INTERNATIONAL REPORT—The global hotel industry should be braced for change.
“We are on the precipice of a new world order for tourism and hospitality shaped by a huge influx of tourists on the world stage,” said Alex Kyriakidis, global managing partner of tourism hospitality & leisure at Deloitte during an interview before the European Hotel Investment Conference that is taking place today in London.
“Predominantly India and China and less so Russia will produce as many as 150 million new tourists over the next 10 to 20 years. This is very important as brands in Europe proliferate into those markets and then become familiar in those markets.”
global managing partner,
tourism hospitality & leisure
Deloitte sees evidence that demand is underserved in the limited-service and budget sectors. “We predict that the next 10 years will herald the first global budget brand in hospitality,” he said.
In a survey of attendees to EHIC, they believe sovereign wealth and high net-worth individuals will be the most active investors during the next five years. The categories received 52% and 50% of responses, respectively.
“From the view of the Middle Eastern sovereign wealth funds, their prevailing attitude these days is only to do deals where they are directly vested into assets. … Secondly, they are shifting from the luxury space to any space provided there is value to be gained. The major sovereign wealth funds will look at other segments if there is a clear value proposition.”
This notion is just being heard within client discussions, so there are no examples of these kinds of transactions yet, Kyriakidis said.
“The sovereign wealth community is extremely sophisticated,” said Nick van Marken, global head of advisory, tourism, hospitality and leisure at Deloitte. “While they have significant resources, they are no different in investment criteria than how a Wall Street investor would look at it. They are far wider in their view then just buying something at the top end.
“That said, there is no doubt that when you get into the trophy asset community, once you’ve got a boat, a plane and a few houses it becomes time for owning a hotel,” he added. “If you look at the ownership community, it includes very wealthy individuals. … There is no doubt that the high net-worth investor is still out there.”
Sovereign wealth is open to being approached with opportunities away from luxury, especially in the mature markets of Western Europe and the United States, Kyriakidis said.
The world is converging on the mobile phone, Kyriakidis said. “If hospitality stays behind that curve, it will lose out to the powerful intermediaries of the future. But it’s not going to be Expedia—it’s going to be Google. They know how to play the mobile game.”
Social media will continue its importance to hotel companies.
“We see the new critics of industry are not going to be Condé Nast (Traveler) and the like,” he said. “It’s all about Twitter, Facebook and other social media.”
Kyriakidis noted some of these findings were released this summer in Deloitte’s Hospitality 2015 report, which explored key drivers in determining success through 2015 and beyond.