Global hospitality industry expected to grow in 2014, with help from new technologies and chinese tourists

Transaction activity and even development of new projects are expected to pick up as investors seek out new opportunities for investment in the global hospitality sector over the next 12 months according to EY’s Global Hospitality Insights Top Thoughts for 2014.

Following years of a slow and stubborn recovery and constrained capital budgets, the global hospitality sector witnessed a strong appetite for growth in 2013, a trend that is set to continue and pick up pace in 2014. Global Hospitality Insights follows 13 key trends expected to have major impacts on the hotel sector in 2014 and anticipates strengthening fundamentals providing a basis for solid financial performance in 2014. Most importantly, hotel companies are finding greater access to a variety of debt and equity capital sources across both public and private platforms, making further expansion possible.


“In general, we expect 2014 to be a signature year for the hotel industry,” says Michael Fishbin, New York-based head of EY’s Global Hospitality practice.EY is anticipating more markets and industry segments will see rising average daily room rates and occupancy next year, which in turn will strengthen fundamentals and prompt higher per key prices for hotel acquisitions, especially in popular ‘gateway’ cities, but also, increasingly, in secondary hotel markets.


Accelerating capital markets

With little new hotel development and few transactions in the last five years, investors globally have amassed an appetite – and capital -- for new deals, leading to an increase in capital markets activity and heightened cross-border capital flows. Seeking high-quality investments in stable markets, Asian investors dominated global hotel transactions in 2013 and look set to repeat their high level of activity in 2014. Chinese and Singaporean investors combined are forecasted to account for over 60% of the total capital invested in hospitality outside Asia.


Development opportunities

Among global investment opportunities, development is attracting attention with developers focused on serving current and projected customer demand in areas such as select service hotels, all inclusive-resorts and “alternative” lodging products, such as hostels.


And, while development activity is rising in many markets around the world, particularly gateway cities, developers operating in Asia and sub-Saharan Africa are among the primary beneficiaries of increased access to debt and equity capital.


Changing guest demographics

The growing worldwide spend of just two groups – millennials and Chinese travelers – is expected to drive a strongly performing global hospitality sector over the next several years.


Millennials’ (or Generation Y) influence over the business travel spend – they are a third of the market and projected to be half of the market within the next five years -- is driving hoteliers to modify services and amenities to appeal to their desire for value, innovation, immediacy, convenience and mobility.


Yet, Chinese leisure travelers may eclipse even the millennial spend. In 2012, according to the United Nations World Tourism Organization (UNWTO), Chinese tourists overtook Germans and Americans as the world’s biggest spenders with over USD 100bn spent on travel. Chinese tourists are the fastest growing segment of the market. As a result, look for more hotels to offer in-room amenities targeted at Chinese guests, such as slippers, Chinese teas, Chinese language newspapers and TV as well as adding Chinese food to restaurant menus.


"Romania was ranked 27th in Europe in 2010 regarding hospitality sectors’ contribution to GDP. Yet, if Romanian hoteliers will timely take into account the fact that Generation Y is expected, in five years, to represent half of the global number of tourists, tourism revenues in Romania could significantly increase. Hoteliers should consider developing facilities that meet the expectations of this category of customers such as booking applications for smartphones, room service ordered from in-room tablets, expanded fee-based loyalty programs designed to maximize the stay experience and, of course, intense presence in social media," says Elena Badea, Head of Marketing, EY Romania.