Capitalizing on emerging markets’ potential
 
Capitalizing on emerging markets’ potential
28 JANUARY 2013 6:59 AM

Emerging markets will post faster growth in hotel room revenues during the next five years than their developed counterparts, making them integral to the growth strategies of the world’s leading hotel players.

Emerging markets will post faster growth in hotel room revenues over the next five years than their developed counterparts, making them integral to the growth strategies of the world’s leading hotel players.

According to Euromonitor International, emerging market hotel room revenues, which totaled $153 billion in 2011, will jump some 34% to reach $205 billion in 2016. By then, these countries will account for 37% of global hotel room revenues, representing a shift of almost 1 percentage point every year.

Michelle Grant

Unable to ignore this momentum, the big hotel companies are implementing three strategies:

  1. growing pipelines;
  2. customizing brands; and
  3. launching programs that appeal to emerging market travelers heading abroad.

China is expected to experience the largest growth in absolute room revenues in the next five years at $24 billion, according to Euromonitor. Put in context, that is half of all actual growth in emerging markets, so it is no surprise that many of these initiatives are aimed at the Chinese market.

Preparing for the inevitable
Global economic power is shifting, as a combination of increasing real incomes, plentiful credit and growing populations have made emerging and developing economies the main drivers of growth since the start of the global recession in 2008. According to the International Monetary Fund, emerging and developing countries will have overtaken advanced economies in their share of world gross domestic product (in purchasing power parity terms) by 2013. Analysts have estimated that the emerging middle classes amount to almost two-billion consumers, who spend some $6.9 trillion annually. This economic backdrop will continue to create new travelers in emerging markets and spur demand for hotels at home and abroad.

Building boom
To take advantage of this potential, companies are racing to build hotels in emerging and developing countries, with many of their room pipelines reflecting this strategy. For example, 64% of Starwood Hotels & Resorts Worldwide’s room pipeline is in Asia/Pacific and 13% in Middle East/Africa (as of 2012).

InterContinental Hotels Group’s room pipeline is also geared heavily toward these regions, with 31% in Greater China and 16% in Asia, Middle East and Africa (as of September 2012). Accor has identified China, Brazil and India as key markets for growth and aims to have 400 hotels in China, 250 in Brazil and 90 in India by 2015.

Adapting to emerging needs
Global chains are customizing their brands to better suit local tastes and market conditions in emerging markets. Brands such as Mövenpick , Grand Mercure and Holiday Inn Express have translated their names in China into Mandarin to better position themselves amongst Chinese guests. Marriott International created specific prototypes for its Fairfield Inn & Suites brand for the Indian and Brazilian markets.

The prototype for India has a three meal restaurant and more meeting space. The Brazilian prototype will also have a three meal restaurant and will be sustainable. IHG is taking this strategy further, launching the Hualuxe Hotels and Resorts brand in 2012, a brand created in China specifically for the Chinese market.

Making guests feel at home while abroad
By 2016, international departures from emerging markets are expected to total 473 million, accounting for 46% of all outbound travel, up from 40% in 2011, according to Euromonitor. As travelers from emerging markets increasingly travel globally, hotels are rolling out amenities, services and training programs to better cater to these guests abroad. In the past 18 months, Marriott, Hilton Worldwide and Starwood Hotels & Resorts Worldwide have all launched programs at specifically chosen hotels that provide amenities and dining tailored for Chinese travelers, including a staff member fluent in Mandarin. In 2011, Accor created service training programs and added culturally-specific amenities to better serve Chinese and Indian guests at its Australian hotels.

The rise in Brazilian tourists to Miami has led many hotels to cater to their shopping whims. The Mandarin Oriental Miami, for example, offers shopping packages to Brazilian guests. They can choose from either an exclusive shopping excursion with a driver, or, alternatively, if they prefer to rent a car to go shopping, they can opt for a package that includes valet parking and a complimentary breakfast.

Michelle Grant is the travel and tourism research manager at Euromonitor International, specializing in hotels research. In her role, Michelle is responsible for Euromonitor’s hotel industry research, which provides analysis and in-depth coverage of the hotel market in 211 countries worldwide.  She works closely with hotel companies, providing insight into consumer trends and market performance to help clients make informed, strategic business decisions. Michelle is a respected source in the travel and tourism industry. She has presented at a variety of high-level conferences, such as the World Travel Market, La Cumbre and the Special Libraries Association and is often quoted in journals, national newspapers and trade publications. Previously, she was a research analyst for Latin America, covering industries such as financial cards and domestic electrical appliances. Michelle has a Bachelor of Arts in Economics and Finance from Washington University in St. Louis.

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