Ten keys to global hotel industry growth
The growth of the global hotel industry this year will be marked by innovation, investment and cultural organization. In most markets, the sector is currently in a period of dynamism and activity is expected to continue to accelerate due to the abundance of capital and increased investor confidence.
The report Global Hospitality Insights by EY, which analyzes the global trajectory of the hotel industry in 2015 and identifies the top ten key industry trends for 2016, indicates that the hotel industry is, in most markets, in a state of progress. Economic factors such as the flow of capital from Asia or the increase in alternative sources of financing are some of the key trends in the sector for this year:
1. Capital flows from Asia
Cross-border capital flows from Asia into global markets are expected to increase in the coming months, according to the EY report. At the end of November 2015, Asian&Asian investors accounted for approximately 33% of international hotel transactions, and the industry's cross-border transactions with Asian stamps reached $11 billion dollars. This amount represents an increase of 24% over the same period of the previous year and the trend is expected to continue in 2016. China was the country that made the most purchases in the hotel sector in 2015, accounting for 44.7% of total Asian capital invested. It was followed by Singapore (16.7%) and South Korea (15.6%).
2. Capital markets
During 2016, private equity companies and cross-border investor groups will continue to play a key role in global transaction activity. For its part, cross-border investment in the hospitality industry reached record levels in 2015, registering $32 billion, up from $26 billion raised in 2014. With respect to alternative sources of financing, an increase in the presence in the market of venture capital firms, hedge funds or even other emerging sources of financing, such as the so-called peer-to-peer lending or crowdfunding, is expected during this year.
3. Successful integration
In an environment of industry concentration, where mergers of large international groups predominate, the success of acquisitions requires the correct integration of cultural and information management factors. Thus, the EY report indicates that 85% of failed acquisitions are attributable to poor management of cultural factors.
4. Commercial excellence
The study shows that in order to achieve a competitive advantage in such a dynamic market, it is essential to promote a flexible business model that adapts to the needs of the sector. In addition, it proposes a series of considerations for achieving commercial excellence in the industry at a global level: understanding the factors that provide value to the stakeholders, focusing on a flexible approach to the market and developing a strategic business model.
5. Trends in creative development
Currently, the largest population is mostly centralized in cities, so the space available in them is increasingly limited. Faced with this situation, hotel developers and promoters have implemented adaptive reuse to optimize projects. Thus, they have converted atícient locations into adaptable lifestyle concepts, which mean lower costs compared to infrastructures created from scratch.
6. Success factors for the tourism market
With the global tourism industry in its sixth consecutive year of growth, tourism destinations around the world are committed to aligning their products and experiences.
7. Technology and innovation
Technology continues to play an increasingly crucial role in the hotel industry. During this current year, industry players will witness new technological advancements focused on loyalty programs and revenue management strategies (RMS), and increased adoption of the Internet of Things (IoT) in the day-to-day operations of hotels around the world.
8. The role of the gaming industry
The global gaming industry isá at a turning point, as its traditional customers are getting older and the generation of millennials ——born between 1982 and 2004— has other entertainment preferences, more oriented towards interactive and social. This change has an impact on the revenues of those destinations that focus their main attraction on gaming. Faced with this situation, casino operators are studying how to meet the new needs of the millennials, without abandoning those of their traditional customers, such as casino redesign, technological development and legislative changes.
9. Collaborative economy
Peer-to-peer services, i.e. collaborative consumption, continue to grow in the sector and represent a notable proportion of the total supply of accommodations in major markets. For example, in November 2015, London had approximately 11,000 AirBnB referrals versus nearly 134,000 traditional hotel rooms, representing about 7.6% of the city's total accommodation market on this platform.
10. Revenue recognition, regulatory developments
In light of the new revenue recognition standard issued by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), companies in the hotel industry must assess the impact of this regulation on their situation;In addition, they should actively engage with their auditors and other advisors to evaluate their existing revenue arrangements and issues of interpretation and application of these regulations.