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Hotel Chains and their Expansion Policy

The hotel industry faced many serious challenges in the last five years but it has managed to show remarkable flexibility. The impact of the terrorist attacks was temporary and that helped to a more steady growth in the following years. Surveys conducted by Deloitte, MKG and PriceWaterHouseCoopers regarding regional and global performance of the hotel industry showed a significant increase in the major markets in Asia and Middle East with a steady but no tremendous growth in Europe.

A big issue which determines the investments and the strategy expansion plan of the major hotel groups worldwide is the significant increase of travel around the globe. More than 800m international visitors’ arrivals were recorded last year. Middle East and Asia share the biggest piece of the pie as the majority of the cities on those markets saw a massive growth in tourists’ arrivals, leading to substantial improvements in hotel performance.

Another important issue is the continued expansion of the aviation industry – especially of low cost carriers – which has made more destinations more accessible than ever. This gave strong motivation to hotel groups to invest in new markets and declare presence in regions that hadn’t included in their previous strategy.

Middle East, North America and Asia had a strong RevPar increase and there are – according to forecasts (Deloitte) – the ones to lead hotel industry in 2006. Europe will remain more modest, though.

A new trend is the increased consolidation of the hotel industry and that new brands are entering the market – with more mega-deals on the cards. This fact will change the scenery in the industry but it will provide a steady but sustainable growth in business performance and will help keep the industry moving in the right direction.

Another trend has to do with the expansion in markets that there is already strong presence but in the level of maintaining the standards of quality and to enter in new market segments such as luxury, economy and budget hotels. A strong diversity from all the industry that has a specific strategic; to capture all the segments in order to maintain all categories of customers satisfied.

China begins to contribute more and more to the global tourism industry and that is going to affect the hotel industry as well. But the issue is that Chinese tourists are money conscious and that will give a rate pressure in the hoteliers especially in Europe. In terms of investment China appears to be very attractive to all major players in the hotel industry. Many are trying to expand through franchising and others look for the right properties which will offer them the maximum revenue.

Highlight issues of expansion policy of hotel chains:

The biggest hotel chains are trying to change the way of their policy in order to remain the big players in the industry. But new groups are entering the scene with great potentials in the industry.

Challenges of the hotel industry today:

  • Developing product standards that are global in nature but meet the needs of the local market
  • Consumer preferences and demands are ever-changing and consumer research in the international sphere is limited
  • Establishment of the brands in places in which there are not present currently
  • Demand for talent- high quality teams to staff the hotels
  • Expand but not spend

All the major hotel groups are focusing on:

  1. The brands
  2. The customer service
  3. Entering more to Economy and Budget hotels market
  4. Strengthen the mature markets and invest in the emerging markets
  5. To open more hotels with management or franchise contracts and fewer by ownerships or leased hotels
  6. To be innovative and offer new products to their customers
  7. To attract more business travellers
  8. To expand online booking
  9. To have more trained and experienced staff

Emerging markets – regions:

  1. Middle East (Dubai, Saudi Arabia)
  2. Asia & Pacific (India, China)
  3. Eastern Europe (Poland, Russia)
  4. Africa
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