In 2019, the secret is out: the hospitality industry is booming, and the wave is poised to inundate several surrounding market sectors as well.In addition to touting a promising forecast into the future, the steady climb of the hotel and accommodations industry over the past ten years affords a unique confidence in its continued potential growth.
Here are five trends directly impacting the industry growth outlook for the next few years:
1.) Global travel is hitting an all-time high.
…and there are no signs of it slowing down anytime soon! Thanks to the influx of international tourists and business travelers to the US from China and India (two of the largest markets in the world), the demand for quality hotels has risen steadily since each year since 2009. Economists see it as a direct result of increased globalization, and also as a byproduct of the downward trend of international traveling costs. As demand continues to rise, supply must follow, creating a uniquely profitable chance for established brands to dominate the landscape with niche-specific brands tailored to economy, eco-friendly/sustainable, or luxury travelers.
2.) Increased emphasis on health and well-being by millenials.
Along with the increased global traffic, many more millennials (age 18-34) are traveling for the sole purpose of healing, relaxation, and fitness. As a result, there are abundantly more business opportunities for hospitality chains to partner with health and fitness brands, in order to offer a more comfortable, all-inclusive stay. With the quality of available fitness and relaxation amenities driving the attractiveness of a location, hotels that invest in improvement or installation of gym equipment, spas, and more have seen dramatic increases ADR and REVPar rates. Simply put, millenials want to be able to maintain their lifestyles on the go; and they aren’t satisfied, social media knows about it.
3.) Destination travel is the new standard.
No doubt about it, people travel to have fun! Hotels are expanding to accommodate the new surge of travelers intending to explore local points of interest. By plugging into the digital landscape, hotel brands can position themselves to become allies with the younger, digital traveler. Per Deloitte’s estimations, the global in-destination activities industry is poised to hit $183 billion by 2020, with in-destination activities representing an opportunity for hotels to connect guests to unique experiences, and drive incremental revenue.
4.) Higher value than competitors (Airbnb).
When traveling to a new city, many travelers have cited lower levels of negative anxiety when booking accommodations with hotels rather than private rentals like AirBnb. The uncertain possibility that an advertised location will not live up to its digital promises was cited as a leading reason for choosing hotels over AirBnb’s, including concerns about cleanliness and safety, in a recent study conducted in the UK. Seven of ten survey participants found hotels a better investment, as well as a better way to experience the city they are visiting. The consistency of comfort amenities such as daily sheets and towels, room service, and a higher standard for basic hospitality standards continues to bolster the hotel advantage.
5.) It’s recession-proof.
The forecasted economic dip in 2020 is expected to be relatively slight and short one, projected into early 2022. Although it will inevitably affect every industry in some way, the impact in the hospitality industry is expected to be light. Currently, only ⅓ of the demand for hotel space is being satisfied, which points to the increasingly urgent opportunity for hotel brands like Hyatt, who reported strong growth through Q3 of 2019. The golden hour for investors has begun, with REIT ETFs experiencing a notable hike in EBIDTA (earnings before interest, taxes, depreciation and amortization) basis points, who can be seen as an indicator of stability moving forward. Summit Hotel Properties, Inc., the REIT that includes Hyatt, has seen huge EBITDA margin improvement by 170 basis points (Investopedia, 2019).
For the near future, the hotel industry enjoys an expansive prognosis, which experts attribute to its many competitive advantages over private rentals and private rental services. We have yet to experience the full impact of this exciting and promising industry!
Daulat is an Investment Management Company that focuses on investments in industries such as real estate, wireless mobile, and quick service restaurants, among many others. Daulat is headquartered in the San Francisco Bay Area, with offices spanning the globe in China, Dubai, and New York.
Rick Mirza is Daulat’s CEO and President. With years of experience in the real estate, hospitality, and financial industries, Mirza has carefully crafted the corporate culture and reputation of Daulat, efficiently working with local, regional, national, and global agencies to position Daulat as a leader in investment management strategies.
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