As the number of travelers – both domestic and international – continues to blossom, there’s no denying the impact of the growing hospitality industry. According to the World Travel & Tourism Council, hospitality as a whole is stronger than it’s ever been. Data suggests that in 2018 alone, global travel and tourism economy grew by 3.9 percent (up from 3.2 percent year-over-year), accounting for a whopping 7.8 percent of the world’s gross. U.S. arrivals and departures also grew by 32 and 24 percent each, respectively.
What are we getting at? Well, these increasing travel demands mean tons for the commercial property sphere that we at Valbridge orbit on a daily basis. With the constant influx of travelers across the nation, there’s no doubt that there is a need for accessible and healthy hotel, home-sharing, and other convenient lodging options.
As we venture further into the year and the booming future, here’s what you need to know to keep up with the growing hospitality sector and industry.
1. Hoteliers and Building Managers Need a Global Mindset
Most incoming travel throughout 2018 originated outside of the country, with the top five contributors to U.S. travel consisting of Canada (26 percent), Mexico (24), the UK (6), Japan (5), and China (4). No longer should building managers, buyers, and sellers narrow their focus to local and domestic traffic. The trend is going global.
Valbridge specializes in appraising all types of property and land. We produce custom, consistent appraisal reports across the U.S. market for hotels, lodging, and other hospitality giants. Properties in major cities (and those surrounding) will want to start expanding their comp sets to accommodate a wider variety of visitors. Those looking to expand and cozy up to new locations should consider working with a trusted property advisor to explore new options for their brands and outlets.
2. Millennials Make the Call
As of 2015, In 2015, millennials surpassed every other age group as the largest generation in the U.S. labor force. As an industry, those in the hospitality sector can’t ignore them.
It’s a known fact that millennials value experiences over material goods. It’s a common thread that drives millennial buying habits — both in their personal lives and travel. What’s more important, too, is that 33 percent of today’s millennials say they travel regularly, and 55 percent are willing to extend their stays in destinations if the trip proves to be enjoyable.
If you’re not already doing so, its time to capitalize on millennial interests – equipping hotels and lodging outlets with amenities that matter (think fitness and wellness initiatives, pools, entertainment, tech and A/V capabilities, and the like). In turn, these additions will also appeal to added value assets for your building.
3. Threats are Transforming into Partners
Airbnb now offers more than 4 million places for guests to stay during travel. In the past, this would’ve been considered a threat to hotel and traditional lodging outlets. Now, that view is changing.
Major cities like New York and San Francisco are enacting new regulation that would require Airbnb to register some properties as traditional hotels (or face legal pushback). This levels the playing field between short term rentals and hotels.
Hotel and hospitality professional have to face the facts that home-sharing isn’t going anywhere. But that’s no cause for alarm. By working in tandem with hoteliers, services like Airbnb can actually provide more flexibility to the hospitality industry’s sales strategy. By working together, “traditional” lodging outlets can capitalize on the opportunity that home-sharing giants are putting on the table.
4. If you Can’t Beat ‘Em, Join ‘Em
When threatened by new competitors, businesses often respond by attempting to squash who’s ever threatening their reign. It’s notable, then, that hotel giant Marriott recently announced it is starting a new home-rental business, thus diving into direct competition with Airbnb.
Essentially, Marriott is testing the waters of an area where other hotel companies have yet to succeed. The new Homes & Villas by Marriott International will offer 2,000 luxury properties across the globe, ranging from a one-bedroom home to castle-like properties across Europe. Though other hotels have tried to present rooms at a specific locale as a home-share, Marriott is sticking to marketing only luxury, stand-alone properties this way. Perhaps, bringing with its strategy an added air of exclusivity? Even more, Marriott is enticing the competition by allowing its Bonvoy members to collect travel points and spend them on these home-share villas.
Hotel-branded homes might just prove to appeal to travelers who want the assurance of cleanliness, security, and the added amenities that some Airbnbs undoubtedly lack, without actually having to stay in a rather confined, cookie-cutter hotel room.
Perhaps this is the future and trend of the next hospitality-driven arm? That choice is up to you. What we’re seeing, though, is a blending of hospitality entities that sound like an absolute indulgence and win for consumer marketing.
5. We Haven’t Reached Peak
Even outside of huge industry markets, the rest of the country is still growing RevPAR (available revenue rate per room) — most of which is coming via rate increase. The pipeline is slowing due to difficulty in getting construction financing, yet demand is increasing at a steady pace.
The trend now suggests that the hospitality sector will continue expanding throughout 2019. Hotel occupancy currently norms at about 74 percent, with average daily room rates sitting around $130. Hotels around the nation have already started reaping the benefits by reinvesting in construction and renovations. If you haven’t, it’s time to pair with a property advisor who can accurately and confidently guide you to expanding at a beneficial and important rate.
With all the opportunity at our fingertips, where do we go from here? The next step is to get in touch with the pros at Valbridge. With our industry knowledge and your hospitality expertise the only road to venture down is the one of success!