BERLIN—Daniel Thorniley began his keynote address last week at the International Hotel Investment Forum by summing up the outrageously complicated global economy with a rather simple quote from Albert Einstein:
“There are two things that are infinite: the universe and human stupidity. I’m not sure about the universe.”
In the keynote that followed, Thorniley, who serves as president of DT-Global Business Consulting GmbH, attributed much of the financial world’s ills to human ignorance.
But for the smart players, he emphasized, there is opportunity for growth.
First, a lay of the land: “2010, after the disaster of 2009, was not the start of a sustainable business recovery that we had hoped for,” he said. “2011 was another disappointment.” The year started out strong but ended in crisis, he said. For 2012, companies have managed their expectations downward.
To find success, hotel companies must focus on “long-termism,” driving market share and fostering relations with customers and clients, Thorniley said.
That means thinking about how one’s actions today influence the outlook in the future; how to steal demand from competitors; and how to forge lasting loyalty with guests.
“The consumer has changed, I believe,” Thorniley said. “… One of the big differences about consumers globally … is the perception of value.”
Guests are more aware of how costs relate to experiences—even at the super luxury level. “They will spend their money on you, but you have to explain, market and sell it better than you had in the past,” he said.
Affordable innovation in emerging markets
The next bastion of growth for the hotel industry, as with many sectors, is emerging markets such as Brazil, Russia, India and China, Thorniley said.
He also advised attendees to look outside of BRIC into areas such as Turkey, Poland, Saudi Arabia and Mexico.
The key to leveraging growth in these markets is affordable innovation, he said. Hotel companies must find cheaper ways to build their products so they can charge cheaper prices to gain volume. And they can’t compromise quality in the process, he said.
The outlook for the low- and middle-classes will improve along with the broader economies. Thorniley said real growth will come within the next two or three years.
‘Sober, thoughtful and tough’
“Business in your industry is mixed,” Thorniley said. “(It is) good in some places, less good in others.”
There are five reasons why business in the global economy is “sober, thoughtful and tough,” he said.
1. Global banks are not functioning properly. Bank lending is rising at a rate of 2% or 3%, which is not enough to fuel recovery.
“Financing is going to be tough,” Thorniley said. “In your industry, you know it.”
2. Consumers are under pressure as well. One needs to look at nearly any economic indicator to see why consumer confidence is sputtering. Pensions and social security are in doubt, taxes are increasing and unemployment is high.
“The confidence has been undermined,” he said.
3. Business is the problem with business. U.S. companies are sitting on $2 trillion worth of cash, but they’re not building factories, hiring more workers or engaging in mergers and acquisitions, Thorniley said. The same goes for the eurozone.
“The corporate world reflects the lack of confidence in the consumer world, and it’s not investing enough,” he said.
4. Governments are not spending. The world has decided to engage in austerity cuts, which is the wrong thing to do, Thorniley said. The International Monetary Fund in July released a report on the subject. They found that in 130 cases during a 30-year period, not one austerity package delivered the desired results.
5. Exports, a key driver in the global economy, are slowing down. More than 12 months ago, exports were increasing 18%. Today, they’ve slowed to 3%.
The China problem
One of the largest “black swans” that could potentially land is China—specifically the country’s failed attempts to control its growth, Thorniley said.
The country is seeing economic expansion in the low 9% range, but the government wants to lower that closer to 7.5%. If it slips and growth slows further, that could spell tough times for the rest of the world, he said.
“I am not a religious man myself. I respect anybody else’s religious views,” Thorniley said. “But every night I hedge my bets and I pray to God … and I say, ‘Dear God, this is Danny on planet Earth. Please look after China. Make sure the China (gross domestic product) doesn’t fall below 7.2%.”
The best way to ensure a global economic recovery, Thorniley postured jokingly, “Start a large prayer group for China.”