Xerfi Global’s recent study on the Hotel Industry analyses a sector which has benefited from favourable tailwinds over the last few years. Most national markets have seen growth in revenue per available room, a key performance indicator in the industry obtained by dividing room revenue by the number of available room nights. Growing global tourism, leading to higher occupation and rates, has been behind this growth, which has however been stunted in some key markets due to particular circumstances, such as the Chinese government’s anti-corruption campaign and reduced travel to France the wake of terrorist attacks.
The hotel industry continues to be dominated by upscale US chains. That said, two Chinese hoteliers, Jin Jiang and Hong-Kong based Shangri-La have become major forces to be reckoned with. But a greater force to be reckoned with in the industry is the growing part of revenues captured by C2C platforms such as AirBNB as well as online travel agencies, such as Expedia or Priceline. While new entrants such as AirBNB are more of a concern for smaller hotels than for large hotel chains, as the same market segment is not targeted, particularly in terms of services offered, digital travel agencies, which encourage price competition and take a cut of earnings, have become a thorn in the side of both large and small hotels.
And indeed, a wide playing field of large and small hotels exists in this highly-fragmented industry. Its highly-fragmented days may however be numbered. Greater consolidation seems to be on the horizon as: a) competition from vacation rental platforms such as AirBNB, drives small, undifferentiated hotel out of business b) there is a growing need for scale to increase marketing and IT spending to keep pace with digital challengers, c) global players are looking to increase their leverage against dominant online travel agencies, d) currently cheap financing encourages a wave of M&A before conditions become less favourable and e) the low level of consolidation makes antitrust obstacles unlikely.
Alongside these moves towards consolidation, leaders are following a number of strategies. To face digital challengers head-on, traditional hotel groups are getting on the digital bandwagon by developing their websites and mobile apps for bookings and check-ins, guaranteeing lowest prices to push out online agencies. They are engaged in a race to add new capacity to tap into market growth, and are moving towards asset-light models in which they manage or franchise hotels rather than own them so as to considerably reduce capital investment and generate higher-recurring revenues. They are also fine-tuning their market segmentation to introduce new concepts such as boutique and lifestyle hotels to appeal to fast-changing consumer preferences.
Kathryn McFarland, The Global Hotel Industry: the market, une vidéo Xerfi Canal Economie.