Current trends in hospitality with 2020 on the horizon
As 2019 comes to an end and the hospitality industry welcomes 2020, we’ve taken a look at six trends that have shaped hotel brands and guest experiences in recent years. More importantly, we delve into whether these trends will continue into the new year and beyond?
From market growth trends, to overtourism and destination demand impact on travel agents and properties, it’s an interesting period for hospitality and an even better time to analyze why.
Performance picks up in South America
When it comes to a cluster of markets reporting significant growth in revenue per available room (RevPAR), look no further than South America—where several markets enjoyed a successful third quarter of 2019.
Uruguay reported 26.7% RevPAR growth in Q3, a result of an 18.5% uplift in occupancy and a 7.0% jump in average daily rate (ADR), driven by double-digit increases in its capital, Montevideo. Supply growth outpaced demand in the country between 2013 and 2018, but the tide turned between January and September of 2019. Tourism is key to the country’s success, which recently revealed a goal of 400,000 cruise passengers by 2025 that looks to be on track. The 2017-18 tourism season brought 242,000 passengers, and that number was projected to rise 24% in 2018-19. Don’t expect this trend to stop any time soon, as Uruguay was named in Lonely Planet’s ‘Best in Travel’ top 10 destinations for 2020, with vast shoreline, progressive social policies and a laid back vibe as just a few of the reasons to visit.
Brazil hosted and won 2019 Copa América (June-July), and the success on the pitch was replicated off of it for hotels in host markets. Rio de Janeiro hosted the Selecao’s successful final but also enjoyed Q3 growth of 25.1%, while São Paulo hosted the Argentina versus Chile third-place play-off and reported better-than-bronze hotel performance with a 9.9% Q3 lift in RevPAR. Host cities Porto Alegre and Belo Horizonte also posted increases above 20% (23.5% and 20.8%, respectively). With Brazil hotel demand projected to increase 1.5% for the full year, which would be its fourth consecutive year of growth in new inventory, the good times look set to continue.
Unrelated to futbal, select markets in Colombia also reported growth, such as Bogotá South & Avenida El Dorado (+16.0%). But the more interesting story is Medellin, which reported a 17.6% uplift in RevPAR driven predominantly by occupancy (+10.9%). Just over a quarter of a century ago, Medellin was named by Time magazine as ‘the most dangerous city on earth’ amid struggles to overturn a drug trade, culture and related crimes.
The market’s fortunes began to turn several years ago and it is now a popular tourist choice, with a reputation for forward-thinking initiatives driven by an educated population. Now more famous for its coffee, stunning mountain surroundings, and outstanding architecture, it’s easy to understand the attraction.
City break destinations gain momentum
City breaks are by no means a new phenomenon, but access to cheaper air fare and extended routes to some of Europe’s harder-to-reach destinations are driving the volume of shorter trips. Popular year-round, as they are predominantly not weather dependent, the closeness of city attractions means that a country’s culture can be discovered in just a few days.
The popularity of city breaks has risen in recent years, but which markets have seen the greatest growth in hotel occupancy during that time period?
Madrid has seen the largest increase in occupancy against 2014 levels, benefitting from growing business demand, a strong events calendar and a thriving cultural scene—the Spanish capital is home to some of Europe’s most impressive art museums.
Budapest and Prague’s affordability has drawn tourists in in recent years, growing their reputation as top city break destinations and boosting leisure visitors. Meanwhile, a focus on MICE (Meetings, Incentives, Conventions, Exhibitions) segments has increased business demand.
Vienna has also experienced popularity growth in recent years, with the Austrian capital welcoming 7.5 million global visitors in 2018—a 6.0% increase on the previous year (Source: Vienna Tourism Board).
The collapse of Thomas Cook
Thomas Cook’s collapse sent waves through the travel industry in September. Having served 22 million customers in 2018, the group was an integral part of the industry and delivered low-cost holidays to warmer resort locations, including Spain and Turkey. These two countries could be set to lose 1.3 million and 700,000 tourists per year, respectively, following the collapse.
Hotels in markets served by Thomas Cook are now likely to see a fall in demand, with the decline in arrival numbers affecting performance. TUI and other air travel providers have stepped in to fill some of the lost supply by launching new routes to Thomas Cook’s former destinations but will likely provide only a slight boost. The jury is still out on how these markets will fare in the next 12 months, but a negative impact is highly possible.
European overtourism limits hotel supply
Accessible travel meant that 2018 global tourist arrivals reached 1.4 billion—and Europe welcomed approximately half of this number. Many cities, monuments and tourist attractions are creaking under the sheer weight of wanderlust and this has resulted in overtourism, so severe in some places that limits have been applied to hotel development.
Amsterdam is one such city, with 2017 the turning point as new hotel and hostel development was banned in most of the city. With a population of less than 1 million, the market welcomed 17 million tourists that year and this was seen as the way to keep the city liveable for locals. A projected 19 hotels and 4,385 rooms are set to open by the end of 2021, but development in the city center has been limited, and several new properties will sit on the outskirts.
Barcelona is another market in moratorium, with limits introduced two years earlier than its Dutch counterpart. The result has been muted supply growth that’s been outpaced by demand and caused performance increases for existing hotels. A number of pre-moratorium projects are yet to come online, meaning Barcelona will welcome a projected 19 properties and 3,047 hotel rooms between November 2019 and December 2022. After that, who knows?
Venice tourism authorities have taken a different approach, choosing to implement a tax for day visitors—which will come into effect in July 2020. This is unsurprising given the number of cruise ships that dock in the market as well as its road-trip proximity to other Italian cities, Slovenia and Northern Croatia.
Asia arrivals on the rise
A rise in visitor numbers has not been limited to Europe as several markets in Asia have reported consecutive years of international arrival growth which is reflected in occupancy increases for notable markets.
Indonesia reported double-digit arrival increases between 2015 and 2018, with 4.6% expected for 2019. Occupancy has risen over the same period in Bali and Sumatra, which reported compound annual growth rates of 3.7% and 2.7%, respectively.
Vietnam arrivals, after a slower increase in 2015, reported growth of 20% and above from 2016-18. Ho Chi Minh City, one of its most popular destinations, produced an occupancy CAGR of 2.4% over the 2015-18 period.
Thailand has been a popular destination for many years and is hardly experiencing a tourism boom, yet it consistently achieves yearly arrival growth. Following significant increases between 2015 and 2018, a 4.1% lift is expected in 2019. Bangkok has benefitted in recent years, with hotels producing a 1.3% occupancy CAGR over the same period.
Franchise hotel openings – U.S. versus Europe
Franchise properties account for the largest share of all hotel operation types in the U.S., while independent remains the dominant model in Europe with franchise ranked third behind chain managed. However, when we compare European room share between 2009 and 2019, independents declined by 5.0% and allowed both chain managed and franchised to grow their share. The latter reported the highest room supply growth over this period, rising 2.7%.
The franchise model is on the rise and is reflected in the number of yearly room openings. Franchised supply growth sat at just under 15,000 rooms in 2009 but rose to just below 25,000 in 2018.
For parent companies, franchised properties often result in lower costs and an opportunity for rapid growth. This enables revenue growth, while a management company assumes responsibility.