November 2006 - With the recent ISHC Annual Conference performed in Miami, Florida, ISHC members participated in some roundtable discussions to identify the ISHC TOP Issues in the Hospitality Industry for 2007.
This time the debate included in-depth discussions on over 100 different issues with 27 making the ballot for the final vote by the people. Ultimately, the next TOP Issues were identified as ones that can be expected to possibly have the greatest effect on the industry in 2007.
ISHC TOP Issues in the Hospitality Industry for 2007
- Labor & Skills Shortages - Growing lack of skilled & skilled employees
- Construction Costs - Escalation of construction &reconstruction costs
- Technology - Lightening velocity of changes - keeping up
- Changing Demographics & Their Effect on Travel Movements - Switch in baby-boomers to gen X
- Future of Hotel Profits - Balancing escalating expenses with the necessity to increase rates
- Branding - Mitigating consumer confusion over brand proliferation and buyer concerns over cross brand impact
- Distribution Revolution - Maintaining rapidly changing taking part in field
- Travel Limitations - And their effect on the travel industry
- Global Emerging Markets - Are travel habits changing
- Capital Availableness - Will buyer and lender assurance continue
#1 ISHC TOP Issue
LABOR & SKILLS SHORTAGE
The problem of attracting and keeping qualified workers, once an issue only in an isolated number of markets, is becoming increasingly a global concern. . Demography, income levels, failure to adequately treat worker satisfaction and a reputation for extended hours and low pay are all cited as contributing factors. Creative hospitality professionals have begun to develop innovative approaches for capturing and keeping high quality workers.
Why can't we find good people? It's turn into a global concern, the main issue confronting our industry. Here are some of the complexities:
- Demographics - People progress rates have been slowing in European countries, the U. S. and elsewhere for decades therefore the number of employees leaving the workforce now exceeds those that are joining. The aging workforce moving into retirement living is creating an enormous void that can only just be likely to grow much larger in the years ahead.
- Lagging Wage Rates. Long criticized for paying salaries and wages below those common in other sectors, hospitality companies are increasingly finding it difficult to entice and retain trained candidates happy to draw in standard wages.
- Industry Reputation - Like it or not, the hospitality industry has not done enough to earn a reputation as a top career choice for school graduates. Notorious for long hours, evening and weekend shifts our industry has Gen-X'ers and Gen-Y'ers seeking other employment opportunities with a perceived higher quality of life and better wages.
- De-emphasis on Training and Employee Satisfaction - Following the worldwide dip in demand that adopted 9/11, many hotel companies didn't fully repair training and staff member enrichment programs that marked the 1980s and 90s. This comes at the same time when lodging brands are progressively more adding amenities and services in order to identify themselves from competitors.
What can we do about it? As a business, we need to work together to develop strategies for rethinking and rehabilitating our industry's image as a thrilling and rewarding profession choice. There is a time not too long ago when people became a member of the hospitality industry for its glamour. Globally, we have to share guidelines for training and retention and make industry sponsored educational programs more readily available to employees at every organizational level. Industry organizations like the International Hotel and Restaurant Relationship and the North american Hotel and Lodging Relationship Educational Institute provide excellent training libraries as well as online training programs. On top of that, there are a few outstanding independent companies that specialize in human source training and development-some which also offer excellent proprietary training materials.
Meanwhile, pursuing are some thoughts to talk about regarding potential opportunities for hotels to meet up with the labor task?
- Grow Your Own. Hotel companies need to build up internal programs to produce attractive career paths so that potential prospects see work as a specialist development opportunity with real potential for growth. Recruiting for basic level positions is easier when the recruiter can describe a career course and can point to managers who've did the trick their way up from line positions. Marriott is doing this better than anyone for many years.
- Guest Workers. The U. S. and many other nations offer guest staff member programs that provides seasonal workers for up to ten months. One well-known US vacation resort brings over two hundred workers from Jamaica each spring and coil to fill various positions under the U. S. H-2B Visa program. They stay through the "resort season", numerous returning every year. Likewise, Disney uses the J-1 Visa program to bring young college or university graduates from worldwide for 18-month internships in entry level supervisory and guest contact positions at its US hotels and theme parks.
- Pay for Production. Hospitality is a labor rigorous business and automation opportunities are often limited. Reconfiguring work process and then sharing the great things about increased production can have excellent results. One hotel General Manager offers a cash bonus divide among the workers in his hotel's laundry section for achieving a monthly production goal computed in pounds refined per labor hour. At another accommodation Attendants are offered a menu of options to receive additional purchase increased productivity as long as strict quality suggestions are attained.
- Job Enlargement. Cross-training and cross-utilization aren't new ideas, but they're good ones. One hotel company of notice has a certification program for everyone its employees. Employees are expected to master the abilities because of their own positions, but acquire pay increases when they've become certified in other careers. These multi-talented employees can complete where needed in peak times and have their own horizons broadened through cross departmental training.
In today's environment, providers are progressively finding they need to compete for employees as hard as they compete for customers. Developing a positive work place with real opportunities for advancement, combined with creative strategies for recruiting and bettering employee productivity will all be more and more essential skills as the labor force continues to shrink in the foreseeable future.
# 2 ISHC Top Ten Issue
All development costs and the expenses for furnishings, accessories and equipment (FF&E) will continue steadily to escalate in 2007, although at a tempo just a little slower than experienced in the time from 2004 through 2006. According to the Associated CONTRACTORS of America, engineering costs, driven generally by materials costs, spiked considerably in 2004. The total annual increase for development materials in general was approximately 10 percent in 2004, followed by 6. 0- percent and 8. 8-percent boosts in 2005 and 2006, respectively. This comes even close to rises of 3. 8 percent in the buyer price index and 3. 7 percent in the developer price index for the period from August 2005 to August 2006. In 2004 and 2005, both of these second option indices experienced annual raises averaging about 4. 0 percent.
The outlook for future years is good for more of the same, although at a slightly slower pace. For instance, steel prices experienced a 48. 8-percent upsurge in 2004, which was preceded by significant rises in scrap flat iron and metallic prices in 2002 and 2003. Steel prices held constant in 2005 but jumped again in 2006. They are anticipated to increase again in 2007 and beyond as demand for metal from construction jobs in China and India increases. Scrap iron and steel prices have increased about 20 percent before a year.
Other critical indicators contributing to the increases in building costs include the price tag on diesel fuel used for transportation of both uncooked and done goods. Some comfort has occurred recently, with fuel costs dropping in tandem with crude petrol prices have decreased. But uncertainties of resource in crude olive oil marketplaces and the relatively tenuous situation in OPEC countries both economically and politically indicate continuing volatility in future prices. Further, winter temperatures in 2006-07 could adjust the balance between diesel and heating oil production, leading to a price escalation in one or both of these fuels.
Concrete prices are anticipated to continue to increase spurred by the ongoing rises in concrete, aggregate and the energy necessary to mine or extract these components. The recent downturn in the residential structure industry may moderate concrete price rises, however the impact of ongoing engineering in China and India may more than offset these affects.
The anticipated upsurge in the amount of hotels currently in the development pipeline will certainly be affected by development cost increases. Evidently, increasing costs will impact on budgeting for new development or restoration projects. Building contractors, specifically smaller ones, may well not be able to offer guaranteed-maximum engineering deals, because they may not contain the purchasing power to secure materials at beneficial or predetermined prices. Even the larger contractors are likely to hedge their contract quotes with provisions that shift the chance of increasing materials costs to the builder. This will have an impact on every aspect of your construction project, specially the arranging of sub-contractors and deliveries of materials. Developers will be wanting to adhere to a good project program, while contractors will often be susceptible to the materials suppliers as well as the option of materials themselves.
Faced with this example, what can a designer or owner do to safeguard its interests? The following strategies may provide some ideas for even more thought and even technology:
- Increase the utilization of pre-fabricated components in new development; this may speed up the overall development timeline;
- Evaluate materials features carefully to guarantee the best suited and cost-effective materials are being used;
- Ensure that development job management is completely qualified and up to rate on new trends in the materials supply arena;
- Value engineer the project's design and features carefully, and then repeat;
- Ensure design specifications and space coding make maximum use of all the building area as easy for revenue-producing activities.
By constantly monitoring changes in the market segments for both building materials and labor costs, and planning assignments with extreme treatment, a builder or owner can protect its interests and ensure a job has a better-than-even chance of being completed on time and on budget.
# 3 ISHC Top Ten Issue
Despite a growing awareness of the value of modern, built in systems, many properties still do not take good thing about them as completely as they might to maximize revenue opportunities. Many also neglect to support and secure these to the level appropriate to the worthiness of the data and the legal results of this data becoming stolen or corrupted. A key point restricting wider adoption is the task of improving the systems' simplicity as they continue to grow in efficiency, in both operational and guest-facing areas. Many of these issues support a style to outsourcing the more complex operational functions and system security to expert, central staff, either commercial or third party.
The major factors engaged are:
- the complexity of the hotel environment, which historically has required a variety of systems to connect to each other,
- a lack of awareness of how much efficiency could be improved upon through the use of modern built-in systems,
- a historic inclination for investing money in FF&E alternatively than in the systems themselves or in regular training for their users, and
- the difficulty of providing complete, expert technical support at the individual property level for the multiple systems used there.
Hospitality management systems have evolved into complex, well included, multi-discipline tools capable of helping properties of most types and sizes appeal to more guests, make more earnings and reach much-improved levels of efficiency. Many years of development in increasing the capacities of specific systems, together with improvements in both user interface technology and vendor co-operation, have produced a lot more detailed and better-integrated systems that is now able to cover virtually every area of even a complex hotel property or a multi-property string. This brings obvious advantages from having more complete and exact data, both operationally and in regard to guests' profile and history information.
However, many properties handicap themselves through hanging on to systems well past their competitively useful life, greatly restricting their potential to put into action such revenue-enhancing procedures as taking Internet reservations, doing effective rate/revenue management, collecting more detailed visitor data for customer relationship management and targeted marketing, and so on. Sometimes this originates from a lack of appreciation of their potential upside, but there is also often apprehension about the difficulty of integrating older but nonetheless valuable systems into a more modern, integrated overall. Current interface systems go a long way to alleviating this issue, but many properties have discovered that the benefits from replacing appreciated elderly systems with a far more comprehensive, designed system outweigh the possible lack of some minor operation.
Another factor discouraging improvements is that the more extensive systems can seem to be challenging to work with. Certainly good interface design, just as much a skill as a research, is something sellers continue to follow through better data designs, property-specific display screen customizations, the refined use of color and differing fonts to steer users through the logical sequence of procedures, etc. This is likely to be a continuing problem in both visitor and operations technology. Check-in kiosks and guestroom technology, for example, must be as intuitive to use as possible, for an array of guest age range and technological familiarity.
Nevertheless, so far as hotel-management systems are concerned the disadvantages of the unintuitive user interface can be conquer through individual training, yet many hotels handicap their users by not providing refresher training on at least an annual basis. In an industry with customarily high staff turnover this virtually guarantees that the systems will not be used effectively, hindering the property from realizing the entire return on its investment and maximizing its revenue.
Further, as systems are more detailed and wide-ranging their support and security management become both more complex plus more essential. Lack of access to the machine through hardware, software or network failing is completely disruptive since comparative manual procedures are actually virtually impossible to put into action quickly. It's very difficult for a person property to cover in-house tech support team personnel been trained in all the systems it uses, yet many properties do not have support contracts with third party vendors that may pro-actively prevent imminent problems.
More importantly, visitor profile data is becoming an extremely attractive focus on for identity theft, and attacks on computer systems containing it are becoming more focused and more sophisticated. Furthermore, legislation such as Sarbanes-Oxley retains corporate officers individually in charge of the accuracy of the financial data. Despite these factors, many systems do not provide audit trails of which user evolved key configuration guidelines. Further, although all systems track the user Identification in charge of changes to guest data, many hotels neglect to enforce control over the posting of IDs and passwords among users, making it impossible to learn who joined or customized specific data - or sometimes even just who's agreed upon on to the network.
All of the factors encourage the movement towards more professional systems management; either from a corporate and business resource team distributed among many properties or contracted out to a professional third party. Centralized income management groups, for example, can provide expert help to multiple properties in a regionally cohesive way. Centrally-hosted systems enable highly-qualified technicians to give a a lot more secure and managed systems environment than would be available to an individual property. This tendency is likely to continue as awareness grows of the worthiness of keeping systems working at peak efficiency, and of the potential destruction from security breaches.
# 4 ISHC TOP Concern
CHANGING DEMOGRAPHICS & THE IMPACT ON TRAVEL TRENDS
The impact of changing demographics on travel developments is a up to now attaining no sector in travel, tourism and hospitality remains unaffected. Whether the subject is the gradual retirement of baby boomers, rampant globalization and its own effect on business travel, or the increased demand for experiential travel, the dramatic worldwide change in demographics poses both difficulties and opportunities.
These recent and ongoing changes in the demographic environment maintain major implications for the hospitality industry specifically. In regards to to product and service offerings, hoteliers need to begin a strategy that addresses multi-generational needs, wants and dreams. Now, as part of your, hoteliers must offer design and amenities that focus on the special needs of ageing consumers (Baby Boomers), as well as youthful travelers (Gen-X and Gen-Y), who have high expectations in regards to design and technology. The original practice of brand standardization flies in the face of this. Hoteliers must conform and look for ways to enhance all guest activities regardless of generation.
On January 1, 2006 the to begin America's seventy-eight million seniors turned sixty-years old, as the last one switched forty. Actually, nearly 8, 000 boomers are turning sixty on a daily basis, and regarding to US Census Bureau statistics, the number of boomers likely to be surviving in the year 2030 is 57. 8 million. This is actually the year boomers will be between ages 66 and 84.
What does this milestone imply for hoteliers? This means changing just how we have usually connected with the so-called 'senior' market. Generally because boomers won't 'develop old' silently as previous generations have. This is the generation that has, and can continue steadily to redefine the traditional ideas of increasing age. Boomers will be more dynamic in their retirement, firmly believing that 50s and 60s are actually middle age. This is primarily credited to longer life expectancies and significant advancements to general health and well-being.
Although boomers will still be important in both populace and economical conditions, the younger market segments (the 49 million Gen X'ers and 72 million Gen Y place) are actually getting into their own, joining middle management positions, moving into political office buildings, and supposing their rightful positions of impact and affluence.
It is very important to hoteliers to bring the generations collectively and commence to provide their different behaviors, patterns and needs. The successful model for true alternatives will require long lead times, but here are some suggested solutions.
- Adopt a widespread design approach which includes lower bedrooms, brighter lighting, larger fonts, and walk-in showers that are all better to use, yet hip, cool and high-tech so that young consumers are attracted to their design.
- Offer choices that provide customer options rather than pre-determined deals. Create experiences versus tours. This enables individuals or multi-generational categories to determine what best works and attracts them.
- High-tech guestrooms must become the norm as opposed to the exception. Today, it's all about Internet access, cordless surroundings, and flat-screen TVs on the walls. But hoteliers must strive to match the relevant technology that's not only expected from the business enterprise traveller, but also the leisure and more radiant packages. The continual widespread adoption of technology by the public will continue to have effect on the buyer expectation of their hotel experience.
- While you will see a rise in health travel offerings focusing on the aging inhabitants such as medical spas, the offerings should also include elements of excitement, spirituality, or stress management that will appeal to younger market segments.
- And finally, consider creating a panel of half a dozen or more folks from different years and cultural communities who are willing to talk with you on a regular basis about their concerns and experience, while providing you honest feedback on your products and services.
Only by focusing on how the motivations of your customers are tied to the underlying beliefs of the era to which they belong will you be able to tailor your products and services to their needs, interests, and needs. Applied knowledgeably, that information will provide you with an integral competitive benefit.
# 5 ISHC TOP Issue
THE FUTURE OF HOTEL PROFITS
We can predict that it'll become progressively more difficult to sustain profit development and improved return on investment performance. And for several reasons including:1) increasing operating costs that will outpace the expansion of Income Per Available Room (RevPAR). 2) the growing costs of capital and the necessity for reinvestment that will adversely impact hotel earnings. 3) Increasing labor and benefits costs that are being driven by changes in demographics, authorities legislation and labor contracts, and 4) higher energy costs.
In the US for example, matching to Smith Travel Research, RevPAR expansion has been robust over the last three years achieving a projected top in 2006 at 8. 9 percent. While there is some debate about exactly where the industry is in today's cycle, there is apparently a consensus that RevPAR expansion has peaked. For 2007 Smith Travel Research is projecting growth of 7. 1 percent, and with the threat of increased resource looming on the horizon, year over time RevPAR growth is likely to continue to decline.
Rising interest rates and higher equity return requirements are expected to lead to higher costs of capital. At the same time, reinvestment costs (capital expenditures) are increasing as existing source ages. As a result, profits will be reduced and owner comes back are anticipated to drop over the next 12 to 24 months.
Labor costs will be the number 1 factor impacting hotel bills. They are being influenced by:
- Changes in demographics that are expected to constrict the available labor pool;
- Government restrictions (higher minimum salary, immigration constraints, and mandated medical);
- New labor contracts including significant boosts in salary and continued limits on the capability to cross coach; and
- Higher benefit bills resulting from increased medical health insurance costs and pension requirements.
In 2005, utilities grew at a level of 13. 6 percent over the last year corresponding to PKF Hospitality Research. While oil prices have been falling lately they remain just a bit above 2005 levels. Electricity expenses are not expected to decline significantly during 2007, and as such will remain a location of concern impacting hotel success in to the future.
In some instances, the factors that contain been determined as influencing hotel profitability are out of the control of specific hotel owners and operators, however, there are steps that can be taken up to mitigate their impact. For instance: giving increased focus on yield management, operators can potentially increase their RevPAR; through creative funding and diligent oversight of capital expenses providers can increase their profits on return; improved employee retention and the use of different labor resources such as retirees can help to contain staff labor costs; and the installation of new energy conservation devices and more efficient design can help control energy expense.
# 6 ISHC TOP Issue
BRANDING: Mitigating Consumer Confusion over Brand Proliferation and Entrepreneur Concerns over Cross-Brand Impact
As most of us involved with hotel development and operations are aware, there's been an explosion of new hotel brands/products announced within the last three to four years. Aloft, Cambria, Indigo, Waldorf-Astoria, Hyatt Place, NYLO, Viceroy, Capella, and most just lately "1", are but a few examples of this rabid development of product type among both the major hotel franchise companies and small start-ups or spin-off management organizations trying to determine themselves as a brand.
But, despite all the hoopla and promotion encircling the roll-out of these new hotels products, and the promise that each will be "unique" and "different" using their company existing or future competition through design, price, service levels, amenities, and/or the mattress, do almost all consumers really understand all the products? Do they need them? And how about the existing hotel franchisee or owner confronted with another brand competitor under a preexisting franchise umbrella that is first considered splitting the pie even more? What does it do to their demand base? Think about the "going matter" value of these asset?
Today, there are an estimated 140 + hotel "brands, " up from roughly 80 in 1995 and approximated 110 brands in 2000. Are these brands and selections necessary? Are usually more brands better, or are we merely creating more confusion for an already baffled customer base? The solution is most likely yes and yes, but not actually negative.
Much of the new product being launched is attempting to take an evolving consumer whose likes and choices are changing as they grow older. The baby boom generation, Gen Xers and Y'ers, Millenniums, etc. , all have demographic characteristics and psychographic needs that could or may well not be satisfied by today's hotel products. So the idea is these new brands and products will better meet these consumer's evolving needs in sufficient amount to be market and economically successful.
In that light, the bigger issue is what to do with the brands left behind. They never seem to be to go away! Perhaps that's where more thought and effort should be focused by industry consultants, investors and franchisors.
On the other hands, regarding start-up hotel companies such as, Kor, Western world Paces Hotel Group, which rolled out the Solis and Capella luxury brands under the authority of a former Ritz Carlton professional, or lately the "1" luxury brand, begs the question concerning whether there could very well be too much collateral and debt capital chasing too little deals in a hot hotel market rather than verifiable market dependence on a much better mouse trap.
From an existing hotel franchisee/operator point of view, how do the major franchise companies protect their existing franchise partners from the impact against these services so the new product is not cannibalizing the prevailing demand base, particularly when there are 10 to 15 years kept on the prevailing operator's franchise contract? This is an on-going issue that continues to surface, but has yet to be resolved between franchisor and franchisee. Franchisee councils, third party impact studies, and areas of protection are some of the methods used to address this complex concern, but none are actually a panacea.
In both circumstances, the onslaught of new brands is a cyclical one and tends to occur during the up and peak details of the hotel circuit. So it is likely to be that proliferation will subside as the industry routine matures or starts to decline. At that point, as we have seen too often, the new brands which were ill-conceived and lacking clear explanation and marketability in the end end up being the weaker performers which can be then often "absorbed" by the better ones. Eventually, these same brands (and everything the hotels bearing their name) that fail to take sufficient consumer interest languish and trade down the meals string of franchise companies as time passes, or are broken up and sold off in items.
These thoughts indicate that, perhaps as an industry, we should focus more on creative solution uses for marginal brands and properties instead of fretting about the new ones stealing existing business.
# 7 ISHC Top Ten Issue
In 2006, it is estimated that $24 billion well worth of hotel rooms in the US by itself will be booked through internet sites representing 27% folks hotel industry room profits --- up from $15. 5 billion just two years ago. Furthermore, industry analysts calculate yet another 25 to 30% of all hotel bookings are affected by online research. The bottom line is that the hospitality industry carries on to experience a revolution in syndication, and organizations are less and less outfitted to keep pace with the dramatic changes in this online "landscape".
As circulation via the web advanced many experts agreed that online occurrence helped "level the performing field"; that indie hotels and small hotel companies could compete on the net with major brands. Today, the issue is not "can they compete" but can any hotel or hotel company keep speed with the colossal changes and improvements that flood the internet?
At the property level the first task was to effectively (and better) manage a myriad of distribution channels from a tactical perspective. Certainly the initiatives to do a much better job at the tactical side of syndication management have paid. Although there's still room for improvement in this respect, online inventory management and better request of rate integrity procedures have certainly helped hotels "get back control" of these inventories and costing.
The newest task is represented in the tactical side of syndication management and more specifically the ability to understand, manage and market to the buyer in the online world. This performing field is changing so speedily that it's almost impossible to keep rate. Hospitality professionals, whether they be in possession positions, mature management at corporate and business or a property level professional, must become "online savvy". Without some knowledge of the online consumer's buying tendencies, it is impossible to effectively "level the learning field" or allocate marketing dollars intelligently.
From travel websites to consumer reviews - from travel oriented social networking to highly targeted, email structured direct marketing - from "really simple syndication" (RSS - permits users to subscribe to their selection of Content) to the use of rich media to differentiate hotel product. . . many of these innovations are creating what PhocusWright conditions "the power shift toward consumers".
The question is: "Are hotels ready because of this"? Oftentimes our "collective heads" remain spinning from the first wave of online syndication problems. Now hotels must be even savvier about every aspect of how their product grows to the consumer. Directors of Sales & Marketing and Directors of Revenue Management must understand at least the basics of search engine optimization, pay-per-click marketing, website link popularity strategies and website traffic research. Allocation of marketing costs and resources must be carefully were able to enhance reach. And the bond (and communication) between demand creation and demand management must be precise - no more can the right hands not know what the remaining hand's doing - imagine a pitcher and no catcher.
So, what options and alternatives might a hotel consider to raised manage this "syndication revolution"? Consider the following:
- Start by obtaining a backup of the HSMAI/TIG Global special statement called "De-Mystifying Syndication". This report was written for corporate executives, ownership categories and property level professionals in an effort to move the industry beyond silos of knowledge and expand everyone's grasp of the crucial subject. It is also the best article on this subject to emerge in at least ten years.
- Consider a earnings management certification for your key RM person. Both North american Hotel & Lodging Relationship (AHLA) and the Hotel & Sales & Marketing Relationship International (HSMAI) offer accreditations as well as establishments like Cornell College or university.
- Support a training initiative to lift up the overall body of knowledge within the hotel about distribution strategy, route management and revenue optimization.
- Review the technology infrastructure to understand the major issues in taking care of distribution across stations and what capital priorities should be place to effectively compete in an online world.
- Assess the Director of Sales & Marketing's potential to relate to, manage and offer innovative control to a fresh, rapidly evolving web business model.
- Think of the management of your proprietary website from 3 specific perspectives (When the resources aren't available internal then outsource one or all of the below):
- Technology (functionality, user friendly, navigation, architecture, etc. )
- Content management (keep it fresh!)
- Marketing (search engine optimization, pay-per-click advertising, link strategy, etc. )
ONLY a hotel can make a guest want another. No one will return to a hotel solely because they appreciated the booking experience. But hoteliers that stay on top of this ever growing "distribution revolution" can not only have a distinct competitive gain, but also preserve the relationship with the customers.
# 8 ISHC TOP Issue
TRAVEL PERMIT RESTRICTIONS
As international travel is becoming more available and less costly, particularly over the last two decades, the ability to travel unhindered from country to country has almost evolved as an inherent right of business and leisure travel. In certain cases, special permission has been required by means of visas and work permits, but for the majority of us, we shown nominal identification at the boundary before being welcomed into whatever country we were browsing. However, the occasions of Sept 11, 2001 and lots of succeeding terrorism works, has begun a process and a big change in cross-border regulations, particularly in THE UNITED STATES, that might have a substantial negative impact on the hotel industry.
In the U. S. , new security preparations were created in 2004, paving just how for the launch of new high-tech recognition cards to possess been presented on January 1, 2008. Through the summer season, the Senate handed down an amendment postponing this program until June 1, 2009, although there remains some skepticism whether the law will pass or not. If enacted, however, the advantages of the new security methods, known as the American Hemisphere Travel Initiative, will have a clear effect on travel between the US and its own neighbors, specially the right away sector.
To put this into perspective, a survey performed in Canada for the Hotel Relationship of Canada suggested 36% of Canadians prepared at least one visit to the U. S. this year, with 24% indicating they might stay at least one nights. However, when asked about the imposition of passport requirements for cross-border travel, 27% mentioned they might likely cancel the trip. Of the 117 million evenings spent by Canadians browsing the U. S. (2005), therefore, it is conceivable that you quarter would not travel across the border if this European Hemisphere Travel Initiative proceeds.
In considering this potential impact, one also offers to keep in mind that Canada has historically been the best one source country of people to the U. S. (about 30% of all foreign visitors to the U. S. ) due to its proximity and ease of access; chances are that of the rest of the 70% of foreign visitors, there will be a higher rate of attrition.
In Europe, the situation is slightly different; the formation of the European Union, using its creation of a powerful economic area to compete at the global level, was accompanied by an agreement of practically unrestricted travel among the list of member nations. The right of every European citizen to go and reside openly within the place of the Member Expresses is enshrined in the Charter of Fundamental Protection under the law of the European union, followed in December 2000. The essential approach to border patrol is written in to the 'Schengen Convention' which lays the duty on those member countries recognizing visitors from outside the EU; the prevailing frame of mind is protect the surface boundary of the EU but permit unrestricted travel inside.
While there may be less risk of impact on overnight travel by Europeans within European countries, there remains the actual impact of the decline in site visitors from the U. S. where in fact the travel permit issue is currently most poignant. There were around 30 million U. S. resident goes to to European countries in 2005, accounting for approximately 15% of the full total foreign appointments; a lack of any large fraction of this level would critically impact the Western european hotel industry.
In the rest of the areas of the entire world, the immediate risk to the hotel industry appears to be lower. Generally, there exists less international travel, and those who do travel have a tendency to already be equipped with passports and international travel documents. However, in the long run, emerging locations such as China, India and SOUTH USA may impose tighter report control and even more stringent customs/immigration procedures that can dampen tourists' excitement.
For enough time being, the impact of tighter travel permit constraints is seen only as a potential risk to the hotel industry, with the effects yet to be understood. As specific countries take steps to safeguard their borders, we will probably see varying levels of control imposed. It appears inevitable, however, that biometric passports, cosmetic popularity, optical scans, fingerprint viewers and other technology will become an everyday part of cross-border travel. The question will be at what point do the purchase price and imposition cause the traveler to re-evaluate their travel strategies.
# 9 ISHC TOP Issue
The World Travel and leisure Organization estimates that global travel and leisure visitation (as measured by arrivals) has increased from 550 million in 1995 to 770 million in 2005 and it is expected to continue to increase attaining 1, 561 million by 2020. China only is likely to create 100 million outbound travelers by 2020 up from less than 15 million presently.
As the amount of international travelers boosts, the beneficiaries (i. e. , countries and specific places) of international travel and leisure will also change. In many cases, historically popular spots may make benefits in the aggregate quantity of visitors, however the proportion of total talk about will probably decrease. A growing affinity for "new" and/or previously less accessible areas (such as Vietnam and China) as well as the strong progress of more traditional vacation spots (e. g. , Singapore) is traveling this shift as well as more useful factors such as location and settings of travelling.
Share of World Passenger Traffic 2023
Note: The dark information in the circles symbolize 2004 home passenger volume level (e. g. , intra Asian travel) while the dark figures over the lines stand for 2004 inter-regional travel (e. g. , European countries to THE UNITED STATES). The light coloured numbers represent ratio change between 2004 and 2003.
The World Tourism Company forecasts significant development in the aggregate quantity of visitors in every regions of the earth but the share of travelers will shift significantly. From a talk about point of view, the historically prominent regions of European countries and the Americas will dsicover the greatest declines while East Asia/Pacific will experience the greatest gains. As a result predicated on current projections East Asia / Pacific will overtake the Americas as the 2nd most important destination by 2020. Nevertheless Europe will stay as the very best destination and will also see the highest upsurge in absolute numbers, followed closely by East Asia / Pacific, with Americas coming in 3rd place.
International Visitor Arrivals and Market Share by Region-1995 and 2020
What is traveling this rapidly expanding outflow of guests? Among the list of leading reasons, travel is being viewed as luxury alternatively a consumer staple at most income levels so that as incomes in growing markets rise, so does indeed the demand for driving. Concerning the increasing share of Asia it can be attributed to a sizable scope to the development of China outbound travel which concentrates in Asia (in 2004, over 70% to Hong Kong / Macao and almost 20% leftovers of Asia) Demographics are also aiding this interest, again notably among growing countries, where populations have a tendency to be youthful (as opposed to the western world where elderly people and near elderly people are the speediest growing time brackets) and the center class is quickly expanding. Knowing of foreign areas through electronic images, the quick popularity of new telecom products and international branding/marketing has a primary appeal to the younger, more affluent demographic. The four BRIC countries (Brazil, Russia, India and China) provide an interesting perspective of this demographic shift.
More travelers though will not necessarily translate into "more of the same" when it comes to travel products and services however. Residents of the BRIC countries and other rising origins will affect the face of travel in more ways than sheer figures. For instance,
- Multi-generational travel is quite common among Indians and other Southern Asian cultures, where grandparents, parents and children often travel alongside one another. . . and frequently for periods of two weeks or longer. These travel habits are widely different from those currently accommodated by western hotel providers.
- Dietary requirements ranging from taste personal preferences to restrictions imposed by religious values will task hotel, restaurant and related foodservice providers.
- The volume of countries with approved vacation spot status (ADS) from China, that is those countries having come to an contract with the Chinese language federal government on passport and related travel-requirements, has increased from less than ten to more than 70 in only the previous five years. An example of the impact from ADS is the amount of Chinese travelers to Australia. Within the first year of ADS, Chinese language travelers accounted for under 1% of total foreign travelers to Australia, by 2020, Chinese language travelers are anticipated to make up 25%. The majority of this travel however, occurs via travel categories often at the "economy" price point.
- The rising variety of outbound Chinese language travelers also take into account a substantial area of the increase in the marketplace share of Asian destinations
- Cultural considerations will affect the traveler products offered to (and desired by) these market segments including sights (e. g. the Chinese language seek historical monuments), building design (e. g. , segregated areas for ladies and children), staffing (e. g. , terms and ethnic sensitivity training), shopping (more demand for branded products) and seasonal tastes/packaging.
The volume, level and spending power associated with international travel is projected to increase largely unabated. Estimations place annual expansion at 5% plus, with expansion rates in rising countries still higher, with international travel is expected to increase from 18% to 24% of total travel over another decade.
#10 ISHC TOP Issue
Capital provides asset liquidity and permits the introduction of new hotels. Increasing institutional investment in to the hotel sector is enhancing asset values and consequently lowering returns. Expectations of income and profitability growth are rousing capital availableness for new development. This environment is likely to continue as long as the hotel industry's cyclical development continues. Indications of a cyclical plateau are starting to show up, and the implications of capital supply will be profound.
Many factors influence the total amount, timing, and availability of capital. In america the fractured financial conditions that been around after 2001 eroded working results and prices above the ensuing couple of years, but therefore set the level for the existing cyclical upturn. Modest prospect of new supply, alongside the industry's high degree of operating leverage, have finally made hotels highly attractive relative to other commercial property classes. As a result, a large migration of institutional capital to the hotel sector had not been long in arriving. Investors have bid up hotel prices and bet down required produces to relatively low levels. The momentum of the hotel investment market has been improved by significant liquidity in the mortgage loan markets.
Are today's hotel investors smarter than those in preceding cycles? Facts suggests that some assets are being underwritten with little margin for mistake. However the industry itself has not altered: significant operating dangers remain. Hotels continue being a demanding, management-intensive business. Nightly "leases" of guestrooms create more cash-flow volatility than long-term office or retail leases. An growing pipeline of prepared additions to supply may impact existing properties. The solid cyclical recovery may have overshadowed some investor's perceptions of the risks.
Many investors assume that barriers to entry for new hotels are actually unusually high. Traditional barriers such as available sites and fighting land uses have been augmented by issues of structure materials' supply and cost. Despite recovering success, high development costs undercut the feasibility of a great number of assignments. However, the ongoing recovery of operating basic principles, the expectation of further increases, and the simple option of capital are all encouraging engineering pipelines to swell in many markets.
Positive investment factors often go hand-in-hand with loosening underwriting expectations, and this appears to be a precise picture of the current local climate for hotel capital. Loan-to-value ratios have drifted upwards for both principal and mezzanine arrears, while heavy competition has pushed down interest rates. Mortgage defaults continue to be low for the time being, but the margin for problem is clearly diminishing.
Some research reveals that operational benefits may be needs to plateau. Opportunistic shareholders may likely be the first to leave for greener pastures. If indeed they do, a big source of capital will leave the sector. This in turn should cause principles to moderate. It may also take additional time to monetize hotel holdings. Traders should begin right now to re-conceive leave strategies and ensure that they don't really get caught behind the market curve.
In all, the productive movement of capital into the hotel sector has helped the industry overcome the difficulties experienced earlier in the ten years. Supply, demand, profitability, and produces have been relatively in sync, with positive effects on the operating and property sides of the marketplace. Maturation of the industry's expansionary circuit will probably lead to a moderation in capital availability and upsurge in capital costs. Being aware of these styles will permit hoteliers and traders to plan forward and take good thing about capital market conditions.
The International Culture of Hospitality Consultants (ISHC) is a specialist culture with 190 people in 21 countries. Membership is by invitation only and customers are leaders on the market in their individual areas of expertise.
With over fifty areas of specialty expertise symbolized in the society and member and experience employed in over 65 countries, ISHC represents a one of kind assortment of experience and competence worldwide.
For more information on ISHC or the ISHC Top Ten Issues in the Hospitality Industry for 2007 please visit the ISHC web site at www. ishc. com or contact Lori Raleigh, Executive Director, ISHC, at
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