terms, to approximately ZAR 497 according
to STR Global; this increase in RevPAR can be attributed to
growth in both room night demand (+5 %) and average room
rate (+4 %). While RevPAR is comparable with that registered
in respect of the same period in 2009, the South African hotel
market continues to operate below pre-recession RevPAR
performance levels registered in respect of the same period in
2008 (-7 %).
South African hoteliers nd themselves operating in a high
ination trading environment where input costs (in particular
food, labor, utilities, and fuel) continue to escalate at above
ination rates (ination is estimated at 5.5 % whereas GDP
growth is estimated at 3.2 %). As a result, hotel protability
remains under pressure, in particular those new-builds which
entered the market in time for the 2010 FIFA World Cup who are
required to service the projects debt funding.
Nevertheless, a pipeline comprised of approximately 13 hotel
developments exist which, if they all materialize, will result in
an estimated 1,787 additional guest rooms. Amid challenging
trading conditions in South Africa, many of the South African
hotel management companies are exploring opportunities
across the African continent where trading conditions and yields
appear more favorable.
OUTLOOK FOR 2013
Looking ahead to 2013, we expect the South African hotel
market is likely to maintain the current status quo. Uncertainty in
many of the countrys key source markets is likely to continue to
inuence international leisure travel demand. In light of the local
economic environment, we expect demand from the domestic
corporate and government demand segments to remain at
current levels. We believe that the return to growth is likely to
be slow, with hotel performance largely driven by the return of
the international leisure traveller coupled with an improved local
economic environment.
Michel de Witt
ROUNDING OUT OUR 2013 ASSESSMENT OF KEY GEOGRAPHIC MARKETS FOR THE HOTEL INDUSTRY IS A LOOK AT
SOUTH AFRICA. THE CAPE TOWN OFFICE OF HORWATH HTL CONTRIBUTES A LOOK AT PROSPECTS IN ITS OWN
BACKYARD, WHILE THE REST OF THE CONTINENT IS REVIEWED BY W HOSPITALITY IN NIGERIA. (SEE P.86)
Slow but steady
R E G I O N A L O U T L O O K : A F R I C A
Uncertainty in many of
the countrys key source
markets is likely to continue
to inuence international
leisure travel demand
2007 2008 2010 2009 2011 2012
ADR RevPAR
0
200
400
600
800
1000
1200
70%
0%
10%
20%
80%
30%
40%
50%
60%
Occupancy
A
D
R
/
R
e
v
P
A
R
O
c
c
u
p
a
n
c
y
HOTELyearbook2013
H
O
T
E
L

M
A
R
K
E
T
S
87
86
A F R I C A
With continued economic malaise in Europe, the African
continent continues to receive keen interest from the
international hotel investment community and from operators.
W Hospitality Groups annual pipeline survey, conducted at
the beginning of 2012, showed an increase in the number of
rooms in the regional and international operators development
pipelines of 21 % on 2011.
But Africas really difcult, isnt it ?
Yes, for many, Africas difcult (and tell me, wheres easy ?!),
but its a lot better than it used to be, with democratic elections
the norm now in most countries, investment in infrastructure
opening up the continents roads, railways and airports, and an
increasing number of regional and international ights.
As important are a number of fundamental socio-economic
and demographic trends that are taking place, and which are
making the international community sit up and pay attention.
Here are some :
The IMF forecasts that seven of the top ten fastest-growing
countries in the next ve years will be in Africa, and that
the average growth in Africa will be higher than the average
growth in Asia.
GDP per capita in Nigeria (on a PPP basis), the most populous
nation on the continent, and the second largest economy, has
increased from US$ 950 in 2000 to US$ 2,600 in 2011.
Ten countries Algeria, Angola, Egypt, Ghana, Kenya,
Morocco, Nigeria, South Africa, Sudan and Tunisia
accounted for 81 % of private consumption in 2011.
Forty percent of Africas population live in cities Africa has
a greater proportion of its population living in cities than India
(30 %). Spending by urban dwellers is increasing twice as fast
as rural spending, and their per capita income is, on average,
80 % higher than the country average.
While Africa has the worlds fastest growing population,
fertility rates are down from historic levels, which means
that the working age population is growing fastest, which
means further real increases in GDP per capita as well as
a decline in the dependency ratio, which means a higher
level of disposable income per capita, available to spend on
consumer goods and services including hotels.
The largest 50 cities in Africa, with 13 % of the population, are
forecast to contribute nearly 40 % of GDP growth in the next
decade.
Forty percent of the growth in spending power is forecast
to occur in households with an average income above US$
20,000.$
There are the key points, which provide the justication for
optimism about Africa : the continents population is young,
with a low dependency ratio ; it is increasingly urbanized ; GDP
growth is far higher than most of the developed world ; and
the spending class is growing by leaps and bounds.
That is the environment in which the hotel industry is operating
and growing.
The table below shows the results of our 2012 pipeline survey :
HOTEL DEVELOPMENT IN AFRICA 2012
REGIONAL SUMMARY
2012 2011 2010
Hotels Rooms Hotels Rooms Hotels Rooms
North Africa 79 17,449 75 17,038 72 16,909
Sub-Saharan
Africa
129 20,625 84 14,521 80 15,223
TOTAL 208 38,074 159 31,559 152 32,132
Of the total 38,000 hotel rooms in the regional and international
chains pipelines, only just over 10,000 or about 25 %, are in
what could be classed the budget and mid-market categories.
The main focus was on the upscale and upper upscale
categories.
The main player in the budget and midscale segments is
Accor, which is rolling out its Ibis and Novotel brands, mainly
in North Africa. Carlson Rezidor is signing deals for its Park
Inn by Radisson brand, and newcomer Onomo is developing
eco-friendly economy hotels in Francophone West Africa.
Better and better and better
TREVOR WARD, MANAGING DIRECTOR OF LAGOS-BASED W HOSPITALITY GROUP, HAS BEEN ONE OF THE HOTEL
YEARBOOKS PERENNIAL CONTRIBUTORS TRULY OUR MAN IN AFRICA. HERE ONCE AGAIN, HE CASTS HIS EYE FOR US
ON THE CONTINENTS PROSPECTS IN 2013.
HOTELyearbook2013
easyHotel, in a deal with Lonrho Hotels, is working out a plan
for 50 hotels throughout Africa, and Premier Inn, conqueror of
the UKs budget hotel sector, is making noises about entering
the African market.
The regional brands are also making moves Protea are
expanding fast in Nigeria, with 10 hotels open at the time of
writing, and at least ve under development, and City Lodge
have nally taken their category-busting brands out of their
South African comfort zone, signing a deal in Kenya.
Is this where the future hotel development opportunities lie, in
the budget and mid-market segment ? Absolutely. Is enough
being done to exploit those opportunities ? Absolutely not.
Take Nigeria, a federation of 36 states plus the Federal Capital
Territory. Between them, there are 37 state capitals, and with
a few other major conurbations, that makes around 45 decent
sized cities where hotels are needed. Of those, fewer than ten
have a branded hotel under development.
Its the future. African consumers value brands and quality. For
the most part, rightly or wrongly, local brands are considered
second-best to an international brand. Local brands are often
lower priced, but people dont necessarily want to be seen
by family and friends to be opting for the cheaper option
international brand equals quality. But affordability is, of course,
extremely important, especially in economies where consumer
credit is scarce, and it is not culturally appropriate to borrow for
consumer spending.
Not everywhere is going to see the international and budget
brands riding in and dominating the market. Like it or not,
there are some small African countries, particularly those
that are landlocked, that will not benet very much from the
increase in spending power, and the increased urbanization
of the population. For hotel industry investors, there are six
countries in sub-Saharan Africa that I believe they should focus
on Angola, Ghana, Nigeria, Ethiopia, Kenya and Tanzania.
These countries all have the scale that is required to develop
multiple hotels, and the economy to support them. South
Africa is experiencing oversupply, and at the same time has
low economic growth, a rapidly growing total population, and
structural economic challenges, so the industry consensus is
that theres not that much to accomplish there, at least in the
short term.
In North Africa, all ve countries have potential, with Egypt and
Morocco probably the most promising.
The Economist magazines 2000 headline, Africa - The
Hopeless Continent, became Africa Rising in 2011. It is
projected that, by 2020, more than 50 % of African households
will have money to spend on discretionary goods and services,
up from 85 million to almost 130 million.
A recent and fascinating survey conducted by McKinsey, The
Rise of the African Consumer (from which many of the statistics
quoted in this article are sourced), found that 84 % of those
surveyed (13,000 people in 15 cities in ten countries) believe
that they will be better off in two years time. Wow !
H
O
T
E
L

M
A
R
K
E
T
S
Badrutt`s Palace Hotel, Via Serlas 27, 7500 St. Moritz, Switzerland, Telephone: 41 (0)81 837 1000, Fax: 41 (0)81 837 2999
Reservations: 41 (0)81 837 1100, reservationsbadruttspalace.com, www.badruttspalace.com
N
o
b
l
e
m
a
n
D
e
L
u
x
e
.
c
o
m
YOUR TRADITION.
OUR SPIRIT.
S I N C E 1 8 9 6
Ms. Rita Hayworth & Mr. Hans Badrutt (Hotel Archive)
MAJ ESTI C AND ELEGANT, I N THE CENTRE OF ST. MORI TZ, AT THE HEART OF THE SWI SS ALPS.
THIS IS WHERE YOU FIND THE BADRUTT`S PALACE HOTEL. LEGENDARY, UNIQUE AND DISTINCTIVE!
S I NCE 1 8 9 6 GUES T WI S HES HAVE BEEN ANTI CI PATED AND F ULF I LLED, HOWEVER GREAT
T H E Y M AY H AV E S E E M E D . W I T H U S Y O U A R E T H E G U E S T A N D WA R M LY W E L C O M E D .
BPH_Ad_General_E_HotelYearbook_209x273_01.01:Layout 1 23.10.12 07:48 Seite 1
A Special Report from The Hotel Yearbook for Spa and Hospitality Professionals Worldwide
SPA2020
Andrew GiNoa oa thc evolving nou: of hotel: and spa:
Ingc Schweder oa thc Asianatioa of spa:
Ralph Newmaa oa challenge: ia thc US marke/
Alisoa Howland predict: thc need: and opectation:
of four generation: of spa consumer ia thc year 2020
Susic Elli: visuale: how todag: trend: migh/ shapc
thc spa busines: a decadc from now
90
I have been involved in the leisure industry since completing my
degree in Recreation Management/Environmental Conservation
in 1984. I have also had the good fortune to work in a truly
global capacity, either through my work or with the numerous
spa associations I am connected to. I have seen many changes
in a dynamic industry and very quickly saw the transition that
hotels made from leisure to spa.

In 1984, my rst venture into the business was as the opening
manager of a leisure facility next to Gatwick Airport. The hotel I
worked for proudly announced the rst 1 million leisure center
to become part of a hotel. It had squash courts, tness rooms,
a swimming pool with whirlpool, and a revolutionary bathing
suite of sauna, steam and plunge pool. It did not have any
treatment or beauty rooms, however. But what the hotel did
have was 50 ight attendants on 3-day stopovers, so we quickly
introduced a Ren Guinot salon by converting my ofces and
the administrative area.

Adaptation and continually striving to offer a better service
have been the key components of the development of spas
within hotels. I believe that the hotel spa has been able to steer
the direction of the entire modern spa industry and enabled
the day spa business to grow and the destination spa to evolve
from the initial health farm/boot camp stigma. From the late
90s, we have seen a steady development of spas throughout
the world, predominantly led by some pioneer companies and
individuals. And while I do credit the hotel industry as creating
the critical mass for the spa industry, I would also like to
acknowledge two pioneers in the destination spa business that
I have followed and admired : Deborah Szekely for the vision
and persistence to deliver health and wellness since 1946 with
Rancho Le Puerta, and Allan Wheway (with Tanya) for creating
world-renowned destination retreats such as Champneys,
Chiva Som and the Sanctuary.

The main inuences for the spa and wellness industry of
the future are being driven by the change in the way people
perceive and live for the future. The rst recognition of change in
Blurring thc line: betweea spa,
tnes:, wellnes: and beautg
How will hotel spas continue to evolve over the next ten years or so ? ANDREW GIBSON, Group Director of Spa at the
MANDARIN ORIENTAL GROUP, shares his thoughts, and in particular highlights the ever-present competition within hotels
for revenue-generating space, and how this could play out.
HOTEL SPAS I N 2020
the spa industry is that the word wellness is a familiar word in
the spa vocabulary at industry and public level. While we are still
debating what the term spa means, I suppose it will take even
longer to determine and categorize the word wellness, and I
do not attempt to add any clarity in this article.
The age of connectivity and communication thrusts everyone into
a global village. According to MobiThinking, a website dedicated
to mobile phone information, there are 5.9 billion mobile phone
subscribers, accounting for 87 % of the global population. Today,
China and India account for 30 % of the worlds subscriptions.
Our world of spa and wellness will be affected by these facts. I
do not have a crystal ball to understand all of the ramications
but I would expect it to change the way people book, the way
they pay, and the way they purchase which means that spas
must adapt. Mobile technology will also integrate more smoothly
with Internet technology. We are already seeing experimentation
with purchase anywhere programs, use of the handheld
to replace cameras, watches, wallets and even act as body
monitoring devices to assist with healthy living. With all this
access to information, it is important for our industry to ensure
we provide our guests and potential guests with good information
in various formats that t the device they are using to access
that information. Once they have found and signed up for your
service or product, it is essential that you do what you promise
and deliver expertise. Most regular spa guests know what they
want, and whether or not the therapist is good or not. A massage
must deliver both a therapeutic and a feel-good benet.

For the last thirty years, leisure development within hotels has
evolved. Thirty years ago, guests were satised if the hotel
came with a swimming pool. The tness boom of the 80s
created a demand for tness and workout facilities. In the 90s,
the offering became more sophisticated with the occasional
whirlpool and possibly sauna and steam. In the rst 10 years of
this century, the hotels started to create brand-dening spas
that wrapped up a package that could consist of pool, tness
and treatments, combined with exotic and often extensive heat
and water facilities. Treatments have been created to reect
www.spa2020.com
Changes are also being driven by public demand from two
different human needs that do have a link to each other. The
rst evidence that change is happening and will continue is from
the wellness sector loosely dened as those that recognize
the need to keep t and healthy. Access to information, media
presentation of tness and healthy living, the availability of
choice for diet and lifestyle, the inefciencies of public health
support and the advances in medical procedures and cosmetic
surgery are just some of the complicated myriad of events that
motivate their audience to desire a healthier and longer life
with quality of life and dignity throughout.
The wellness and spa industry can work hand-in-hand to create
this. Deborah Szekely, and many others that have followed her,
have created fantastic retreats that provide any which way to
healthy longevity. In 10 years time this will be mainstream in
almost every hotel through counseling, joint services and care
with medical teams, visiting practitioners, nutritional education
and healthy eating and numerous other ways to identify the
hotel brand with a particular way of living. These services
already exist in many hotels but the critical mass of public
demand has not been sufcient to make these services viable.
This will change !
the brand philosophy and create media attention for the hotel.
Today the leading hotel companies have people appointed to
focus purely on the spa delivery. Interestingly, if you look back
at the history of public bathing and examine Greek, Roman
and Islamic baths you will nd that the combination of a social
place to gather, tness, pool and a combination of heat and wet
facilities are fairly standard and consistent throughout history.
The modern hotel spa is not so far away from the ancient Greek
baths and therefore it should be able to survive for a long time.

That does not mean that the spas we see today will remain the
same. I do see new treatments changing the dynamics of the
services offered in hotels. The spa business in hotels is maturing
which means that there is a lot more wisdom and information
available in the business. With access to bench marking
statistics, a better comprehension of the business model, and
pressure for a return on investment in a hotel, the owners and
operators of hotels are demanding more revenue per square
foot and expect to see prots from the spa. If there is nobody to
explain how the spa facilities contribute to the bottom line of the
hotel, then the non-revenue generating services such as pool,
tness space, sauna and steam, for example, are in danger,
under pressure to be omitted or compromised and minimized.
S
p
a

2
0
2
0
92
Linked to this change, but originating from the beauty sector,
is the acceptance of salons in mainstream hotels beauty
dened as the need to look and feel good. With the success
of spas and the desire to educate the public on the difference
between a spa and a beauty salon, there has developed an
unease by hotel spa operators to include beauty salons in the
services offered. Vanity has always dictated ethics, but now
that the ethical and sustainable problems are being overcome,
there is even more motivation to look and feel good. Hotel spa
operators, spurred on by public demand, the need to create
media-worthy events or developments, and driven by the
attractive opportunities to generate retail revenue, are starting to
introduce beauty treatments under the guise of different names.
Composite names such as cosmeceuticals, nutraceuticals
and cosmedics provide treatments with a quasi-medical
benet or acceptance. The nancial size and strength of the
beauty industry is a Goliath compared to the size and power
of the spa industry. This is, of course, strengthened by the
medias fascination with beauty. Improved products, medical
advancements and new equipment have enabled the industry to
boom. Inuenced by massive prot opportunities, there is also
tremendous competition among the never-ending product lines.
The attractive prot margins, retail opportunities and support
from the powerful companies will change the design of future
hotel spas. Reception areas, treatment rooms and of course
retail presentations will be lifted and improved to specically
appeal to this type of market.
Blurring thc line: betweea spa,
tnes:, wellnes: and beautg con/.
HOTEL SPAS I N 2020
Think of the energy of Bliss and how the product they offer
compares to the calm and relaxation of Mandarin Oriental. In the
last few years I have heard General Managers and Spa Directors
seek out services such as Botox, llers, teeth whitening and
spray tanning. In my own company, we have created a beauty
philosophy and dened what is permitted and not permitted
in our properties. We felt this was necessary to retain our core
values and ensure that any service we provide is performed with
the same care and safety standards as our spas. In keeping
with our philosophy, we are designing separate beauty areas
so that the spas remain holistic while the beauty can drive for
clear results. Over the next decade, we may see the evolution of
beauty salons competing against spas for the space in the hotel.
The potential negative of this trend is that the success of the
beauty services may persuade some developers and operators
to eliminate the non-revenue earning areas within their spa.

Modern hospitals already operate like luxury hotels. They
provide in-room service, ne and fast food restaurants, banking
services and appoint guest services managers. If hospitals are
bringing hospitality into the hospital, then I think it is safe to
predict that hotels will consider introducing the hospital into the
hotel. Wellness tourism is dened as people seeking retreats as
described earlier. Medical tourism is dened as people seeking
medical procedures in a country that is not normally where they
reside. This is generating new business opportunities where
medical and hotel companies are able to work together to
provide pre- and post-operative accommodation, rehabilitation
and complementary services that aid recovery. Numerous
operational hurdles about managing guest expectations may
currently exist, but the solutions will be found.

Finally, what if you dont change ? I am optimistic that the
normal human need to be touched and the therapeutic powers
of massage will ensure that this is the main activity of true
spas for many more years. If spas continue to deliver excellent
service and memorable experiences, then there will remain
enough space for the traditional hotel spa to continue despite
the new trends that will eat into their market share.
Improved product:, medica|
advancement: and new equipmen/
havc enabled thc industrg tc boom
Brochure Final 6_op.pdf 31/08/2012 13:43:48
probably the best coconut water in the world
@JaxCocoUK
www.jaxcoco.com
for sales information contact sara@jaxcoco.com or julie@jaxcoco.com
94
LET ME BEGIN WITH A SCENARIO, CIRCA 2020
Lisa, aged 36, has been working 12-plus hour days for months
trapped in a terrible cycle of bad food, bad sleep, little
exercise and incredible stress. For a while now, all the cloud-
based apps and biofeedback measurement tools that monitor
(and automatically aggregate) her entire health behavior and
history (from her sleep patterns to calories consumed and
burned to her stress/cortisol levels and blood pressure) have
been beeping red alerts to her that change is needed now.
(The periodic telomere testing thats done through her
companys employee wellness program agrees with the
shrill beeps : All this unhealthy behavior has led to a marked
shortening of the caps of Lisas chromosomes [her telomeres],
a red alert into changes happening at the cellular level that
could lead to serious chronic diseases.)
She and her boss know shes in dire need of a healthy recharge,
especially with a huge project looming that shes currently
unt to pull off. While they can only spare her for four days,
shes accrued enough currency in her companys incentives
program (for meeting business and health goals) that part of
her mini vacation will be covered if she chooses a destination
with the environment and programs in place so that she actually
leaves healthier, less stressed and mentally and physically back
on track, and does not opt for some debauched, unhealthy
booze cruise, leaving her sicker when she checks out than
when she checked in.
Lisa like everybody her age immediately turns to her
various go-to, social media-powered, travel and spa locator
and recommendation apps. (Does she even know how to hold
a magazine ?!) After an intense research session, watching
rich property/spa videos, reading up on diverse programs and
heeding her networks recommendations, she picks a nearby
destination abundant with customizable wellness, health and
spa programming. It didnt hurt that during her research the
hotel pinged her a 20 % discount on its four-day de-stress,
back-on-track package just what she was looking for.
Lisa: wonder| world
How could spa develop between now and 2020 ? What trends are at play, and how could they inuence the shape of the
business a decade from now ? We asked SUSIE ELLIS, President of SPAFINDER in New York and the founder of the Global
Spa & Wellness Summit, to gaze into the future and describe the scenarios she sees. Her ideas make for some fascinating
food for thought.
THE FUTURE OF SPA
During her online booking, Lisa identies her exact goals and
desires for the stay : her ideal daily calorie count, the tness
classes and spa treatments she wants (she opts for a little
Botox why not return looking great ?) and the ratio of social
and alone time she seeks. The hotel zaps back a exible, but
full and integrated itinerary/price, which looks equal parts happy
and healthy, and Lisa books everything all at once. Her personal
health, wellness and beauty history-cloud is, of course,
instantly transmitted to the relevant property touch points and
practitioners, and it will know her physical and mental health
realities, and things like her allergies, yoga experience level,
preferred massage types and even her hair color formula before
she even strolls in.
When she does walk in, Lisa is instantly struck by the un-
forbidding, marble-free, nature-within-and-out, serene and
social atmosphere. She is personally greeted at the door
(through smartphone tracking), and her bags and that stressful
smartphone are immediately whisked away (she opted for an
unplugged retreat), as she accepts the offer for a welcome
hot pool circuit, followed by a foot massage in a private
tent overlooking the lake. And over the next four days shes
immersed in the wellness everywhere approach of the hotel.
Her sleep-focused and temptation-ghting room features
an incredible bed, total blackout with no technology lights
showing, healthy snacks and many touches like yoga mats and
meditation class channels. The three square meals she eats are
delicious but hit her calorie goals. She joins social experiences
like group hikes, bike rides to a nearby museum, harvesting/
cooking classes and the fun and evening wine-tastings ( just
two glasses, and there is no bar) when she wants to, and
cocoons herself in the many peaceful, private enclaves when
she doesnt.
Shes alerted (by the bracelet she wears) to the yoga, Pilates
and meditation classes on her chosen itinerary and although
there are formal spa and tness spaces at the hotel, classes
and treatments are interwoven across the property, and often
outside, deep in nature. Her sessions with a tness/nutrition
95
she gets off track. And then hotel wellness everywhere will offer
her a targeted, super-meaningful discount/incentive to return.
WHAT ARE THE TRENDS THAT COULD MAKE LISAS WORLD
A REALITY ?
Lisas hotel spa journey in the year 2020 is, of course, meant
to help you imagine some (but certainly not all) of the key
developments we feel will increasingly dene the spa and
hotel spa experience in the next decade.
Now let us try to highlight, more methodically, some of those
key trends that are interwoven in her story and to identify ve
top spa trends that we feel will gain greater traction by 2020.
1. SPA AND WELLNESS WITH A HOTEL
The wellness everywhere hotel concept is heating up.
Consider examples like Westin (with its branded Heavenly
beds and spas, SuperFoodsRX menus, in-room workout
equipment and jogging concierges), or IHGs upcoming EVEN
brand (with touches like coat racks that morph into pull-up
bars and wellness experts in the gym). But by 2020, the global
stress, chronic disease, obesity and time-off-deprivation
epidemic will be more intense, and the very concepts of what
a vacation and a hotel are will be transformed : less riotous
excess in stately palaces, and more desperately needed
experiences focused on de-stressing and true rejuvenation. So,
if the spa and the gym have been cloistered as amenities
conned to the fourth oor, these walls will conceptually (and
literally) get broken down ; treatments, classes and new breeds
of wellness will percolate across the property, and there will be
a sharper focus on the metaphysical power of nature, whether
massages under the stars, or guests tending and eating from
the on-site gardens.
In addition, the idea of medical tourism will become ubiquitous
because of the aging population in many parts of the world,
coupled with skyrocketing health care costs. As people travel
coach get her engaged in a cool online game, competing
against other guests to meet certain diet and tness challenges
over the next three months. And if Lisa scores high, her next
visit is free. In a session with a positive psychology specialist,
she shares her work stresses and fears and learns techniques
to stay happy, calm and focused. In a special stress-reduction/
mindfulness workshop devoted to creating peak brain
performance, an innovative solution for that looming big project
suddenly strikes her.
During her stay at the hotel she notices a section of rooms that
seem to be reserved for guests who have additional medical
needs, even surgical ones. The area is more staffed and
secluded and reminds her that in a recent meditation class she
met a woman who was working on her mindfulness practice in
anticipation of a cosmetic procedure she would be undergoing
in a few days.
When Lisa leaves four days later, she is rested, energized,
happy and has met people she bonded with (including a nice
couple whose child was in the wellness day camp program the
property provided). All her new tools and commitments to stay
on track in body and mind will be facilitated by the ongoing
online coaching connections with her tness/diet specialist
and psychologist that are set up. She will be kept close to the
property and supported when she hits home and tracked when
Her session: with a tnes:/nutritioa
coach ge/ her engaged ia a coo|
onlinc gamc, competing agains/
other guest: tc mee/ certaia die/
and tnes: challenge: over thc no/
threc month:
www.spa2020.com
S
p
a

2
0
2
0
96
to other countries for medical treatments and procedures,
many hotels will set aside rooms for guests with extra needs
with amenities ranging from medical nursing staff to doctor
consultations to accommodations for those with disabilities due
to age or limitations.
If this spa and wellness with a hotel concept inches close
to the programming and spirit of a destination spa, these future
healthy hotels will be more approachable closer to people
(not on private lagoons reached by seaplane) ; more affordable
with a less forbidding vibe; and packing a lot of health into
shorter stays. And with employer healthcare costs exploding,
more businesses will demand (and underwrite) healthier
business travel. More hotel spas will square their offerings with
the science of willpower, removing temptations like endless
happy hours and pyramids of brownies in the lobby. But these
new mainstream-appealing wellness hotels will not be about
austerity and pain they will interweave tness, spa, healthy
food and innovative wellness activities in a fun, restorative,
happy package.
And with this healthy hotel wave, destination spas may become
more specialized around unique philosophies and goals.
2. LONG-TERM CLIENT CONNECTIONS TECHNOLOGY,
GADGETS & GAMING
At the 2012 Global Spa & Wellness Summit, renowned
innovation expert John Kao argued : Spas must move from
the event-driven model and create much more sustainable
connections and experiences. And by 2020 they will, and
these more powerful, longer-term spa-client connections will
be enabled by a host of new technologies, including online
wellness gaming and coaching and an explosion of health
gadgets 2.0 (like advanced biometric monitoring devices and
mobile tracking apps).
Given the global diabesity pandemic, traditional health
education is clearly failing, but medical studies show that
THE FUTURE OF SPA
coaching is the superior model to galvanize long-term
behavioral change. Right now, local coaching networks and
industry standards are just being forged, but by 2020, it is
expected that every type of spa could enlist coaches, the new
critical (and protable) link between the on-site experience and
guests ongoing wellness success. New coaching models and
price-points will emerge, from group coaching to specialized
mindfulness sessions. Current technologies like video, apps,
Skype, email and social media (and other platforms we have yet
to imagine) will power these long-term connections.
Expect more spas of every stripe, particularly hotel spas, to
embrace gaming platforms, both online and on site. Online
gaming, with its core elements of rules, levels of achievement,
challenges/goals, rewards/badges and a peer/social feedback
system, is perhaps the most hyper-engaging way to get people
to adhere to changes, whether it is tness, diet, stress reduction
or even beauty challenges. Gadgets that make monitoring
bio-information and connecting the results online will be truly
advanced. Every vital sign, every calorie eaten or burned, every
step taken, can get uploaded and shared, so the games spas
will offer will get very precise and real.
Today, spas and hotels need to better embrace the avalanche
of cheap and easy customer communications technologies
available, whether incentivizing people to check-in at places
like Facebook or foursquare, creating YouTube videos of
facilities and treatments, or ensuring easy online booking. But
to reach Lisa in the year 2020, where video, apps, social
media and games have equaled life (and websites or print
may no longer be used), spas will ratchet up entirely new ways
of reaching and dialoguing with customers. Look for online
booking to get far more granular, far beyond room or treatment
booking to whole itinerary/experience booking.
And the spa-medical technology connection will take off. More
(protable) medical spa procedures will be delivered at hotel spas
(through local doctor relations) because it is a very appealing
consumer model. Watch for medical-spa connections like spas
Lisa: wonder| world con/.
In addition, as the medical evidence about the positive impact
that mindfulness practices and meditation have on a host of
physical and mental conditions keeps mounting (including its
ability to strengthen the willpower muscle), far more spas will
launch such programming. If massage has been the m word
of spas past, mindfulness is the m word of the future.
Today, despite (or perhaps because of) our wired world,
people are suffering from loneliness at unprecedented rates.
And isolation, a disease proven to lead to serious health
problems, will only surge by 2020. So, more spas will seize the
opportunity as trusted places of touch to nally address
this problem creatively, and become places of true social
interaction and community. In line with this concept is the notion
that companies extremely motivated to keep employees
healthy, as the high cost of health care eats up prots will
encourage their staff to select the latest incarnation of spa hotel,
whether for business or vacation travel.
Jeremy McCarthy, director of Global Spa Operations and
Development at Starwood, recently (and perceptively) noted
that while much of the industry discussion has been about how
spas deliver healthcare like hospitals, or tness like gyms,
as Telomere Health Centers. Telomeres are the caps of our
chromosomes, and studies reveal that their length is a predictor
of diseases like cancer and heart disease. Because exactly what
spas provide stress reduction, healthy diets, exercise and
mindfulness practices can improve telomere health, spas could
be perceived as delivering crucial life-saving therapies. And more
spas will offer telomere testing (which is launching this year).
3. MORE MENTAL WELLNESS AND MINDFULNESS
Today spas have a major, but mostly unleveraged, opportunity
in mental wellness and mind-focused programming. Consider :
In places like the U.S., 50 % of the population suffers from
stress, and one in eight suffers from depression and the
stress/depression wave will only rise circa 2020.Within the next
decade, spas, which have been all about body health, will turn to
the mind. More spas will partner with diverse types of therapists
(like cognitive psychologists and experts in behavioral change),
and more spas will create platforms where mental health
support and a supportive dialogueabout feelings can happen.
Brands like Westin are already using positive psychology
practices throughout their spas/hotels (from gratitude journals to
inspiring messages throughout the property).
www.spa2020.com
S
p
a

2
0
2
0
we are the only industry uniquely focused on delivering pleasure
and making people feel good. So, while the spa-medicine,
spa-tness, spa-everything intersections will grow, spas will
increasingly re-embrace that which is totally, irreducibly,
ineluctably spa the delivery of happiness. Happiness is
no longer some vague, intangible concept ; its a hot scientic
eld : Studies show happy people reduce their risk of premature
death by up to 35 %, earn more, and so on. The quest for
happiness and mindfulness and the value of a lived life, true
wellbeing (both physical and mental) and pleasure will matter
much more, and spas (not hospitals) will deliver it.
Some spa-mind connections will get very innovative. The latest
from brain science suggests that spas could be re-perceived as
places where creativity best gets accomplished, given that stress
is the number-one threat to the brains innovative thinking
center. Integrated stress-reduction and mindfulness approaches
Lisa: wonder| world con/.
THE FUTURE OF SPA
can actually re-wire clients brains to create peak performance-
thinking conditions which makes it probable that corporations
will prefer (or insist) that their employees stay at a spa hotel that
proactively works on helping them stay creative. So, imagine, by
2020, spas could be transformed into creativity/thinking labs,
rather than places where we escape from thought.
4. MEANINGFUL WELLNESS PROGRAMS FOR TOTS TO TEENS
Spas have already become a family affair, but within the next
decade the paradigm shift from childrens spa activities focused
on pampering and parties to meaningful wellness programs will
be well underway.
The acceleration of this trend, identied by SpaFinder as
one of its major predictions for 2012, was also evident at the
2012 Global Spa & Wellness Summit, where medical experts
99
year 2020 there will be a global water crisis. As healthy water
becomes scarcer and more prized, spa will return to its roots
as a center for healing and social water experiences and
dramatically inuence how hotels and resorts allocate water.
Already we are seeing hotels building rooms with low-ow
showers but without bathtubs. As well, some that have bathtubs
are taking away the stopper to discourage the use of a huge
amount of water for just one person.
How will this new water awareness play out ? Fast forward to
2020. The healing benets of water and the bodys desire to
soak tired feet and limbs in warm or hot mineral springs are
enthusiastically sought, and available, at the hotels spa. Like
in Roman times, the spa (an acronym for sanitas per aquam,
which means health through water) is the favored meeting
place in hotels (and in communities). Imported water in plastic
bottles is no longer served ; rather, water is bottled at the
source the hotel. Weary travelers still seek a soak in warm
water, and many people (especially the elderly) like exercising in
pools. Entire families enjoy water circuits and waterfall plunges.
Plus, the latest technology continually cleans the water (without
chlorine), recycles it and infuses it with energy and minerals that
offer life-enhancing benets.
And with stress at an unimaginable level in 2020, the
quick stress-reducing benets of water therapy (as well as
mindfulness, exercise and massage) will likely become a natural
part of every hotel guests experience. Look for the spas
capture rate to near the 100 % mark.
Spa experiences will now be balanced with the industrys global
initiative to put emphasis on the health of water. For a hotel not
to be part of the solution will be unfathomable.
THE BOTTOM LINE FOR SPA 2020 ?
Expect the conversation to change : Instead of hotels having a
spa, there will be talk about spas that have a hotel.
challenged attendees to create childrens programs focused
on developing lifelong wellness habits. (According to data
presented at the Summit, global childhood obesity is epidemic,
with 155 million overweight and 45 million obese children
worldwide.)
And rst prize, along with a standing ovation, in the Summits
annual Spa of the Future Student Challenge Competition
went to the University of Denvers Deant ! spa concept that
rejected the typical pampering-patronizing-pink-and-sparkling
manicures found in teen spas in favor of programs that address
the emotional, physical and social needs of teens.
The rapidly growing demand on the part of travelers to be
able to take teens and tots along for the spa ride as well as
parents growing concern about childhood obesity and wellness
will help spur the concept of family spa-ing into a more
mainstream one, and more spas and hotels will offer creative
wellness programs for the entire family.
Also, look for hotels to reevaluate age restrictions in tness/
spa areas, offering what could be called all-day wellness
babysitting something many properties think parents will
be overjoyed about. In fact, by 2020, sports and adventure
programs like those found at Schloss Elmau Luxury Spa &
Cultural Hideaway in Germany (think family spa, nature spa
and all-day kids club) will be the norm, not the exception.
5. TAPPING INTO WATERS BENEFITS
Spa and water have been ubiquitous since the Roman Empire,
but by the late 1960s, thanks to an abundant water supply and
indoor plumbing, taking the waters in the industrialized world
often meant a nightly bath and at-home Jacuzzis.
However, thinking that the unlimited use of water by an
exploding global population (projected to be nine billion by
2050) could continue indenitely is rapidly proving to be a
falsehood. Many climate experts are predicting that by the
www.spa2020.com
S
p
a

2
0
2
0
100
This unique spa industry, which virtually didnt exist 30 years
ago and is predicted to hit the trillion-plus dollar mark globally,
has grown and evolved into a variety of spa/wellness domains
inuencing everything from the hotel/leisure industry to the
medical community to product manufacturers to education
and insurance.
So why has this industry grown so much over the past three
decades ?
The rising cost of healthcare and the availability of high-
quality information via the Internet have driven many people to
de-stress ; to learn how to take charge of their wellness and
practice preventative care, rather than the reactionary care of
traditional Western medicine.
This aspect of taking responsibility for ones wellness will be
a deeper inuence as spas grow and evolve as we have
witnessed with the growth of medical tourism and its inuence
on the spa industry.
Knowing that the spa industry is destined to grow is a
no-brainer. But understanding what is going to drive that
growth led me to research the unique characteristics of each
generation and the need to understand the nuances particular
to each. This will most certainly inuence how spas evolve to
serve their clients in the year 2020.
BABY BOOMERS (AGES 47-65)
This generation of approximately 80 million (in the US) has
Wha/ wil| i/ takc tc servc thc need:
of thc spa consumer ia 2020 ?
Thats the question we posed to ALISON HOWLAND, President of SPA SUCCESS CONSULTANTS in Palm Beach.
To answer it, her systematic approach was to look at the special characteristics of each age segment, fast-forward
to 2020, and visualize their future expectations. Here are the fascinating results of her thought process.
THE SPA CONSUMER
brought revolutionary changes to our social and cultural
scene, and built vast, far-reaching corporate empires. They
have helped weave the social, political and economic fabric of
America, and their many achievements have made them one
of the greatest generations of all time, with greater wealth and
inuence than any other generation today.
This generation is known as value shifters, playing a major
part in social reform and advancement, and whose inuence
was experienced in the past US presidential election. They
are worker bees who embrace innovation and whose strong
work ethic birthed the age of technology. Being hardworking,
dedicated and driven, this generation had to put their
retirement on hold, but their spirit of independence will win out
in the long run.
Fast-forward 7 years :
Baby Boomers will range in age from 54-72, although this
is a demographic segment that for all intents and purposes
refuses to age like their parents did. This generation brings
new meaning to the concept of senior as it still rocks with
its heroes like Mick Jagger, who at 69 years (typifying what is
being called the golden boomers) still struts on stage selling
out concert arenas globally. The Baby Boomers do not take
aging lightly : the proliferation of the ways and means to look,
feel and stay youthful have been pioneered and popularized
by this generation, which after all helped to birth the day spa,
medi-spa and the entire well-being movement.
What this generation will not admit to is a need for help
an admission that would make their aging a reality. Thus
implementing ways to make the spa experience easy and safe
should be done in a subtle way. Think about spas with no-
slip oors ; elegant handrails ; no stairs but beautiful, gently
sloped ramps ; treatment tables that are easy to get on and off.
Treatments that address the challenges of aging will also be
in demand : heat therapy, stretching, thinning skin, treatments
that ease aching or painful joints, pedicure chairs that arent
treacherous to get into or out of... This generation will continue
Taking responsibilitg for onc:
wellnes: wil| bc a deeper inuencc
a: spa: grow and evolvc
101
and location convenient for them. Think about extending your
spa to Spa Vans : a complete spa on wheels, available 24/7.
GENERATION Y (AGES 17-27)
From green activism to anime, Gen Y is a complex generation
with diverse interests. Immersed in the digital world from an
early age, this generation is at the forefront of mashing up
how we communicate, entertain and innovate. This social
generation consists of connectors as evidenced in the rapid
rise of Facebook and the need to stay current, with the iPhone
among their favorite products. By staying connected, they
have the ability to be forerunners and are two steps ahead,
intellectually curious to discover the latest trends, news, music,
green issues. They are also escapists, and have the need to
disengage from the hectic world around them via gaming,
anime, cartoons. This generation has seen the impact of the
failure of big corporations, and there is a desire for a more
personal branding of business. This is a skeptical generation.
Fast-forward 7 years:
The Gen Ys will be reaching 24-34, just barely into adulthood.
Technology is natural to them, as is a keen interest in nature.
Spas that are authentic, that offer the ability to connect while
disconnecting, spas that bring nature inside while retaining
a technology edge will appeal here. This generation will seek
the ability to disconnect yet still chat with their friends about
what they are experiencing talk about the best word of mouth
advertising, instantaneously ! The exibility of treatments that are
offered in group settings will be important (or they may choose
of thc spa consumer ia 2020 ?
spa-ing in the manner to which theyve become accustomed,
i.e. in traditional spas, with a high level of customer service,
offering treatments and services that further aid in their quest
for wellness and youthfulness with a subtle safety vibe.
GENERATION X (AGES 27-47)
Also known as Millennials, this generations luminaries are
pushing the limits, re-shaping corporate culture, re-thinking lm,
and revolutionizing entertainment. They are accelerating the
speed of life and are an estimated 50 million strong in the US. This
is a highly educated and sophisticated generation, and they are
pragmatic, so data as well as a practical approach are essential
ingredients to reach this demographic. They enjoy their thrills
with a degree of danger, such as snowboarding, skateboarding
and skydiving. Some members of this generation suffer from the
middle child syndrome, feeling that they got the shaft, so to
speak : the Baby Boomers are growing older ; Gen Y is coming
of age what about us ? For this generation, with the recession
still keenly affecting their lives, nding work is vital. They are
the generation that created themselves as CEOs of their own
companies, blazing their own career path as entrepreneurs.
Gen Xers will range in age from 34-54, so the fringe will just
about be middle aged. This generation has been profoundly
affected by the Great Recession, which I believe will ensure that
they seek value when making purchases. For them, deals that t
their budget and lifestyle will be what and how they spend their
disposable income (Groupon, Living Social). Spas that offer
true value, and allow them to customize their experience in as
many aspects as possible, will appeal to the Millennials. This is
the generation that created themselves as corporate leaders,
so they will demand the best for themselves and will need to be
strategically marketed to. They will seek out the unusual not
quite mainstream as they will feel an entrepreneurial kinship
with companies that have unique offerings.
Think about massage on demand : the ability to have the type/
kind of treatment at the price they deem appropriate, at a time
Ti: generatioa wil| seek thc abilitg
tc disconnec/ ye/ stil| cha/
with their friend: abou/ wha/ theg
arc operiencing
www.spa2020.com
S
p
a

2
0
2
0
102
one-on-one). So think about revamping a pedicure area to be
more group-friendly, and a place to recharge an iPhone/iPad (or
future devices not yet created), as they will tell all their friends
about this fabulous spa and fabulous experience, while posting
the news via social media to extensive groups of friends.
of thc spa consumer ia 2020 ? con/.
THE SPA CONSUMER
GENERATION Z (AGES 7-17)
Also called Generation Next, this pre-teen generation is
approximately 23 million strong (US) and growing, and its
members are considered true digital natives, having grown up
on iPods and iPads, making them true multi-taskers, with an
103
Generation Z, now aged 14-24, the rst generation truly birthed
in the digital age, will not have any of the old paradigms about
spas and wellness. This is the generation that will learn quickly,
make decisions even faster, and will seek companies that can
keep pace with them. For them, information is taken in via small
bites, and theyll probably want their treatments the same way.
Where we once thought of express spa treatments being
mini-versions of a full treatment, for this generation, getting their
wellness via micro-time yet still delivering a total experience
will be a key to success. This is the generation that will be
getting a 30-minute spa treatment while watching a movie
and communicating with friends even scheduling their next
treatment all at the same time.
IN 2020...
For future spas to succeed, they will need to clearly identify
their branding as well as their target customer, and create a
laser-focused campaign to capture that customer using the
communication tools and channels that that customer wants
to be communicated with. Analyze your spa and business, and
determine what your brand is and what you stand for ; then
develop a ve-year plan to achieve it. This way, when 2020 hits,
you will already be handling the future.
It may be a tricky path, but with the perseverance this
industry has demonstrated in the past few years, I am condent
it will evolve, adapt and succeed with spa consumers far
beyond 2020.
Demographic information on Baby Boomers, GenX, GenY,
and GenZ sourced from SPARXOO Report :
http://www.sparxoo.com/2010/03/02/examining-baby-boomers-
stats-demographicssegments-predictions
of thc spa consumer ia 2020 ? con/.
expectation of instant gratication. They have grown up with
social communities and are open books, nding little value in
privacy. This generation will be micro miners who will thrive
on information in bite-sized, manageable pieces la Twitter and
micro-blogging platforms like Tumblr.
www.spa2020.com
S
p
a

2
0
2
0
104
SPAS I N NORTH AMERI CA I N 2020
Resort and hotel spas in North America have had their ups
and downs over the past ten years, with 2006 and 2007 being
the high-water mark. It is not any revelation that the nancial
turmoil that had so greatly impacted the hospitality industry
over the past ve years has also had a negative impact on spas.
That said, spas are a mainstay of hotel and resort development
and remain an important factor in inuencing guest satisfaction.
What will spas in the North American hospitality space look like
and what can our industry expect over the next ten years ?
HOW WELLNESS IS HAVING AN IMPACT
Leisure and business travelers alike have become accustomed
to having the option to enjoy a relaxing spa experience. As has
been the trend in the past several years, the pampering and
luxury images of spas have been replaced intentionally by
more of a wellness or lifestyle approach that stresses the
benets and outcome of a spa treatment.
Below are a few thoughts regarding what areas of focus will be
required for spas to succeed in the coming years :
Becoming an essential. Basic spa services will become
more of a must-have than a nice-to-have. Massage will
continue to grow as the dominating service with options
such as deep tissue, hot stones, and reexology as a focus
as guests more than ever will begin to understand the true
benets and value of massage, much as they have grasped
the importance of a healthy/t lifestyle.
Overall wellness approach. Combining spa with healthy
lifestyle components that were once only the domain for
destination spas will become increasingly more prevalent.
This does not refer only to spa cuisine, but a wellness
approach which combines and incorporates activities such
as yoga, Pilates and meditation into the actual spa service, as
well as offering tness and nutritional consults. Though many
spas are already heading in this direction, we will begin to see
a seamless approach incorporating both tness and nutrition.
To continue down this wellness-focused spa path, we will
need to nd new and creative ways to bring nutrition and
tness into our pre- and post-spa experience by enhancing
traditional relaxation areas with these components. This will
occur in our evolving spas in the future.
Therapeutic spa treatments. These are also changing the
face of how and why we spa. Not only are guests seeing the
health and lifestyle benets of these services, but the medical
industry is beginning to incorporate these services into their
prevention and treatment plans.
Other points that will have an impact on the future and growth
of spas include the following :
Gender-focused spa options. The fact is, men and women
spa differently, and as we recognize spa-goers needs, we
will begin to see facilities mold themselves to those needs.
For example, nail areas that were once solely the domain for
women will now have a more gender-focused approach with
amenities including TVs and services such as
grooming ateliers.
Integration instead of outlier. Though hotel guests
have come to view spas as a mainstay in their travels, the
hospitality industry is still not entirely comfortable with the
concept that spas are a critical element to a hotel or resort ;
nothing like they are with service areas such as food &
beverage or valet parking. Spas are still the outliers, not quite
yet considered by many sites as an integral part of the hotel.
Aa increasinglg integra| par/
of hote| developmen/
As in the rest of the world, the spa industry will face some interesting challenges in the next decade in North America.
How will the industry cope ? How could it evolve ? RALPH NEWMAN is the Chief Operating Ofcer of Rockville, Maryland-
based WTS, a spa consultancy, and here he shares his insights with us on the outlook for the ten years to come.
Leisurc and busines: traveler:
alikc havc becomc accustomed tc
having thc optioa tc enjog a relming
spa operiencc
105
always remain an outlier and will not maximize opportunities
for revenue and net operating income.
Storefront presence. This will be important whenever viable.
Spas need to have a more desirable location within each
property, not only for easy access by the hotel guest, but
also for the local, non-hotel guest. Exposing the spa locally
and developing a day spa clientele often is critical for a spa to
Exposing the spa to leisure groups, business groups or to
special occasions such as weddings can be a struggle for
certain hotels and resorts. While we are seeing a slow but
steady improvement in this area, hotels should make the
spa a part of what the hotel is selling to guests and to local
trafc. It is critical for the spa industry to understand and
assist in making it easy for hotels and resorts to incorporate
spa services as a part of their overall packages, or the spa will
S
p
a

2
0
2
0
SPAS I N NORTH AMERI CA I N 2020
survive nancially today, particularly in an urban environment.
For this to be successful, exposure and easy access must be
a priority. There must also be separate and distinct marketing
and promotion plans for internal (within the hotel) and external
populations.
Qualied staff. Sourcing, training and retention of qualied
staff is the foundation of spas future. As the number of spas
grows over the next decade, the pool with regard to staff and
human resources has become painfully inadequate and far
more competitive. Try as we have to incorporate new areas
such as self-serve scrub bars and series of water plunges,
or light and sound therapies, hotel guests have made it clear
that the most important attribute contributing to a memorable
spa experience is the human element. The single greatest
challenge going forward which impacts both customer service
standards and nancial performance is the ability to source
and mentor qualied staff. It is the most limiting factor in
maximizing revenue and bottom line success that we see
today. As an industry, spas will need to nd ways to entice
staff and to provide an avenue for them to continue their
education and personal/professional growth.
Branding. The spa industry is searching for an identity
and the surfacing of several recognizable brands would
likely have a positive impact on the growth of the industry
through consumer recognition and media involvement.
Virtually everyone has heard of Starbucks and knows it
is synonymous with quality coffee. There are few, if any,
Starbucks or recognizable brands within the spa industry.
There will likely be familiar names associated with spas,
and perhaps an eventual approach will be using the name-
brand for spa credibility or spa recognition. Spa brand or
spa product brand recognition within the industry is limited
to the audience it addresses. Will it happen in the next ten
years as we have seen with a name such as Google ? Will
some brands become known, albeit on a lesser level than the
examples above ? It will become important for spas to have
some identiable leaders going forward for the industry to
truly ourish and enjoy continued success in moving the spa
industry to the next level.
THE NEXT TEN YEARS : GROWTH AND EVOLUTION AHEAD
There is no question that spas are here to stay. However, the
face of the spa industry is changing. What was once simply
a hotel perk or amenity has evolved into an increasingly
viable, revenue generating prot center for hotels and resorts
worldwide. As the integration and importance of wellness into
everyday lifestyle continues for travelers and hotel guests, spas
will continue to play an ever more important role in creating a
memorable experience for guests and other hospitality and
spa patrons. It is up to the hospitality industry to realize and
take advantage of the growing revenue and prot potential that
spas can offer. Hotels and resorts should give them the support
they need to make necessary structural design or equipment
changes as well as hire well-educated staff that will continue
to push the industry forward with their skills. Smart hoteliers
understand the need for supporting these industry changes.
However, spa owners, designers, consultants and operators
should consistently embrace the challenge to educate our
hospitality partners as well as our own industry on how to make
this transformation and continued growth potential a reality.
The next ten years in the spa industry is ready to be a time of
growth and evolution.
Aa increasinglg integra| par/
of hote| developmen/ con/.
Tc singlc greates/ challengc
going forward which impact: both
customer servicc standard: and
nancia| performancc i: thc abilitg
tc sourcc and mentor qualied sta
108
THE LI NK TO ASI A I N 2020
TODAY
A signicant change in the world today is manifested in the
inevitable shift of power and inuence from the West to the
East. Sauerkraut is now making way for wontons ; burgers are
making way for nasi goring and sushi. This shift is evident in
various aspects, whether it is economic, social, or political.
The Asia-Pacic region is expanding its inuence, evident in
the fact that the global economic recovery depends in many
aspects on the growth engines of India and China. In a recent
study by the Pew Research Center, Asians are now the fastest-
growing immigrant racial group in the USA, thus effectively
increasing the inuence Asians have in the social, economic,
and political situations in that country. According to the US
Census Bureau, Asians are also the highest-earning and best-
educated immigrant group in the country.
In the hospitality industry, we have seen tremendous growth
in Asia, mainly in India and China. More and more international
hospitality companies are opening and operating there, catering
to the high demand generated by the respective domestic
market. InterContinental Hotel Group (IHG) and Starwood have
recently launched hotel brands specic to the Chinese market.
Outbound travel from China and India is rapidly increasing due
to their growing economies. Even Asian breakfast items, such
as congee, have found their way into the previously Western-
dominated coffee shops of hotel brands such as Fairmont,
Swisstel, and Marriott.
MERGING
In return, many Asian hotel groups have expanded into the
West, such as Banyan Tree, Shangri-la, Peninsula, and
Mandarin Oriental. Outside of the hospitality industry, Asian
companies such as Samsung and Toyota have become industry
leaders, reducing the market share of former leaders like Nokia
or General Motors. A global economic, social, and political
power shift eastward has been established, and by 2020 this
will have further expanded.
In the wellness industry, Complementary Alternative Medicine
(CAM), which has long existed in Asia as traditional or oriental
medicine, is gaining more popularity in the West. According to
the 2010 Complementary and Alternative Medicine Survey by
Health Forum, More than 42 % of hospitals in the USA currently
offer one or more complementary and alternative medicine
therapies. Thats a 5 % increase since 2007. By 2020, insurance
companies in the West can be expected again to support
alternative wellness modalities that will keep the population
healthy, which in turn keeps the workforce more productive.
WHATS HAPPENING
On the other hand, Asian countries are opening up to Western
traditions through the establishment of Western medical
hospitals, as well as offering the option of health insurance
policies including Blue Cross, ManuLife, and Bupa, which
covers Western medical prcedures.
Currently, the key trends the market is observing in Asia are :
DNA / genetic screening / sequencing. There has been a
dramatic decrease in the cost for such processes. By testing
newborn babies, far greater clarity is realized concerning their
propensity for disease, thus providing for greater prevention
opportunities as well.
Stem cells : Use of stem cells in cosmeceuticals and beauty
products is progressing. They aim to achieve anti-aging
effects to prolong youth.
Centenarians : We are living longer. The Telegraph reported on
a UK study that half of 30-year-olds today may live to be 100.
Obesity time bomb : Globally, 25-30 % of youths are obese.
This is not just a Western problem, as it is growing in
prevalence in India, the Middle East, and China, too.
Super bacteria : There is a need for greatly enhanced immune
systems. With antibiotics causing more harm than good, a
continued boom in homeopathic solutions and Complementary
Alternative Medicine has occurred, allowing the population to
defend against what have now become known as lifestyle
diseases, which include cancers, diabetes, and heart disease.
Tc coming Asianatioa
of thc spa busines:
Over the next decade, the global spa industry will be inuenced more and more by trends emanating from Asia, writes
INGO SCHWEDER, the CEO of Bangkok-based spa consultancy GOCO. Not to mention the fact that outbound travelers
from that part of the world will account for an ever-growing proportion of the worlds international tourists and their
expectations will be high.
109
and Eastern Europe. A culture of preventative health was
created which still prevails within the region to this day and is
increasingly gaining awareness in other parts of the world.
NEW FRONTIERS
With the worldwide explosion in consumer interest in wellness,
governments, hotels, and companies have begun to make big
investments in the wellness industry and tailored products to
We can anticipate that by 2020, there will be an even greater
fusion of Eastern and Western medical practices prevalent in
our daily lives.
LEARNING FROM THE PAST
In the 1800s, leaders such as Otto Von Bismarck made state-
paid wellness vacations in sanitariums or spas with medical
facilities a key component of welfare systems in Germany
S
p
a

2
0
2
0
110
THE LI NK TO ASI A I N 2020
cater for upwardly mobile consumers in regions such as China
and the Middle East. Companies all around the world have
begun diversifying their products and services to cover the
world of wellness. For example, IMC Octave, a private company
with core businesses ranging from shipping and offshore
engineering to mining, energy, and trading, has recently started
developing a rst-of-its-kind destination spa in eastern China,
with a plan to expand this segment further.
Another example is the launch of Ahn Luh, a joint venture
between Chinas largest tourism group, Beijing Tourist Group
Co., Ltd., and the prominent regional developer Great Ocean
Group, which is expected to start operations by 2015. In the
medium term, it will be a luxury brand targeted at wealthy
Chinese consumers in China. However, in the long term, the
brand aims to specically cater to Chinese outbound travelers
all around the world, acknowledging the huge potential in
growth of this customer base. The brands concept is to
infuse the richness of Chinese culture and traditions directly
into the brands selling propositions, for example making food
and beverage authentic, and its spa offering will be based on
traditional Chinese medicine. This will differentiate the brand
from all its ve-star competitors in China.
In the Middle East, Qatar Foundation has engaged GOCO
Hospitality to conceptualize and bring onstream the countrys
rst destination spa, a wellness lifestyle residential community,
which is to be opened in 2016. The concept is truly unique : the
spa will showcase wellness traditions from all around the Islamic
world, the result of thousands of hours of academic research,
and the production of a complementary product line. The spa
aims to target visitors from neighboring countries, to tackle
common health problems such as obesity, and also welcome
typical destination spa-goers from afar.
Demand for wellness services is increasing, and the
development of wellness facilities is certainly on the rise.
Coupled with a more educated, spa-savvy consumer,
the challenge we will face in the future in Asia will lie in
the expectation of greater quality and the need for more
professionally trained team members. Once this level of respect
has increased, it will attract new talent, encourage the desire for
continuing education, and spread awareness that spa is in fact
a reputable industry to work in.
As of February 2012, SRI International put global revenues of
the wellness sector, combining beauty and tness, spa, and
wellness and medical tourism, at USD 2 trillion. Worth USD
106 billion, wellness tourism already generates twice the global
revenues of the more established medical tourism market at
USD 50 billion (Wellness Tourism & Medical Tourism Where
do spas t ?, Global Spa Summit 2011.)
THE WAY FORWARD
At present, the Asian population stands at approximately four
billion people. By 2020, the world will have become even more
Asian-centric. The inuences of Asian economies and societal
cultures will have spread to the Western world, a reverse form of
cultural imperialism and globalization. The center of growth and
development for various industries, including wellness, will be in
Asia. Comprehensive urban day-spa facilities that incorporate
exercise, traditional treatments, tness, thermal bathing, and
consultative care will have increased in numbers in all parts
of the world. Beauty clinics will become a mainstay. This will
include such procedures from laser treatments and Botox to
more advanced elements including stem cell technology for anti-
aging and prolonged youth. Nations will put increased efforts
behind the creation of wellness communities where a whole
span of wellness services, hospitality, and real estate combine
and celebrate the cultural symbiosis of the respective country.
Tc coming Asianatioa
of thc spa busines: con/.
Bg 2020, thc world wil| havc
becomc evea morc Asiaa-centrir
Kempinski Hotels is deeply committed to providing
excellent career opportunities. Its Career Day, hosted
annually, is the ideal occasion for new recruits to meet
the Management Board and General Managers.
www.kempinski.com
Luxury Hospitality needs
commitment, passion and
the right attitude...
Hotel Yearbook 2013_2.indd 1 11/20/2012 2:17:56 PM
Putting the crowd to work
for you
CROWDSOURCING IS A RELATIVELY NEW TECHNIQUE FOR TAPPING INTO THE VAST POOL OF TALENT AND LABOR
AVAILABLE VIA THE INTERNET. IT PARTICULARLY OFFERS SMALL INDEPENDENT HOTELS AN ALTERNATIVE APPROACH
TO MARKETING SUCCESS, WRITES SONJA HOLVERSON, PROFESSOR OF MARKETING AT SWITZERLANDS COLE
HTELIRE DE LAUSANNE.
The nature of the hotel industry is characterized by two
prominent aspects that mostly determine its protability: high
xed costs and uctuating demand. Taken within the context
of the inevitable impacts from the macro-environmental
forces including economic, demographic, socio-cultural,
political, natural, and technological with which hoteliers are
confronted, the industry is highly vulnerable. This volatility
is greatly compounded for small independent hotel owners
that lack critical mass and resources, including human and
capital, to compete alongside the larger international hotel
groups and to even be noticed in an increasingly noisier travel
communication marketplace.
THE MARKETING CONUNDRUM FOR SMALL
INDEPENDENT HOTELS
Any hotelier who has personally engaged in social media,
for example, has experienced the prolic number and newly
dened characteristics of the communication and distribution
channels which are veering further away from traditional and
familiar hospitality marketing tactics. This can be overwhelming
for a small hotel owner and manager.
Many small hotels have sought refuge and success with hotel
marketing consortia, but very small hoteliers do not have a
budget for this membership. Furthermore, they have neither the
time nor the resources to have their own strategic marketing
staff, as well as employees working in sales and communication
online as well as ofine in order to keep up with and implement
all of the latest trends that their customers are expecting.
Deemed by many marketing experts to be an imperative, the
social media phenomenon has developed into an industry as
well as a job position, with Social Media Managers earning from
$73,000 to $116,000 annually in cities like New York and San
Francisco. Lesser positions with lower salaries are also being
created, but it is most unlikely that a small independent hotel
would be able to budget any such positions.
However, small hoteliers have always had advantages that the
big hotel chains do not have, such as their individual highly
motivated objectives, personal touches in service, unique
product offers and great exibility in adapting to the rapidly
changing travel marketplaces.
CROWDSOURCING AS A MARKETING OPTION
One step to protability for small independent hotels is to focus
on reducing the high xed costs including some marketing
salaries as well as variable costs such as creative and marketing
agency fees. Small hoteliers could consider the various forms
of what is known as crowdsourcing, a more project-oriented
approach available in todays global business environment.
The concept of crowdsourcing is not entirely new. Project
collaborations have been around since the beginning of
humankind. In the 1980s, enterprises were experimenting with
multi-functional teams and project-based tasks. However, up to
this point the group of participants (the crowd) was dependent
on proximity. It was the creation of the World Wide Web in 1991,
and then the invention of the Mosaic browser in 1993, that
changed the way we live and work forever. The unprecedented
and continuing acceleration of the Internet enables specialists
to connect more easily and encourages communities of specic
interests to form in all areas of society.
The term crowdsourcing was coined by Jeff Howe, business
author, in an article he wrote for Wired magazine in 2006
which was followed in 2008 by his book Crowdsourcing :
Why the Power of the Crowd is Driving the Future of Business
(Three Rivers Press, New York). Howe denes crowdsourcing
as when a company takes a job that was once performed
by employees and outsources it in the form of an open
call to a large undened group of people, usually on the
Internet. Companies are using various business models of
crowdsourcing which are determined according to the type
of projects needed by their clients. The crowd, large or
small, is usually dened very specically and managed by
the crowdsourcing organizer that matches the participants
best suited with the project at hand. There is also a form of
crowdsourcing that companies perform for themselves by
putting out an open call to a more public crowd seeking
various opinions via social media channels. Furthermore, there
C R O W D S O U R C I N G
113
112
HOTELyearbook2013
are also crowdfunding companies which are concerned with
investments in start-up companies. These two models are not
in the scope of this article.
Crowdsourcing should not be confused with traditional
outsourcing which is based on capacity (large number of
workers doing similar jobs). Crowdsourcing is based on
capability (expertise in the areas required) and taps into
global knowledge, expertise, creativity and other resources.
Large brands, as well as start-ups, are increasingly using
crowdsourcing for their marketing and innovation-related
business objectives. According to the 2011 gures from
Crowdsourcing.org, the media and entertainment industries
comprised 20 % of crowdsourcing revenue, and the travel and
hospitality industries accounted for 6 % of revenues.
Crowdsourcing can be used in a very broad sense by simply
asking loyal or new customers to provide input in order to make
improvements for a business of any size. In the hotel industry
in 2009, InterContinental Hotel Group (IHG) and Chase Bank
crowdsourced their Priority Club Visa membership program
which is offered in the IHG customer loyalty program. In
order to optimize Visa cardholder satisfaction of members
and double the number of Visa cardholders, IHG contracted
Communispace.com, a specialist that creates online
communities and connects companies to their customers.
Communispace created a pool of 300 Priority Club Visa
cardholders to determine the most important benets and
services based on the crowds opinion. IHG followed this up
over the course of a year by continuing a dialogue with their elite
customers and implemented a new program focusing on the
elite level of its loyal customer base (Gold and Platinum).
A very innovative crowdsourcing hotel project was implemented
in 2006 by Starwood Hotels and Resorts, which was
developing an upscale lifestyle hotel that we now know as
aloft. The crowd was composed of the anonymous avatars
(created by real people) moving about and interacting with
the virtual aloft Hotel on the platform of Second Life, which
was more conservative at the time than it is today. How the
avatars reacted on Second Life to various virtual scenarios
regarding space, furnishings, facilities and designs was valuable
information for Starwood and helped determine the outcome of
the nal hotel product of which there are now 46 properties
around the world.
Some business models of crowdsourcing companies have
a crowd which is composed of a registered pool of various
relevant experts with certain skill sets unconstrained by
geography. There are crowdsourcers that invite companies
to propose projects and then members of the crowd bid for
incoming activities. Other crowdsourcing companies contract
with the client and select the appropriate online experts in the
crowd that would best match the clients project. Since the
crowd does not require ofces, supplies, transportation, and
other costly overhead, there is usually a great deal of savings
for the client compared to the conventional use of their own
personnel or local marketing agencies.
CROWDSOURCING OPPORTUNITIES FOR SMALL HOTELIERS
Even in a consolidated hotel industry and chaotic online travel
marketplace, it is possible for small hoteliers to connect with
the many potential customers out there searching for unique
lodging establishments. Matthew Barker of Hit Riddle tells us
that their approach to crowdsourcing for travel companies is
very campaign-specic with selected experts from his pool.
Barker says, There is some light at the end of the digital
tunnel. Independent travel companies often have much better
access to all the raw materials necessary for a healthy Web
presence : local knowledge, genuine expertise and plenty of
passion and personality. The owner of an independent B&B, for
example, usually has more passionate local travel knowledge
and experience than the manager of a well-known hotel chain
M
A
N
A
G
I
N
G

H
O
T
E
L
S

I
N

2
0
1
3
Crowdsourcing has
enormous potential for
small independent hotels
Putting the crowd to work
for you cont.
property. The trick is in applying those qualities online and
converting them into a solid and cost-effective digital marketing
strategy, along with the judicious use of an external contractor.
Todays evolving technology and changing business models
make it possible to enlist ever-larger numbers of specialists
to do ever-more complex and creative tasks at signicantly
reduced costs. Crowdsourcing has enormous potential for
small independent hotels and provides collective intelligence,
specic skills, and constantly fresh ideas. Oftentimes, there is
a deep commitment of the member of a crowd community
towards specic interests such as graphics, website design,
search engine ranking, content writing, logo designing,
lmmaking, product development, etc. When these members
of different crowds come together, they can accomplish a
more successful and more rapidly completed project than an
individual could working alone in order for the hotel to achieve
its marketing objectives.
EXAMPLE OF AN ONGOING CROWDSOURCED SMALL
INDEPENDENT HOTEL PROJECT
Online travel marketing specialist, Hit Riddle, just began
crowdsourcing a project with a small family-owned rainforest
lodge in the Peruvian Amazonian jungle, called Tambo
Blanquillo. Bocu Manu is the nearest airport in the area which
includes the Manu National Park of Peru. The Tambo Blanquillo
Lodge, built in the local style of the communal houses, offers
20 rooms with shared bath and a new dining room as well as
a wooden platform area for pitching up to 20 double tents with
shared bath and a mess hall. The lodge also offers full service
guided multiple day trips into the jungle of 4-5 days.
The objectives of the crowdsourcing project with Hit Riddle
for the Tambo Blanquillo Lodge are to increase the companys
search engine rankings, where there is a very competitive
environment. Although there is great demand for its services,
according to Hit Riddle, the lodge is competing with a number
of well resourced authority players such as internationally-
owned hotel chains, major online travel agencies and larger
tour operators. A major contributing factor to a websites
search engine rankings is its degree of authority, as calculated
algorithmically by the search engines. Although, the lodge has
the most authority in terms of actual knowledge and expertise
of its region, in the search engine world, this is overshadowed
by larger companies who have the resources to develop the
technological authority that is the current metric for Internet
search ranking.
To counter this disadvantage, websites like Tambo Blanquillo
rst need to expand and improve their websites by increasing
the amount of useful, informative and high-quality content
published throughout the site. Secondly, they need to seek links
C R O W D S O U R C I N G
115
114
from other authoritative websites to help increase their own
authority score.
Companies like Hit Riddle can crowdsource these solutions for
small hotels because they have an enormous global travel network
with travel writers, bloggers, and other content creators who
can write authoritatively about any part of the world, as well as a
network of Internet marketing specialists. In addition, they have
developed relationships with authoritative networks of publishers
in order to link to the Tambo Blanquillo Lodge which will increase
their authority signals to the search engines. In order to acquire
the social media exposure, Hit Riddle will work with their network
partners to post and promote the lodge, which will increase its
exposure and improve its search engine ranking on the Internet.
According to Barker, What we do is to help a smaller company
like the Tambo Blanquillo Lodge to level the playing eld and
compete with the larger brands for the coveted top spots that
they deserve. We can do that by crowdsourcing some of the
things that their website is missing for those important authority
signals. [] We can also negotiate rates and lower costs
through economies of scale.
PRELIMINARY RESULTS
The Tambo Blanquillo Lodge project has so far completed
two months of work. However, website trafc has increased
over 185 %, search trafc has increased by 195 % and search
engine rankings for target keywords have moved up 63 places.
Barker tells us that these have cumulative results : Within six
months, we would expect to have them competing on the rst
page for all their main target keywords, and when you consider
the competition, thats a pretty impressive ambition for a single
property accommodation provider.
THE FUTURE OF CROWDSOURCING
Crowdsourcing provides a marketplace of diverse and fresh
creative and technical services. This collective intelligence
is available now and evolving rapidly into a variety of unlimited
possibilities for small independent hotels in order to compete
with the larger hotel groups and tour operators.
Crowdsourcing projects can require a lot of discussion and
feedback with the participants at least in the beginning.
Furthermore, as with all business partners, one has to carefully
inquire about specic crowdsourcing companies offer and
conditions, which vary a great deal.
However, crowdsourcing frees up ones time, speeds up project
completion, provides global access to multi-culturally sensitive
branded freelance specialists, gives access to economies
of scale which reduces overhead, and helps lead small hoteliers
to protability.
M
A
N
A
G
I
N
G

H
O
T
E
L
S

I
N

2
0
1
3
Online Travel Agencies :
the empire strikes back ?
WHAT CAN THE HOTEL INDUSTRY EXPECT TO SEE IN THE RAPIDLY EVOLVING OTA ARENA IN 2013 ? WE ASKED PROF.
PETER OCONNOR, THE ACADEMIC DIRECTOR OF THE MBA IN HOSPITALITY MANAGEMENT AT FRANCES PRESTIGIOUS
ESSEC BUSINESS SCHOOL AND A SHARP OBSERVER OF THIS MARKET, FOR HIS THOUGHTS ON THE COMING YEARS
POSSIBLE DEVELOPMENTS.
The hotel online distribution landscape has changed signicantly
over the past few years. Online channels have become vitally
important, with the vast majority of todays customers making
their travel plans online, and a corresponding positive effect on
online booking levels. In the US hotel sector, online sales can
now account for over 50 % of a typical hotels room revenue.
Although other parts of the world lag considerably in terms of
online penetration, gures of 35 % of bookings owing through
online channels are not unusual for European hotels, with
signicant further growth certain in the short run.
However, a bone of contention for many hotels is the source
of their online bookings. Within the highly consolidated US
market, hotel chains have managed to leverage their brand
power, technical expertise and deep pockets to ensure that
the majority of electronic bookings ow through their direct
brand.com websites. In Europe, where the market is more
fragmented and global chains have much less presence, the
proliferation of small and independent properties means that the
majority of online hotel bookings ow not directly but through
one or another of the various Online Travel Agents (OTAs).
Hoteliers have traditionally had a love/hate relationship with the
OTAs. Although grateful for their business when times are bad,
most hoteliers begrudge the outrageous commissions they
pay for bookings, as well as complaining vocally about unfair
competition as the OTAs skilfully position themselves between
the hotel and the customer.
OTAS ARE GOOD FOR YOU
To be clear : OTAs do add value. Using their electronic marketing
expertise, they help hoteliers sell more rooms, allowing them to
reach customers and markets that would be otherwise impossible.
OTAs deliver heads-in-beds and do so on a totally pay-per-
performance basis. In effect, they continuously market the hotel
property (the so-called billboard effect) to a global audience, but only
get paid if they manage to complete a sale by making a booking.
And even though OTAs are perceived as expensive, trying to
drive similar levels of business directly would necessitate major
D I S T R I B U T I O N
investment on the part of the hotel in search engine positioning,
website optimization, not to mention booking engine and credit
card fees all of which would quickly make the 18 % to 25 %
paid to an OTA look like peanuts.
BIGGER AND MORE POWERFUL
The distribution challenge currently facing the hotel sector
is therefore not the presence of OTAs per se in their online
distribution mix. In fact, in todays highly competitive world,
hotels need to accept OTAs as an essential partner in their
distribution process. The real issue is that, as a result of
accelerated growth and strategic acquisitions, certain OTA
players have become so big that they have started to dominate
the market, leveraging their market size to effectively dictate
terms to hotel suppliers and customers alike.
At the European level, this is currently happening with industry
giants Expedia Inc. and Booking.com, both of whom are
major suppliers of business to the majority of European hotels.
Recent analysis from Nomura claims that these two companies
collectively control over 65 % of European indirect online hotel
sales, although certain other, more regionally focused, companies
(particularly HRS/hotel.de) do have signicant critical mass in
particular markets (in this case Germany). If hotels want to prot
from the phenomenal growth in the online sale of hotel rooms,
they have to do business with one or more of a very small number
of highly inuential (or should we say dominant) companies.
Unfortunately, abuse often goes hand in hand with dominance.
Facing increased regulatory scrutiny in both the UK and the
US in relation to allegations of price xing, Expedia Inc. is
trying to transform its previously precious merchant model by
push suppliers into accepting an agency model even though
ultimately, the hotel will end up paying a higher price for each
reservation delivered.
Similarly, Booking.com, previously regarded as the most
supplier-friendly of the OTAs, has started to dictate far more
stringent terms and conditions to its hotel suppliers as it has
grown in power. For example, the company has started recently
117
116
HOTELyearbook2013
restricting hotels access to previously available guest contact
details, in effect ensuring that the customers relationship is with
the OTA rather than with the hotel itself. In addition, Booking.
com has now started retaining cancelled room inventory to
ensure that these rooms are subsequently resold through the
system and that it receives its commission.
However, it is regional player HRS that has so far been the most
blatant in terms of (ab)using its market position. Shortly after its
takeover of competitor hotel.de, which in effect gave it control
over nearly two-thirds of the German online hotel market, the
company calmly announced that not only would it charge hotels
a higher commission in the future, but if a company wanted to
be distributed through the system, it had to provide both best
available rate and last-room availability. Anyone who was not
willing to comply could take their business elsewhere.
CAN WE EXPECT ACTION IN 2013 ?
As consolidation continues in the online travel space, with
smaller companies being swallowed up by the major players,
such dominant behavior is likely to accelerate. How then can
hoteliers battle this like-it-or-lump-it approach ? Given their
market power, the only way that OTAs will concede is if they are
forced to do so. And there are basically two ways to accomplish
this industry pressure or regulatory action.
The hotel industry is far too fragmented, however, to be able to
organize the concerted effort needed to pressure such powerful
companies. Unlike the airline sector, for example, even when
considered together, the hotel chains control much too small a
percentage of room inventory to be able to challenge current
business practices. In the extremely unlikely event of a boycott,
the OTAs could simply bypass protestors and focus on those
not participating in the action. Past experience has also shown
that hoteliers are not good at cooperating for the common good
a fact evidenced by the lack of a global lobbying organization
on behalf of the sector.
And unfortunately, regulatory action also seems unlikely.
Recent mergers in the OTA sector have been scrutinized by
the competition authorities. Although subsequently allowed,
some hope is offered by the closer examination that regulators
seem to be paying to how the sector operates, with the
aforementioned price xing and anti-competitive behavior cases
sure to have a long-term effect.
Tough love from the OTAs thus looks likely to continue, placing
hotels in an increasingly hostile situation, particularly in 2013.
To survive, hotels need to become much more proactive about
managing their portfolio of distribution channels. In particular,
they need to develop and cultivate relationships with not just the
major players but with multiple alternative prospects. Smaller
niche players need to be nurtured to avoid becoming overly
dependent on any one source of business.
When it comes to distribution, hotels need to stop their short-
term thinking and look at the broader picture. If they continue
to endlessly feed the major OTAs with inventory and special
rates, soon they will be left with no alternatives. A broader, more
portfolio based, approach to distribution is needed to minimize
risk and ensure hotel success in the long run.
M
A
N
A
G
I
N
G

H
O
T
E
L
S

I
N

2
0
1
3
Global branding is dead.
Micro-branding is next
FOR A GENERATION OR MORE, BRANDING HAS BEEN REGARDED AS AN ABSOLUTE MUST BY HOTEL MARKETING
PROFESSIONALS. BUT HAVE WE FOCUSED ON BRANDING THE RIGHT THINGS ? YOURI SAWERSCHEL OF GENEVA-BASED
CONSULTANCY BRIDGE.OVER THINKS MAYBE WE HAVE BEEN MISSING AN OPPORTUNITY.
Often in the hotel industry, branding is perceived as the art
of putting a logo everywhere. By placing their logos on every
napkin, pen, bathrobe and amenity, hotel brands have become so
ubiquitous that they have somewhat lost their soul and uniqueness.
In the meantime, several small hotel companies such as 25h in
Germany, The Standard Hotel in New York or Yotel in London
have gained a lot of attention by branding themselves differently
from the mainstream brands. They are known globally but are
not global brands. Unlike the latter, these companies often
B R A N D I N G
operate only in their home market. As a result, not only do they
have a better understanding of local tastes, but they also benet
from stronger community ties and cultural identity.
In order to differentiate themselves, it is likely that global
brands will seek inspiration from these smaller companies that
manage to attract both international and local clienteles equally
successfully. Global brands are and will remain relevant ; global
branding, however, is likely to change signicantly in the next
years. The future belongs to hotels which are able to rethink
The Opposite House hotel is positioned
as a lifestyle destination
Courtesy of the Opposite House Beijing
completely the way they look at themselves and, consequently,
brand themselves.
To be fully attractive, hotel outlets must have their own
identity, as opposed to being treated as sub-brands of a main
hotel brand. This is what I call micro-branding. Unlike the
centralized and hierarchical brand architecture, through micro-
branding, distinct points of sale are positioned as different
brands, each with its own value proposition.
MIX-AND-MATCH, CHEAP-AND-CHIC
The great thing about micro-branding is that it allows the
targeting of different segments under the same roof in a
coherent way. In the fashion industry for example, Louis Vuitton
does not target the same customers with its travel luggage line
as it does with its range of small leather accessories. Following
the same logic, a hotel doesnt have to target the same
customer segment with all of its outlets.
The Standard Hotel in New York micro-branded its outlets very
successfully : its expensive night club Boom Boom Room attracts
celebrities and wealthy individuals, while its Biergarten is popular
among locals looking for a casual beer with friends. Using this
logic of mixing and matching different value propositions, bridge.
over has recommended to a luxury London hotel to turn one of
its F&B outlets into a gourmet sh & chips restaurant.
TWO WAYS TO GET THERE
There are essentially two ways to pursue a micro-brand
strategy : develop micro-brands in-house, or bring established
brands in. The Opposite House, a design hotel in Beijing, has
been very successful at developing home grown micro-brands.
The Punk, a bar/club located in the basement of the hotel is a
meeting point for young hip Chinese and expatriates, while the
Sureno, located next to it, is a contemporary restaurant known
as one of the best Italian addresses in town. A short cab ride
away, Park Hyatts Xiu Bar cultivates its independent branding :
it has its own website, a private elevator with street access, and
it does not always accept in-house guests.
Developing a stand-alone brand for an outlet bears its fair share
of uncertainty. As such, hotels may decide to partner with other
M
A
N
A
G
I
N
G

H
O
T
E
L
S

I
N

2
0
1
3
Through micro-branding,
distinct points of sale are
positioned as different
brands, each with its own
value proposition
The Biergarten of the Standard Hotel
attracts hotel guests and visitor alike
jetsetterrport
Global branding is dead.
Micro-branding is next cont.
players to share the risk (and consequently the return as well).
Casinos were among the rst to bring in celebrity chefs to run
their restaurants. Today, we see a growing number of hotels
featuring known chefs or established restaurant brands like
Anne Sophie Pic at the Beau-Rivage Palace in Lausanne or the
Nobu at the One & Only in Cape Town, respectively.
MICRO-BRAND EVERYTHING
While micro-branding in hotel restaurants is being increasingly
explored, its application to other outlets is still to be discovered.
Room service, for instance, could be branded as an
B R A N D I N G
independent dining option with an offer differentiated from the
usual lounge bar menu. Why cant room service be positioned
as an exotic pizza delivery service or as the ultimate Spanish
tapas dining option ?
Kids clubs and sports facilities are other outlets with a huge
potential for micro-branding. At bridge.over, we recently
advised a leading hotel in Abu Dhabi to brand its kids offer
separately from the hotel by creating a dedicated area featuring
a playground, a toyshop, a video-game room and an ice-cream
stand. In the same way, hotel sports facilities could also be
HOTELyearbook2013
Sport facilities : a huge potential for micro-banding
Courtesy of Hotel Concorde Berlin
branded separately. Why not imagine a Nike tness centre or a
Speedo swimming pool ? These outlets would then be marketed
independently from the hotel, using different communication
channels and targeting various segments.
Finally, hotel lobbies, long considered functionally empty spaces
without a soul, have a great potential to be branded as hybrid
lifestyle destinations. For example, the lobby could become
an open space featuring a orist, a perfumery, (like in upscale
department stores), a bookstore, or even a gourmet food court
like the Mercado San Antn in Madrid.
The examples above give an insight on how branding is likely
to evolve in the near future. Not only small independent hotels,
but also global chains can benet enormously from a micro-
branding strategy. For creative managers who are able to think
differently, the potential of micro-branding is both limitless and
extraordinarily exciting.
M
A
N
A
G
I
N
G

H
O
T
E
L
S

I
N

2
0
1
3
The Punk bar/club in Beijing
123
122
We are feeling machines that
think not thinking machines
that sometimes feel!
ALEX BATCHELOR IS THE CHIEF OPERATING OFFICER OF THE DELICIOUSLY NAMED BRAINJUICER, A LONDON-BASED
AGENCY THAT APPLIES BREAKTHROUGHS IN BEHAVIORAL ECONOMICS AND SOCIAL SCIENCES IN THE DEVELOPMENT OF
TOOLS TO EXPLAIN AND PREDICT HUMAN BEHAVIOR. HE SHEDS LIGHT FOR US HERE ON SOME OF THE COMPANYS NEW
THINKING IN MARKET RESEARCH FOR THE HOTEL INDUSTRY.
M A R K E T I N G
HOTELyearbook2013
A life lived through the prism of hotel stays is an interesting one.
I am told I was conceived in a hotel but of course I cant know
this. I stayed in hotel rooms in London, Hong Kong, Tokyo,
Manila and Bagui, as well as 6 weeks in a ships cabin, before I
was one year old (I dont claim to remember any of them either !)
I have supported Chelsea football club since the age of 5
because of a stay in a hotel (a kindly Italian hall porter at the
Grosvenor House Hotel and the replay of the 1970 FA Cup nal
between Chelsea and Leeds were to blame).
I have spent over 150 nights in the same hotel within a
15-month period (the Mvenpick in Amsterdam) to the extent
that they used to introduce me to new members of staff (This is
Mr Batchelor ; he comes every week).

I spent my wedding night in a hotel room and went back with
my wife for various anniversaries to the same room at The
Savoy, until they refurbished the whole hotel and the room we
stayed in changed. We have still been back just to a different
room and will have been married 20 years next year.
I write all of these details because I have some deep personal
experience of hotels. As you are reading The Hotel Yearbook,
I suspect that you do, too ! Over 47 years, I have spent almost
two thousand nights in hotels, in over a hundred countries.
What distinguishes them is that even though I cannot possibly
remember that much about any one exactly where each hotel
was, how much I paid, any features of the room, even the name
of the hotel I can remember, for an amazingly high proportion
of them, exactly how I felt. Happy or sad or angry or perhaps
worse : neutral, indifferent.
Indeed, emotion is what matters in most decisions and it
drives a lot of our memory, too. A well respected neuroscientist,
Antonio Damasio, wrote a great book called Descartes Error. In
it, he outlines how emotion is the main driver of our behavior
and he shows, at a neurological level, that most of our decision
making is driven by our amygdala, our ancient, reptilian brain.
(Damasio is also the source of the title of this article.)
Much of his neurological work has found widespread support
from the growing eld of behavioral economics. Daniel
Kahneman, author of another excellent book called Thinking,
Fast and Slow, has devoted his life to demonstrating that human
decision making is a long way from the rational, considered
model of Homo economicus. He delights in designing
experiments that show us how we are irrational and how our
decision making is awed and is honest enough to admit that,
despite a Nobel Prize and a lifetime spent studying the subject,
he is just as likely to take these mental short-cuts as anyone else.
Kahneman doesnt waste time trying to explain the different
regions of the brain that are involved, but simply distinguishes
between two brain systems, which he calls System 1 and
System 2. System 2 is the rational, slow, analytical, learned,
conscious system the one that does quadratic equations.
System 1 is the innitely more powerful, emotional, intuitive,
implicit, instinctive, unconscious one. If we draw a computing
analogy, then System 1 operates at 11 million bits/second
while System 2 can only manage 50 ! Little surprise, then, that
most of our decision making is emotional and instinctive.
If we accept the premise that emotion drives our behavior
then we are left with the question of how you might measure
emotion. This leads us to the work of Paul Ekman. A respected
social anthropologist, he spent 40 years travelling the world
looking at how emotion is expressed in human faces. When
he started his work, the theory was that facial expressions
were culturally inuenced. But Ekman showed faces of
white students from San Francisco to tribesmen in Borneo
If we accept the premise
that emotion drives our
behavior then we are left
with the question of how
you might measure emotion
who had not seen white people before (and vice versa) and
demonstrated that there are seven basic human emotions that
we all recognize the same way. Subsequent work has validated
his research and shown that babies code for, and recognize,
emotion in human faces before they are one year old. The
American TV series Lie To Me is based on the work of Paul
Ekman indeed he even writes an interesting blog that explains
that the show is genuinely based on his academic work, and
explains when the needs of TV drama cause it to drift into the
realms of fantasy !
By this stage I can almost feel you asking, well what does all
of this mean to someone in the hotel industry ? Well, to make it
less painful, lets look at how you might try and understand the
customer experience in an industry with close links to hotels
airlines. I found a video on YouTube that we use to highlight the
issues, but despite the advances in modern technology I cant
yet play you this video in The Hotel Yearbook. The basic story is
shown in the pictures below.
How would the airline industry normally try and evaluate this
customer experience ? The honest truth is that they would do
so with a questionnaire that looks something like this :
You may notice the capacity for confusion with a series of
closed questions. The things we ask are mostly not relevant :
yes, the staff were polite, well dressed, the area was clean
BASED ON FACETRACE
AND MINDREADER
CLEAR AND INSTANT READ ON SYSTEM 1 WITH REASONS WHY

Which of these faces best expresses how you feel right now ?
and tidy but you dont really know what happened. I speak
from experience when I say that often, the metrics used might
cover the time taken per customer when checking in, the time
taken from the rst customer to the last, but that none of those
would pick up on what actually happened here which is that
the check-in team just failed to communicate with the waiting
queue of customers and basically kept them waiting, until they
were ready to open check-in, by ignoring them. No matter how
wonderful they were when they did check-in the customer,
the part that people remember strongly is the bit where they
were ignored !
At BrainJuicer, we use the human emotions identied by Ekman
to understand consumer and employee responses in a wide
variety of ways.
M
A
N
A
G
I
N
G

H
O
T
E
L
S

I
N

2
0
1
3
125
124
We are feeling machines that
think not thinking machines
that sometimes feel! cont.
M A R K E T I N G
HOTELyearbook2013
The survey is then very short and the responses are very
clear. In this example, you would discover that the customer
was angry and that the reason for that anger was that they felt
ignored and kept waiting.
Over the course of a 25-year career in marketing, I have worked
indirectly for hotel chains large and small from IHG, to the
Four Seasons, to lebua. Many of these organizations have large
customer satisfaction surveys, and many of them use the Net
Promoter Score as a key metric. Recently, we have started
to hear two main complaints. The rst is that their customer
satisfaction scores are increasing but they arent getting any
more customers in fact, quite the opposite. The second is that
even though they know what their Net Promoter Score is, they
dont know what they need to do in order to make it better.
Over the last year we have been using this approach in
a particular hotel chain and have generated some
interesting learnings :
First, focus on how people feel it will be the surest guide to
any future behavior.
Second, it is important to know how both your guest and your
staff feel. Everyone knows that you want to have happy guests
and happy staff, and that you dont want to have unhappy
guests and unhappy staff but both the other options are
unsustainable too. Happy staff and unhappy guests eventually
means an empty hotel and happy guests and unhappy staff
also eventually means an empty hotel, as things will never run
smoothly, since you will always have too many new people
trying to work together as a team. (As an example I remember
meeting the team working in the in-house laundry of the Four
Seasons in Philadelphia a few years ago. Think there were ve
members of the team, and four of them had been there since
the hotel opened in 1983. The newcomer had joined the
team in 1985 ! I am sure their dedication and teamwork helped
support a great guest experience).
Third, let guests write freely about what interests them
I can promise that their concerns wont match your list of
chosen options.
Fourth, try and gather the data as close as you can to the
moment of the experience. We have experimented with mobile
surveys, iPads in reception, hostesses with iPads in the
restaurant and would say that any survey completed weeks
after the event is less useful as a source of feedback.
I will continue to stay in lots of hotels and am still amazed
how the best hospitality can make us feel happy when we are
excited, tired and away from home. The little surprises that
make the best experiences are what keep bringing us back
for more.
Focus on how people
feel it will be the
surest guide to any
future behavior
www.benchevents.com
Bench Events - A Portal for the Hotel Industry
For further information, please contact:
Matt Weihs
Managing Director
matthew.weihs@benchevents.com
Jennifer Pettinger
Head of Production
jennifer.pettinger@benchevents.com
Bench Events is proud to host top conferences
for the hotel investment industry in
partnership with other leading providers. Our
highly successful conferences are well known
for offering a complete package: top notch
speakers, riveting panel sessions, amazing
networking and fabulous receptions.
Do come and experience these for yourself
great events for making great business deals!
Bench Events ,

.
Unsere erfolgreichen Konferenzen bieten Ihnen ein komplettes
Paket bestehend aus: erstklassigen Referenten, fesselnden
Workshops, fantastischem Networking und grandiosen Empfngen.
Delivering Knowledge, Contacts and Opportunities on a Global Scale
International Hotel
Investment Forum
- March
InterContinental, Berlin
www.berlinconference.com
Arabian Hotel
Investment Conference
- May
Madinat Jumeirah, Dubai, UAE
www.arabianconference.com
Turkey &Neighbours
CATHIC
Turkey and Neighbours
Hotel Investment Conference
- May
Marmara Taksim, Istanbul
www.cathic.com
British
Hospitality
Summit 2013
British Hospitality Summit
June
InterContinental Park Lane,
London
www.bha.org.uk
Africa Hotel
Investment Forum
September
Venue to be announced
www.africa-conference.com
Russia & CIS Hotel
Investment Conference
October
Venue to be announced
www.russia-cisconference.com
Engaging your employees
in 2013
IN THE YEAR AHEAD, HOTEL EMPLOYEES WILL HAVE EVER GREATER ACCESS TO MORE AND DIFFERENT WAYS OF
UNDERSTANDING THEIR COMPANYS PERFORMANCE, CULTURE AND LEADERSHIP, WRITES STEVE LAWLER, MANAGING
PARTNER OF ST. LOUIS-BASED OPINIONS INCORPORATED. NEW SOCIAL MEDIA TECHNOLOGIES WILL CATALYZE
CHANGES IN THE RELATIONS NOT ONLY BETWEEN EMPLOYERS AND EMPLOYEES, BUT ALSO THOSE BETWEEN EMPLOYEES
AND GUESTS. ENGAGING EMPLOYEES WILL THEREFORE BE A KEY OBJECTIVE FOR ENLIGHTENED MANAGERS.
Although the exact metrics of employee engagement are
evolving, the general framework is already solid enough to
justify the increased attention paid by leaders and managers in
the hotel industry.
Engagement increases when employees understand their
organizations strategy and direction, know how their role
contributes to success, have the resources they need to be
effective and are treated with dignity and respect. When these
things are true, employees make greater contributions to nancial
goals and guest satisfaction. Employee activities become more
aligned. There is an increase in employee engagement. Effectively
leading and managing employees requires tracking those emerging
developments that are having high impact on the relationship
employees have with their employers. In our work, we see several
such developments that can change the way employees engage
with their work and their employers in the year ahead.
First, micro and macro shifts in the world of hospitality work
require continuous adaptations to strategies and practices for
L E A D E R S H I P
assessing and engaging employees. In the near term, we see no
slowdown in this accelerated rate of change. Of signicance are
higher percentages of women students in hospitality schools
and management training programs, more regionally born
managers succeeding Europeans and Americans, especially in
Asia, and the shifting career aspirations of younger hospitality
moving more towards real estate, banking and nance, affecting
recruitment for careers in operations, food and beverage,
marketing and sales to name a few.
Yet the most signicant employee mind shift is towards higher
levels of expectation and experience in both parts of the high
tech/high touch equation. The right mix of high tech and high
touch that is a challenging balance for achieving an exceptional
guest experience is of growing signicance in the realm of
employee engagement and satisfaction. Customization,
authenticity and transparency join high speed, rich data and
robust metrics as essentials for successfully understanding
associate engagement. Tracking these shifts involves developing
a richer understanding of the employee experience, and this
127
126
requires greater use of customized employee research combining
both qualitative and quantitative tools. Employees, like guests,
expect a more personalized experience. There is great pressure
for hospitality organizations to deliver new features and upgrades
to the employee/employer relationship at every turn. First rate
technology and superior internal customer service are necessary
to effectively engage contemporary hospitality employees.
Second, the accelerated use of social media tools is having
greater impact on the way employees understand their roles
and frame their expectations within existing organizational
structures. Worth noting here are changes inw employee
communications channels, the increase in more direct
employee/guest social media connections, and greater
employee access to strategic information, all of which are
introducing both increased risks and greater opportunities. With
new social media technologies, effective plans for employee
communications are rapidly growing past voicemail, e-mail, and
newsletters to texting, Facebook, Twitter, YouTube and Google +
with the future bound to include as yet undeveloped options.
With Web 3.0, unfolding information is free to show up in spaces
and places not formally sanctioned, with users expecting
customized content and delivery. As greater use of social
media inuences employee/guest relationships, we see direct
connections supplanting some elements of a companys role as
intermediary and owner of the relationship. It is not outlandish
to imagine a guest having a lively and engaging conversation
about a hotel with a new, tech savvy associate found through
the guests social media connections as a way to gathering
information ahead of actually visiting a locations website. This
dynamic context has a larger set of variables. The conversations
organizations are having with their guests are growing on
multiple levels and into new channels as well. Although still
delivered through ofcial channels, brand messaging and
information ows more and more through relationship instead
of roles.
Social media becomes a broader horizon for managing
employee branding and feedback as well.
Employees have access to more and different ways of
understanding a companys performance, culture and
leadership. Potential employees look for innovative ways of
recruiting, training and managing current employees, ways that
express a relational, not functional, sense of work. Deepening
employee engagement involves being more connected, more
of the time, and in ways that are increasingly collaborative.
Social media connectivity and collaboration as a work-style are
increasingly important essentials with younger employees. Such
collaboration involves a great sense of the local and particular
within the larger organizational whole. Shaping ones work and
ones role are extensions of expressing ones particular identity.
High potential employees want work that is a worthy expression
of their unique giftedness.
Finally, we see sustainability motifs emerging as a key element
in positive regard from younger employees for a location and a
corporate brand. This is not in place of traditional elements like
career potential, salary and benets, working conditions and
location. Yet along with these traditional expectations come
additional ones. Organizations that have clearly articulated
sustainability practices and that are making some specic
contribution to sustainability in a broader context are held in
higher regard with younger workers. Steps taken to practice
sustainability both inside and outside the walls signal to
these employees that the organization is moral and realistic
both. Although it is not clear as of yet if there are preferences
for certain types of external sustainability projects (water,
reforestation, alternative energy sources, etc.), there are
preferences for internal practices that use greener products and
that practice the basic principles of reduce, reuse, recycle.
w
M
A
N
A
G
I
N
G

H
O
T
E
L
S

I
N

2
0
1
3
Social media becomes a
broader horizon for managing
employee branding and
feedback as well
Exploring the terrain of 2023
in 2013
MORE AND MORE HOTEL COMPANIES ARE TURNING TO A TECHNIQUE CALLED SCENARIO PLANNING TO HELP THEM
VISUALIZE HOW THEIR FUTURE BUSINESS LANDSCAPE COULD DEVELOP OVER TIME. ACCORDING TO WOODY WADE,
AUTHOR OF THE RECENTLY PUBLISHED BOOK SCENARIO PLANNING : A FIELD GUIDE TO THE FUTURE, THIS CREATIVE
YET LOGICALLY STRUCTURED APPROACH ALLOWS COMPANIES TO ENVISAGE ALTERNATIVE WAYS THEIR COMPETITIVE
ENVIRONMENT COULD REALISTICALLY UNFOLD, ENABLING THEM TO SHAPE MORE FLEXIBLE LONG-TERM STRATEGIES TODAY.
Are you responsible for developing a strategy for your
companys future ? If you are, then you already know that a
solid plan needs to be based on a solid reading of the future.
But you are surely also aware of a painful but relevant fact : it is
impossible to know how the future will turn out.
So how do you resolve this dilemma ? In a constantly changing
world, is it possible to develop a picture of how your future
business environment will look ve or ten years in the future
a vision that you can have condence in ?
WHAT MANY SENIOR MANAGERS DO IN THIS SITUATION
In order to get a handle on the way the key elements of their
environment will develop as the years go by, most companies
rely, at least to some degree, on projections or forecasts of
their key variables. Concocting a short-term plan based on
short-term forecasts (Here are our market projections for
2013, so what should we do next year ?) is relatively safe,
and will probably yield acceptable results, barring some huge,
unexpected change in your landscape. But if you are developing
a strategy that aims to assure your continuing competitiveness
a decade from now, relying on forecasts and projections may
actually be dangerous.
Why ? Not because the projections may be wrong! Inaccurate
forecasts may lead you to make suboptimal decisions, but they
are rarely so wrong that you risk going out of business because
you based a strategy on them. No, the reason why relying on
forecasts and projections is potentially dangerous is because
they paint a misleading picture of the future. They imply that the
future will simply be a mathematical variant of the way things
already are today : i.e. take the current numbers, identify a trend
line, extrapolate a few years into the future, apply another tweak
or two, and voil ! youve created a picture of your business
terrain ten years from now.
Or you believe you have, and therein lies the danger. By
forecasting the key variables that matter to your business (such
as market growth rates, prices, exchange rates, and so on),
your gaze is xed on a myriad of measurable details. All well
and good. But could any of these variables be actual game
changers for your business ? Probably not.
Instead, if anything has the potential to cause profound change
in your environment, and have a truly dramatic impact on your
business over the next few years, it is more likely to be larger,
more potent forces than any of these statistical details. Think
about it. Was Kodaks long-term success endangered because
the value of the dollar changed by 20 % ? (Or 25 % ? Or 22.5 % ?)
Did Blockbuster Video go bust because it didnt project the
growth rate in the number of VCRs in its markets ? Did Nortels
demise come about because of its inability to forecast interest
rates accurately ? No. Their fates hung on much bigger changes
that emerged in their business landscape, such as technological
innovations, new competitors, substitutes for their products,
evolving social or political changes, shifts in consumer behavior,
and so on.
It is huge, big-picture changes like these not interest rate
trends or foreign exchange rates that have the potential to
make you or break you. But like real earthquakes, these seismic
shifts are rarely predicted and they are certainly not captured
in forecasts. Just the opposite : forecasts lead you to think
things will continue like they are now.
S T R A T E G Y A N D P L A N N I N G
129
128
SCENARIO PLANNING TO THE RESCUE
So what should companies do to develop an early-warning
system that could alert them to possible big changes ahead ?
If its not possible to forecast or predict them, is there at least
some way to discern how the future lay of the land could look ?
Yes. A fascinating approach to this challenge is called scenario
planning. It is a structured process that focuses on the most
critical uncertainties you will face the ones that you and your
strategy team identify as being the most crucial factors affecting
your long-term ability to succeed. By imagining in detail the
different ways those particular trends or forces could develop, the
process allows you to generate the outlines of a range of different
future scenarios, i.e. alternative business landscapes that could
realistically unfold, depending on how those factors change.
Unfortunately, even though its step-by-step logic helps you
visualize three or four different futures, scenario planning
cant tell you which one will actually materialize. But that is
all right ; it is not meant to function as a crystal ball. Indeed,
scenario planning is not a tool for predicting the future, but
rather for exploring it ; that is, for dening and describing
realistic possibilities that you could be confronted with. Using
this technique, you generate ideas about what could happen
in your business environment if certain trends play out. Then,
armed with these sometimes eye-opening insights, it is possible
to recognize how each scenario each future landscape
you might nd yourself operating in could usher in a set of
opportunities and challenges that are possibly unique to that
particular business constellation.
OK, GOT THE SCENARIOS NOW WHAT ?
When you have dened what these opportunities and threats
could be, you can ask yourself some probing questions about
your readiness to compete if that scenario were to materialize :
What issues, internal and external, would your company have
to address in each scenario if you want to assure that you will
be competitive ? What capabilities would you need to master
in order to thrive in each scenario ? Are there specic skills or
strengths you would need to beef up in your organization ?
Who could be your primary competitors in each scenario ?
Could the emergence of this scenario favor the entry of a new
competitor or even a new kind of competitor ? Could some
other disruptive market force appear ? What might it look like,
and how would you respond ?
What nancial, marketing, operational, or human resources
policies would serve you best in each scenario ? How much
would they cost to implement ?
Where should you put your priorities ?
Thinking about the future in terms of alternative landscapes
offers decision makers two signicant advantages over
conventional, put-all-your-eggs-in-one-basket strategy making.
First, by recognizing that different futures are possible, you can
build the needed exibility into your strategic plans and ensure
that your company has the suppleness and agility to be ready
for more than a single outcome to materialize.
But scenario planning is actually more than just a planning
technique. At the end of the day, it is also a powerful leadership
tool. Why ? Because if you want to make ambitious plans for
your organization, and convince your team (not to mention your
Board) to support your strategy, then a scenario approach
demonstrates that you are not betting the companys success
on a single future to unfold, but are anticipating a range of
outcomes that could realistically come about, and you are
preparing for them with a supple, adaptable strategy.
That is surely the sign of a thoughtful, cautious yet ultimately
condent leader.
M
A
N
A
G
I
N
G

H
O
T
E
L
S

I
N

2
0
1
3
Scenario planning is
not a tool for predicting
the future, but rather
for exploring it
131
130
Five health needs of hotel guests
ARE HOTELS IN TUNE WITH THE HEALTH AND WELL-BEING NEEDS OF THEIR GUESTS ESPECIALLY THOSE THAT HAVE
JUST ARRIVED FOLLOWING A LONG AND TIRING JOURNEY ? NOT ALWAYS, SAYS SARA STEWART, MANAGING DIRECTOR
OF JAX COCO UK. BY MAKING FIVE SIMPLE IMPROVEMENTS IN THE THINGS THEY OFFER THEIR GUESTS, HOTELS
COULD MAKE A REAL IMPACT ON THEIR WELL-BEING NOT TO MENTION DEMONSTRATE THEIR ATTENTIVENESS.
W E L L N E S S
HOTELyearbook2013
Health, tness and well-being are all becoming increasingly
essential factors in our daily lives. We are becoming much more
aware about how we can improve our overall quality of life by
investing time and money in our health, tness and wellbeing.
The hotel industry needs to be at the forefront of this ever
growing trend, by offering the very best expert advice to enhance
and maintain the health and well-being needs of their guests.
This is edging into the forefront of the PR and marketing
strategies of a number of companies in, and entering, the
hospitality space. However, even though consumers are
becoming much more health and tness conscious, we are
aware that there is huge choice in the marketplace which leads
to a lot of confusion for our customers. Our mission is to deliver
the best quality products with the greatest benets, and our
strategy is to educate the consumer about the fantastic health
properties of our products. In order to achieve this, we are
working with the worlds top health and tness experts, who are
helping us deliver this message to our B2B and B2C customers.
When our clients travel, they tend to choose a hotel based on
their services and facilities so they can keep their tness goals
up this can include gyms, spas and food & drink choices.
Together with input from these health and tness experts, we
have come up with ve things that we believe the hotel industry
should be thinking about in the health and well-being arena,
which will improve the customer experience for their guests.
Their advice for the hotel industry includes these ve simple
gestures :
REHYDRATION
One of the biggest heath issues for all travelers is dehydration.
In order for our bodies to function optimally, they need to be
properly hydrated at cellular level. But changing time zones,
long-haul ights and different temperatures can directly affect
our bodies hydration levels. Dehydration leads to a change in
the charge and polarity of the cell and in the movement of its
electrolytes. This change in our cells alters their pH (it becomes
more acidic), and our body has a difcult time maintaining
proper levels of magnesium and potassium. This delicate
balance of vitamins and minerals is essential to keep our bodies
functioning optimally. A slight alteration in our hydration levels
can lead to fatigue, headaches and muscle soreness, and also
has an effect on the elasticity of our skin.
The solution is to make sure your guests drink a natural
hydrating drink as soon as they get to your hotel. This will
quickly restore their cells pH balances, giving your clients the
boost they need for their trip, and counteracting any tiredness
or lethargy.
Offering a hydrating drink or even a specic hydrating juice on
hotel menus would benet the hotels hugely. If this is offered
with a mat for clients to do some tailored stretches, it will help
hydrate the body and alleviate any stiffness from the plane,
increase the guests metabolic rate and acts to prevent the
condition DVT. A welcome back consisting of a yoga mat,
coconut water and a series of simple stretches would be the
perfect way to keep guests healthy and happy during their trip.
- Dalton Wong,
Global heath and tness expert, Twenty Two Training
FITNESS MENUS
Food to t the exercise. Exercising before breakfast is ever
increasing in popularity. Which is great. However, one thing a
lot of people get wrong is post-exercise nutrition. What you eat
immediately after exercise is essential to recovery, mood, stiffness
and well-being. Having a Post-Workout Menu could promote
breakfast sales while offering a great service to your guests.
- Steve Mellor,
Health and tness expert, Freedom2Train
OUTDOOR EXERCISE
When guests exercise outside, they are exposed to the sun,
and this in turn increases their production of vitamin D. This
powerful vitamin has been shown in research to boost cognitive
function, immune function, mental clarity, well-being and more.
M
A
N
A
G
I
N
G

H
O
T
E
L
S

I
N

2
0
1
3
Exercising outdoors is ever increasing whether its a walk, run or
exercises they all count.
- Steve Mellor,
MAKING THE MOST OF THEIR WORKOUT
Lots of people work out when traveling. Hotels could offer a
Daily Workout Plan tailored to guests needs. This can be
designed specically for the hotels gym/facilities, while also
offering an Outdoor Workout Plan making the most of nearby
parks, gardens, riverbanks and so on all tailored to the city/
area surrounding the hotel and offering guests a clear plan and
instruction of what to do.
- Steve Mellor,
HEALTHY MINI-BAR OPTIONS
The good intentions and often serious commitment my clients
make to their health is frequently sabotaged when they travel
due to the vast quantities of poor quality and junk foods on offer
in airports, stations, planes and hotels. My number one piece
of advice to clients is never leave the house without food and
water as its a dangerous world out there if you wish to eat
healthily but are unprepared.
Before traveling, I encourage my clients to drink lots of water
and coconut water to enhance their hydration. Once they arrive
at their destination, well, they are on their own to grapple with
the overwhelming temptations to partake of the not-so-healthy
options in the mini-bar and on the room service menu. I suggest
calling ahead and asking for the mini-bar to be cleared and
stocked instead with lots of water and fresh fruit. If only the
world of travel could embrace the health wave and offer healthy
options so that those of us committed to our health, who dont
want to eat junk food, have better options. For example, hotels
could offer clients a choice of a healthy mini-bar or the regular
sugar laden one. I know which one Id choose ! To arrive in my
room and nd a mini-bar packed with coconut water, fresh
water, fresh fruit, crudits, nuts and seeds would make me a
very happy hotel guest indeed !
- Amelia Freer,
Nutrition expert, Freer Nutrition
Before traveling, I encourage
my clients to drink lots of
water and coconut water to
enhance their hydration.
133
132
Look, sweetie,
they have the 17th available!
FOR MANY HOTELS, WEDDINGS ARE AN IMPOTANT SOURCE OF REVENUE. YET THE WAY THEY MARKET WEDDINGS
TO THE PROSPECTIVE BRIDE AND GROOM HAS NOT ALWAYS CAUGHT UP WITH THE WAY YOUNG PEOPLE SHOP IN 2013 :
ON THE WEB (WHERE ELSE ?) CIARA CROSSAN, AN ENTREPRENEUR FROM CORK, IRELAND, ASKED HERESELF,
HOW COULD HOTELS REACH OUT TO THIS NEW BREED OF TRANSACTIONAL WEB USERS AND IMPACT THEIR WEDDING
REVENUES ? THE RESULT : HER START-UP COMPANY WEDDINGDATES, A HARBINGER OF OTHER WEB-BASED SERVICES
AND APPS BEING DESIGNED FOR THE HOTEL INDUSTRY IN 2013.
M A R K E T I N G O N T H E W E B
HOTELyearbook2013
Benjamin Franklin once famously said, In this world nothing
can be said to be certain, except death and taxes. But unless
you are a tax accountant or a funeral director, how do you grow
your business in challenging economic times ?
Weddings are what I like to think of as a recession-proof life
event. Even in times of economic struggle, people continue
to tie the knot, albeit perhaps in a smaller, less lavish way.
Idealistic young couples still want to show the world that they
are in love and, with the increase in divorce rates, second time
(even third time) weddings are increasing year on year. Civil
partnerships are now rmly on the map and the rise of the pink
pound when it comes to weddings has been well documented.
A drop in corporate bookings due to the current economic
circumstances has led hoteliers to look to weddings to
supplement their C&B business. But in an increasingly
competitive marketplace, how are hoteliers reaching out to
newly engaged couples ? And, more importantly, how are they
converting these couples into wedding revenue on the books ?
User behavior online is changing as the web has moved
from simply an information resource to a place where we
transact daily. We purchase ights, book hotel bedroom
accommodation, shop and pay bills online every day. According
to the UK Internet Advertising Bureau, the hospitality & travel
industry is a leading adopter of digital marketing, accounting for
10 % of the entire digital advertising spend in the UK during the
rst six months of 2012.
In the realm of weddings, a recent survey we conducted
suggests that 90 % of couples will go online and Google
wedding-related terms before they ever set foot in the door of
a hotel. Yes, they are researching online, but how about going
further ? We also know that over 60 % of couples set a wedding
date before they decide on a venue. How can hotels better
leverage their digital marketing experience in bedroom bookings
to grow their business in the niche and sometimes more
complex wedding vertical ?
WeddingDates is an Irish-based software company that has
married the transactional nature of the web with the demands
of the 21st century couple. We provide hotels with software that
allows couples to check availability for their chosen wedding
date online. This cleverly designed application makes it easier
for couples to transact on hotel websites and to submit
enquiries more easily via an interactive calendar tool. The
enquiries that come via the calendar are for dates that the hotel
has available to sell and thus are more qualied, more targeted,
and more valuable leads.
Our hotel customers are reaping the benets. Conversion rates
of 10 % are not uncommon, and we give hotels the ability to
track and measure the impact of the software very quickly
and see the additional revenues hit the bottom line. For one
5-star hotel, our software generated 276 leads which led to
M
A
N
A
G
I
N
G

H
O
T
E
L
S

I
N

2
0
1
3
30 converted wedding bookings and revenue of 900,000 in a
single calendar year.
While hotel websites have been thoroughly optimized for
bedroom booking conversion, when a user goes to a weddings
or events page on a hotel website, thats usually where the
interactivity stops. Some photos, marketing text and maybe a
download brochure link is what faces a bride (or groom !) when
planning the happiest day of their life not exactly an inspiring
start ! Online enquiry forms have a tendency to be way too
lengthy and generic. Many use the same form for meetings and
conferences as they do weddings and events. (I dont know
about you, but I have never been a delegate at a wedding !)
Hotels need to realize that wedding bookers want to be
communicated to in a different way than corporate bookers,
and tailor their websites accordingly. With increased choice in
the marketplace, an alternative venue is only a click away. While
you may have a stunning wedding property, we consistently
hear back from brides who say the major inuencer in their
decision was the ease of communication with the venue, or the
staff member that gave them the show around.
For hotels where weddings are a key part of the revenue mix,
even a slight uplift in the number of weddings per year can
make a big difference. WeddingDates customers report a
20 % increase in enquiries and an improvement in enquiry
quality, when they install our software on their websites. And in
economically-challenging times, a 20 % uplift in revenues can
have a major impact on keeping the wolf from the door.
In An Age When the Traditional
Structures Have Struggled To Adapt,
New Solutions Are Coming Through
BY CHRIS SHEPPARDSON, FOUNDER AND CEO OF CHESS EXECUTIVE, AND HEATHER GIBSON, EDITOR, EP BUSINESS
IN HOSPITALITY MAGAZINE
In mid September 2012, EP Magazine (a UK industry
magazine), in partnership with a number of industry experts,
launched a new venture EPIC which is designed to work
with entrepreneurial concerns seeking to grow but struggling
to nd support from the traditional institutions. These could
be start-ups, young companies that have been trading for a
few years, or even established concerns that are unsure as to
their next steps or seeking Joint Ventures in order to grow.
At a Chairmans Think Tank, hosted by EP in June, it was
agreed that there was a need for the industry to help itself by
helping entrepreneurs prosper. Hence the creation of EPIC
and there has been a strong level of support from industry
for the base concept - from companies of all sizes (large
and small) who are interested to help, support and work in
partnership with the new and young.
In just the rst three weeks, the new venture had over 25
plans and proposals presented, and the team is presently
working with around 18 on an on-going basis. These include :
new restaurant concepts, new products, new healthy food
styles and approaches, new food service ideas, and young
businesses that simply want help to grow.
The core team at the centre of EPIC include experienced
nancial experts, business planners, communications
specialists, technology experts, former CEOs, and Chairman.
After four years of recession, 2012 has marked a time
when many people have wanted to nd different ways of
progressing, either themselves or their businesses. Rightly
or wrongly, many feel that the traditional institutions and
structures are not helping them and they are seeking new
solutions. EPIC came from debate and consultation with
industry who saw a need, and one of the most fascinating
aspects of this has been how many large companies have
been open to discussing how they could work in partnership
with good new ideas and concepts. The hospitality industry
has always been successful at nding its own solutions and
not relying on others.
But at the heart of EPIC lie two key questions :
1. WILL THE LARGE COMPANIES FILL THE VOID LEFT BY THE
LARGE FINANCIAL INSTITUTIONS AND HELP SUPPORT THE
YOUNG AND NEW ?
This may sound like quite a radical viewpoint but in truth it
has happened often in the past. In fact, one leading chairman
remarked that corporate players are one side of the coin and
the entrepreneur is the other side. They may be opposites
but neither can live without the other, so they should both be
prepared to help each other. There are many examples where
both live successfully in harmony.
Uncertainty characterises the present economic climate.
Signicantly, the pace of growth is argued to be too slow
to generate a meaningful recovery and as a result the UK
remains well behind its peak since the onset of the recession.
The way out of recession lies in the emergence of
entrepreneurs and SME organizations, which build
momentum, create new concepts, new innovations, create
new jobs and wealth. It is not just start-ups but also young
companies that have evolving concepts and now need to go
to the next stage of development.
The ideas do exist, the entrepreneurs and SMEs exist but
the desire for risk is very limited following traditional funding
routes and models. As this is the case, there is a logical
E P B U S I N E S S I N H O S P I T A L I T Y
argument that large companies who often are in search of
new innovation step forward and ll the void left by the lack of
traditional funding. Is this a real possibility ?
EPIC has been in positive discussions with a number of
major concerns that are open to this idea and it is happening
throughout the market. It is interesting to refer to a BBC
report that appeared in early August that noted that the
UK technology sector was being boosted by major players
seeking to nd new cutting edges. The report noted :
The UK tech start-up scene has been boosted by a urry of
deals in London, Belfast, Milton Keynes and Shefeld.
The announcements include investments by Vodafone and
Barclays designed to support start-ups; and the opening of a
video games studio by one of Japans richest businessmen.
It follows recent announcements from Google, Facebook,
Amazon, Intel and Skype about new projects in London.
The BBC report pays particular attention to Vodafones
incubator centre, which is modelled on an operation it
already runs in the USs Silicon Valley ; a research and
development centre that aims to identify promising start-ups,
provide them with ofce space and bring in its own experts
to co-develop, trial and market their products in return for a
stake in the businesses.
The reports also cites other key examples :
Gree stud|o - the Tokyo-based app maker w||| deve|op t|t|es
for its social gaming platform out of the city. The rms chief
executive is a self-made billionaire and is rated Japans fth
richest man by Forbes magazine.
ln Ju|y, Amazon revea|ed p|ans to bu||d a med|a
development centre in the city to improve its on-demand TV
and movie services, which include Lovelm.
The same month Faoebook sa|d |t was oreat|ng |ts frst
engineering team outside of the US. Although the team only
involves 12 people, the rm said it intended to recruit more
once they had settled in.
Chris Sheppardson Heather Gibson
Goog|e has a|so set up a 'oreator spaoe" at |ts Soho offoe
to help members of its YouTube service create professional-
looking videos. The facility includes a green screen to allow
users to be superimposed over pre-lmed backdrops as
well as professional editing suites and cameras.
Can we create something similar in hospitality ? In fairness,
from the dialogue that EPIC has begun over the last few
months, it appears as though this can be achieved and this
will raise some fascinating questions as to how the landscape
for supporting entrepreneurs may change both in the short
term but also in the longer term as the large players recognise
the need and value of working with smaller concerns but with
fresh ideas. Will the banks lose inuence and power ? Will the
large companies all develop their own innovation centres ?
Many questions to be answered.
2. CAN WE DEVELOP A CULTURE COMFORTABLE TO TAKE
ON RISK ?
At the Think Tank, the chairmen were asked what age they
were when they rst became board directors ? The average
came out at as average of 30.5 years old. This may not
surprise many but maybe more so when one considers that
the average age of the Emerging Business Leaders Network
(not yet board level) that has been developed by EP lies at 36
years old.
So why is it that it appears that people are reaching
board level at a later age ? Businesses are certainly more
sophisticated today and more controlled than ever before.
It is often argued that the skill set of middle management
is less advanced than in previous times and that middle
management are less accountable. Why ? These are broad
generalizations, but the last decade has become dominated
by the power of brands and the question has to be asked as
this has hindered the progress of some.
One of the interesting observations that did come out was
that is has less to do with brands but more to do with the
fact that the world is today so open and transparent that
it discourages risk. If someone made a mistake 20 years
ago only a few people would know, and act accordingly.
Today with emails and social media mistakes are far more
highlighted and publicized, and the result is that a more risk
adverse culture has developed.
So how do we nd a way of encouraging risk again ? It was
interesting to note David Camerons quotation at the end of
the London 2012 Olympic Games where he stated :
We are saying out with the bureaucratic, anti-risk culture
which has led to a death of competitive sport in too many
schools and in with the belief that competition is healthy, that
winning and losing is an important part of growing up.
Is it really any different in the work environment from
schools ? Arent we seeing the same trends ?
So there is a need to encourage a belief in taking risk. There
will be many that say, entrepreneurs will always emerge
and this is true but they need a helping hand. Entrepreneurs
are important as they break barriers and they see a different
picture of what can be delivered to the customer. Yes,
entrepreneurs will always emerge, but we can support that
process better.
In An Age When the Traditional
Structures Have Struggled To Adapt,
New Solutions Are Coming Through
E P B U S I N E S S I N H O S P I T A L I T Y
!"#$%# '" ()#
Africa, luxury, power and
responsibility
CHRISTOPHER H. CORDEY, STRATEGIC FORESIGHT ADVISER AND FOUNDING DIRECTOR OF THE SUSTAINABLE LUXURY
FORUM, ASKS WHAT ROLE LUXURY COMPANIES PLAY, AND COULD PLAY, IN SOLVING ENDEMIC ENVIRONMENTAL,
ECONOMIC AND SOCIETAL ISSUES IN EMERGING-MARKET COUNTRIES. FOOD FOR THOUGHT FOR KEY SEGMENTS OF
THE GLOBAL HOTEL INDUSTRY.
Today, we are at a crucial moment of history. A moment in
which the human race is faced with a radically new challenge.
For the rst time, its prodigious dynamism collides with the
limits of the biosphere.
The story is one of growth in population and consumption
compounded by inadequate governance and policy responses
necessary to manage this growth. The result is simply
degradation of the environment and societies.
In 2013, the collective challenge we will be facing is, how do we
take advantage of increased population and consumption? How
can we work collectively to nd and drive solutions to manage
the negative consequences that this growth generates ?
By 2050, we will need to feed 9 billion people. Of the additional
two billion compared to todays world population, 40 % will
be living in Sub-Saharan Africa, and about 50 % in the Muslim
world. Many people will be moving up the economic ladder
toward a middle-class standard of living, consuming more
resources per capita.
Meanwhile, in Western Europe we will need to nd solutions to
welcome 10 times more legal migrants from Central Europe and
the South. Energy and resource shortages could spark regional
wars, create famine, and in any event continue to affect the
political, social, nancial and economic spheres. A healthier
but aging population in the Western world will require longer
care, which will impact negatively on existing retirement and
social plans.
A knowledge dependent society and free access to knowledge
will continue to increase competition from low-wage countries,
thus forcing companies to prototype new business models or
risk disappearing.
So how can we collectively address these issues ? Research
shows that luxury brands at large were slow compared to
other industries to engage toward sustainable excellence &
transparency, but some show progresses.
AFRICA, THE NEW LUXURY ELDORADO
Tomorrow, it wont only be about the BRICS, but also about
Africa, the new luxury Eldorado, as Suzy Menkes described it
while introducing the 2012 International Herald Tribune luxury event.
Aside from the 200 hidden African billionaires (according
to the Templeton Emerging Market Group) who have most
probably already established themselves outside of Africa,
the real opportunity is the emergence of the new middle class
throughout the continent. But rather than as a continent, Africa
must be considered as 54 separate and distinct countries, with
a wide array of political, economic, geographical, cultural and
social features.
Sub-Saharan Africa has a newfound global condence, fuelled
by its burgeoning economic prowess, says Euromonitor. With
double-digit growth, oil, gas and resource-rich countries such
as Kenya (with Nairobi probably bidding to welcome the 2024
Olympic Games), Ghana, Tanzania, and Nigeria are becoming
the magnet of foreign investments.
Even a single country like Nigeria 170 million people (44 %
under the age of 14, 70 % below the poverty line, 250 different
ethnic groups, 500 languages) is set to post the second-
strongest gain in total champagne volume by 2016, trailing
only France.
But across Africa, tremendous inequalities, wealth disparities,
health, education, infrastructure, safety and corruption issues
are to be solved. The question is, must these issues be
addressed rst and foremost, or in parallel ?
E T H I C S
139
138
HOTELyearbook2013
The real opportunity is
the emergence of the new
middle class throughout
the African continent
How will the executives of luxury brand companies and
hotel groups balance the tremendous but risky business
opportunities with poverty alienation, regional famine, illiteracy
or endemic health issues in an extremely poor, young but
populated continent one accounting for 15 % of worldwide
population, half of whom are younger than 25 ?
Africa is obviously on the radar of several luxury brands,
for example :
Porsche : The opening of Porsche Centre Lagos is an
important development for the brands presence on the
African continent. We are excited about this new venture and
we look forward to developing in the Nigerian market.
Burberry : We absolutely will look to expand in the region.
Ermenegildo Zegna Group There is a new focus on Africa.
Prada : We want the younger generation to experience the
world. That doesnt mean spending time in places like New
York, Paris, and Los Angeles. Prada needs young people who
know something about Africa.
HOW FRAGILE IS CHINA ?
On the other side of the planet, how fragile is China ? With the
existence of one million Chinese USD millionaires and a rapidly
growing aspirational middle class, the country is set to become
the second largest luxury market by 2017.
Based on its average income, China is still a poor country, with
150 million people (10 % of the population) living on less than
$1 per day (the United Nations standard of poverty). For China
to become a modern, harmonious and creative high-income
society by 2030, in the words of the World Bank, the country
will have to deal with growing public concerns about the
widening income gap.
The government has already implemented some new
regulations to mitigate the income gap perception, for example
by banning outdoor advertising for luxury products and cracking
down on cars and watches bought (or sometimes simply
received) by government ofcials.
Back in 2011, on the sustainableluxuryforum blog, we were
already referring to the Chinese Luxury Syndrome as coined
by Zhou Ting, executive director of the research centre for
luxury goods and service at the University of International
Business. Luxury goods have become indicators for social
problems ; the source of the problem is not the luxury goods,
but the society itself.
His view is corroborated in the newly published book The End
of the Chinese Dream, in which Grard Lemos analyzes how
Chinas community and social problems threaten the ambitious
nations hopes for a prosperous and cohesive future. And why
protests will continue and a divided, self-serving leadership will
not make peoples dreams come true.
WEAK SIGNALS
As we experience a period of global power and political shifts
and growing inequalities and instabilities, these are weak
signals to consider. Western public opinion (the 99 % or the
Rest as coined by The Economist) is awakening against the
growing divide in wealth.
How can we not be concerned when we see that South African
miners have to riot (and die) merely to get a salary increase from
their current $500. What about kidnapping threats in promising
but fragile southern countries ?
Radical transparency, or the concept of removing all barriers to
free and easy public access to corporate, political and personal
information, is on the rise. It forces companies to react and/or
adapt when inappropriate activities are spotted. This will be an
issue for luxury goods companies and hotel groups operating in
these markets.
There are numerous examples where renowned high-end fashion
and luxury brands have been caught engaging unethically. Browse
the ethical consumer web site to rate famous fashion brands on
various factors such as animal testing, environment, human rights,
political activities or product sustainability. The results are extremely
damaging for a number of well-known high-end fashion brands.
E
T
H
I
C
S
Africa, luxury, power and
responsibility cont.
Take the Good Guide app, for example, a consumer tracking
and rating system for beauty, fashion and apparel products. The
app draws on 200 databases to help anyone nd safe, healthy,
and sustainable products, currently providing this information
for more than 50,000 products and companies. How could the
hotel industry be affected by such scrutiny ?
TODAY
The days of awareness raising are long gone. Farsighted and
progressive luxury companies are already taking advantage
of ethical sourcing, traceability, product labelling, ethical
certication or RFID tracking ; thus addressing the greater needs
of transparency of stakeholders. But what are the impacts ?
For the last three years, we have monitored a growing number of
progressive luxury companies engaging their organization toward
sustainable excellence, either starting strategic philanthropy
programs or engaging their organization in compliance exercises.
The good news is that despite all economic, nancial and social
turmoil, the luxury industry is in excellent shape and has shown
overwhelming resilience over the years. Hermes grew 22 % in
the rst quarter of 2012, with all regions posting double-digit
growth. LVMH grew 16 % in 2011, and Richemonts sales grew
24% in that same year. Should board members accelerate the
pace of investment in corporate sustainability ?
65 % IN DEFENSE MODE
We guestimate that 65 % of luxury companies are still in
the defensive phase, i.e. denying practices, outcomes or
responsibilities. Some 30 % are in the compliance phase,
adopting a policy-based compliance approach as a cost of
doing business, and about 5 % are in the managerial phase, i.e.
embedding societal issues in their management process.
Some within the industry object that it is not an easy task for
luxury executives (who are normally evaluated on sales, prot
or EBIT criteria) to deal with ethical, human rights, governance,
prostitution, biodiversity, environmental damage or corruption
issues, while at the same time empowering their team to design,
create and market high added-value goods and services.
WHATS COMING IN 2013 ?
Three years ago, corporate sustainability was a nice to have
E T H I C S
141
140
option for luxury companies. Since then, it has become (at
minima) a reputational imperative to avoid being directly or
indirectly associated with air/soil/water pollution, genocides,
unethical sourcing, civil wars, child labor and prostitution,
whether in mining zones or tourist destinations. But it goes
further than just mere reputation.
The highly ignitable blend of wealth divide, instabilities,
inequalities, reputational and human risks, mixed with the
irresistible industry resilience and business opportunities in
promising but fragile countries, should spur forward-looking
luxury and hotel executives to reassess their mid-term strategies
in emerging countries, beef up their corporate sustainability
engagement and allocation of resources to ultimately create
positive and lasting socio-economic impacts in these countries.
As in other sectors, luxury brands wont be able to operate
in emerging countries without ensuring that they enable
communities in which they do business to benet, thrive and
prosper as well. Even more, luxury brands, because of their
aspirational values, can play a much greater role in enabling
societal and behavioral change.
Industry best practices, comfortable margins, industry
certication, NGO or academic support, experienced CSR
specialists, dedicated training for senior or future luxury
executives and specialized forums are widely available, and can
facilitate the required organizational and behavioral transition as
it materializes.
With tomorrows global economic, demographic, environmental,
nancial and social challenges, business is about sustainable
innovation, about creating sustainable competitive advantage,
but also positive socio-economic impacts creation for the 99 %.
In a recent paper on elegant disruption, I pointed out the
inspiring role, but also responsibility, that luxury executives
have : If luxury executives want to continue inuencing what
young people dream about, then they had better take that
responsibility far more seriously than the way they do now.
Another academic wondered, As the Ying and the Yang of our
behaviors, power and responsibility are how we balance our
relations with ourselves with the interests of others, which is at
the core of what we mean by our values.
E
T
H
I
C
S
The Hotel Yearbook 2013
2012 Wade & Company SA
ISBN 978-2-9700595-9-2
AN 11CHANGES PUBLICATION
Publisher
and Editor-in-chief
Woody Wade
Wade & Company SA
CH-1091 Grandvaux, Switzerland
E-mail : wade@11changes.com
www.11changes.com
Concept, design and art direction
Gmarketing, Switzerland, www.gmarketing.ch
@elevenchanges
Orders
Copies of both the print and electronic editions may be ordered
online at www.hotel-yearbook.com
Reproduction of excerpts from this publication is permitted
under the condition that both the authors name and The Hotel
Yearbook 2013 are cited.
The views and opinions expressed in this publication are those
of the individual authors and not necessarily those of Wade &
Company SA.
Hotel Yearbook 2014
The 2014 edition of The Hotel Yearbook will be published in
January 2014. For information about advertising or sponsorship
opportunities, please contact :
Wade & Co. SA
Tel : +41 21 784 3303
E-mail : wade@11changes.com
H O T E L Y E A R B O O K 2 0 1 2
Impressum
Our strength in the area of property financing is closely linked to our
collaboration with international experts and our local teams. This is
proven by 2,400 employees on three continents on a daily basis. They
support investors with financing projects and provide an elaborate
portfolio of property management services. Our Hotel Properties Team
consists of specialised professionals who are closely connected
with our international branches. Our primary focus is on loans for
first class hotels in prime locations and portfolio transactions across
Europe, North America and Asia as well as select resort destinations
managed by inter nationally renowned operators.
Find out more on www.aareal-bank.com/hotel-properties
We nance hotel projects
on three continents.
In your time zone, too.
H
o
t
e
l

P
r
o
p
e
r
t
i
e
s
Aareal
Please contact us for more information:
Aareal Bank AG Special Property Finance Hotel Properties
Phone: +49 611 348 3641 E-mail: hotel@aareal-bank.com
Our strength in the area of property financing is closely linked to our
collaboration with international experts and our local teams. This is
proven by 2,400 employees on three continents on a daily basis. They
support investors with financing projects and provide an elaborate
portfolio of property management services. Our Hotel Properties Team
consists of specialised professionals who are closely connected
with our international branches. Our primary focus is on loans for
first class hotels in prime locations and portfolio transactions across
Europe, North America and Asia as well as select resort destinations
managed by inter nationally renowned operators.
Find out more on www.aareal-bank.com/hotel-properties
We nance hotel projects
on three continents.
In your time zone, too.
H
o
t
e
l

P
r
o
p
e
r
t
i
e
s
Aareal
Please contact us for more information:
Aareal Bank AG Special Property Finance Hotel Properties
Phone: +49 611 348 3641 E-mail: hotel@aareal-bank.com
Stocks
or
bonds?
In times like these you need a partner who can provide
answers, react quickly and make robust investments
that have potential. Thats how we see private banking.
After all, performance creates trust.
www.vontobel.ch/privatebanking
We have answers to your
questions: +41 (0)58 283 66 77
Vontobel Private Banking in
Basle, Berne, Geneva, Lucerne, Zurich
13-00-00_Hotel_Yearbook_203x267_e.indd 1 17.12.12 13:48

Hotel Yearbook 2013

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Hotel Yearbook 2013

Uploaded by

Copyright:

Available Formats

HOTEL

CLEAR AND INSTANT READ ON SYSTEM 1 WITH REASONS WHY

You might also like