Overview and Trends

in the Hospitality
Sector

Presented by
Dr. Judy A. Siguaw, Dean
Cornell-Nanyang Institute of Hospitality Management
Agenda

Size of the hospitality industry

Growth in tourism

The hospitality industry in Asia

Drivers of tourism growth

Trends and issues in Asian hospitality
industry
Size of the Hospitality Industry
 Global Hospitality Industry

The hospitality and tourism sector is the largest
industry in the world.

Contribute 10.4% of the global GDP

US$5.4 Trillion in 2007

Source: WTTC 2007

 Global Hospitality Industry

Employed over 231.2 million people in 2007

Accounted for 8.3% of Total World Employment
in 2007

Estimated to be comprised of more than 300,000
hotels and over 8 million restaurants, as well as
countless tourist attractions, travel agencies,
tour operations, cruise lines, tourism-driven
transportation systems, consulting firms, and
real estate investment companies.

Source: WTTC 2007

 The Asia-Pacific Hospitality Industry

Asia-Pacific is the the region with the greatest
growth potential for the hospitality industry.

2006 – Average tourism growth of 7.7%

across APAC
- Average tourism growth of 2.7%
across Americas and 2.5% across
Europe

Total number of tourist
arrivals in the Asia Pacific
region – over 252 million in
2006.
www.pata.org
Source: WTTC
The Asia-Pacific Hospitality Industry

Top ranking countries in terms of absolute

tourist arrivals
 China (49 million overseas travelers)
 Malaysia (but inflated due to heavy daily border
traffic)
 Thailand
 Singapore
 Japan
 South Korea
 Australia
Middle East Tourism

UAE predicted to average 7% p.a. growth

Visitors to Dubai projected to reach 10
million by 2010 and 25 million by 2029.

Dubai investing $45 billion in infrastructure
and tourism.
Drivers of Tourism Growth
Drivers of Tourism Growth – Triple A’s

Affluence

Affordability

Access
Affluence

Rising GDP in developing nations is being
rapidly followed by rising living standards
in countries such as China, India,
Indonesia, Malaysia and Thailand.

Source: Peter de Jong, PATA 2007.

Affluence = Travel

Asians are on the move

Recent years have seen outbound travel
from Asian countries grow by more than
20%
China reached 34.52 million outbound
travelers in 2006
Affluence - Increased Consumer Spend

The middle class – A changed mind set

People now have the money and are
willing to spend it not only on necessities
but also on luxury products, travel,
adventure and cultural experiences.
Affordability - Low Cost Carriers (LCC)
 Affordability - Low Cost Carriers

Air Asia “Now everyone can afford to fly”

 Budget airlines are here to stay – Air Asia, Value
Air, Air Sahara, Air Deccan, Kingfisher, Tiger,
JetStar Asia, Star Flyer, Spring Airlines etc

Lower fares = higher demand
 40% could not afford to fly
 30% can now afford to fly more
 PLUS more business travel
Affordability - LCCs

LCC radically changing travel volumes
 45 budget airlines
 870 more aircraft in Asia Pacific by 2012
 250,000 pax per aircraft p.a.
 75,000,000 more tourists by 2008
 China – existing 150 airports will expand to
240 by 2010
Low Cost Carriers (LCC) - December 2003

Source: PATA
Low Cost Carriers - 2006

Source: PATA
Affordability - Low Cost Carriers

Between 2003-06, LCCs and full-service carriers

competing on low fares yielded airport traffic
increases of:
 57% in Jakarta
 41% in Kuala-Lumpur
 27% in Bangkok
 21% in Singapore

Source: PATA 2007

Affordability - Low Cost Carriers

Secondary airports are seeing rapid

increases in traffic as well:
 Udon Thani (Thailand) +80%
 Padang (Indonesia) +70%
 Johor Bahru (Malaysia) +50%
Affordability - Low Cost Carriers

LCC travelers do not necessarily have budget

holidays
Affordability - Low Cost Carriers &
Budget Hotels

Demand for air travel = demand for hotels
 Equally affordable hotels in Asia
 Safe & clean
 Advent of 1-Star Asia hotel chains

Accor F1 (Asia Pacific), Tune Hotels (Malaysia) &
Taj Ginger (South Asia) brands
 Alliances between LCC and LCHotels

Tiger Airways & Hostelworld.com
Access - Technology

Online travel market
 Only a decade old
 Fastest growing distribution channel in Asia

Advantages for consumers:

 Comparison shopping is easier.
 Consumers understand busy periods command
premiums and that “cheap” comes with some
inconvenience.
 Custom designed holidays
Access - Technology

Online Suppliers and Distributors: Airlines and
Hotels
 Cheapest way to sell travel
 Eliminate the middle man – TAs
 Can pass on savings to the consumer
 Greater market access – independent hotel in Laos
can get bookings directly from a Russian Tourist
Access - Technology

Online sales
 USA market - maturing - battle for market share
 Europe market - still growing rapidly
 East Asia - is developing - potential is huge

In Europe, thousand of travelers go abroad each

weekend with same ease and cost as going to a
restaurant.
 Similar behavior can be expected from Asian
travelers as travel habits become more sophisticated.
Access - Technology

LCC Sales
 reduce costs through channel management
 90% direct to carrier (online/call center/etc)
 Air Asia: 45% via Internet; only 4% thru travel
agents

Accor Hotels : most low-end hotel (Ibis;

Formule 1) bookings direct to hotel/online
Access - Technology

New playing field gives control for all channels of
distribution back to hotels and airlines

With direct distribution, suppliers can take back
control of:
 Pricing
 Brand identity
 Promise to guests
 Relationship with the customer

Profitability!!!
Access - Technology

Direct distribution
 Has produced a de-branding phenomenon

Franchise/management company fees represent
one of the largest operating expenses for branded
hotels

Strong direct distribution strategies mean hotels
can go solo
 Trends and Issues

Human Resources

Emerging Markets

Development

Customers

Technology
Human Resources Issues

Lackof HR talent may be biggest

obstacle to growth in hospitality!
 ADDITIONAL HUMAN RESOURCES
NEEDED BY 2009
 50,000 - Singapore
 200,000 – Macau
 890,000 - Vietnam
 1.5 million – Middle East
 1.9 million - Japan
 2.7 million – India
 3.2 million - China
 Trends and Issues

Human Resources

Emerging Markets

Development

Customers

Technology
Emerging Market Issues

Enhanced regional socio-economic

development

Higher infrastructure costs to meet tourist
needs

Increased negative socio-political impacts

Increased negative environmental impacts
Negative Impacts
Unplanned Development in
Emerging Countries
• Start out well - tend to deteriorate over time
• No workable plans for the overall development
• Little effective regulation:
• uncontrolled growth
• physical degradation
• deteriorating natural ambiance
• pollution: seas, wetlands, land
• inadequate infrastructure
• destruction of heritage sites
 Trends and Issues

Human Resources

Emerging Markets

Development

Customers

Technology
Planned Development Trends

Strong international and government
support encouraging integrated
development.

Considerable developer interest, with
many integrated projects planned.
 Planned Development Trends

Mega

Mega Integrated Integrated
Developments – Developments
The Palms, Dubai. – Jeju Island,
South Korea
.

Mega Theme Parks –
Dubailand
Jababeka –
West Java
Indonesia

Iconic Developments -
Surfers Paradise Australia
Marina Bay Sands

© Marina Bay Sands Pte. Ltd. 2006. All rights reserved.

Marina Bay Sands

© Marina Bay Sands Pte. Ltd. 2006.

© Marina Bay Sands Pte. Ltd. 2006. All rights reserved. All rights reserved.
Marina Bay Sands

© Marina Bay Sands Pte. Ltd. 2006. All rights reserved.

© Marina Bay Sands Pte. Ltd. 2006. All rights reserved.
 Casino Development

Current gaming revenue in Asia Pacific
 $14 billion (legal) + $10 billion (illegal)
 Total (current) revenue = US$24 billion

50+ new casinos by 2012
 Gaming market sensitive to high quality
 70% in 5-star developments (US$1.5 billion to develop)

Boost (legal) revenue to US$45 billion
 New growth + capture of illegal gaming

Other revenue: Casino + hotels + F&B + retail +
entertainment
 Casino Hubs in Asia

Macau only legal gaming hub in China
 1.9 billion people within 3 hours travel
 Recently dethroned Vegas as world’s biggest
gaming center
 Revenues anticipated to reach US$14 billion
by 2010.

Genting Highlands
3 casinos, theme park, hotels
Casino Hubs Asia

Singapore as 3rd gaming hub
2 casinos, hotels, theme parks
 Advantages: air hub; transparent government
& business; infrastructure; STB marketing

Goa – 6 casinos
 Small, primarily slots
Macau

Has recorded high growth rates in tourism
traffic:
 Malaysia - 106%
 Philippines – 88%
 Thailand – 55%
 Singapore – 53%
 Trends and Issues

Human Resources

Emerging Markets

Development

Customers

Technology
Customer Trends

Multi-national

Multi-cultural

Multi-lingual

Multi-religious

Multi-generational

Looking for an experience
Customer Trends

Hospitality organizations must be ready to
welcome the physically challenged and/or
older and/or obese.
 Customer Trends

Social dialogue through technology
 Myspace.com
 Facebook
 Second Life

Second Life-type platforms will be critical for
connecting to customers:
 Must be interactive
 Provide a reason to return
 Create ability to share with friends
 Encourage WOM
Customer Trends

Customer-generated content (CGC)
 Trends and Issues

Human Resources

Emerging Markets

Development

Customers

Technology
Technology Trends
QUESTIONS?
Thank You!