This Week's Herman Trend Alert

Leadership in Normal 2.0

  The Herman Trend Alert

March 11, 2009

Global Hospitality's Near-term Future

A recently released study, conducted by Ernst & Young, LLP, reflects some interesting developments in the hotel industry. Throughout 2009, contracting economies and reduced leisure/business travel across much of the world will continue to put pressure on global hotel markets. Operating performance in the global hotel industry remained profitable, because most hoteliers focused on controlling costs and preserving the bottom line.

As a result of the challenging economy, hotel operators will continue to concentrate more of their energies on cost reduction, improving operating efficiencies, reaching out to guests via enhanced Internet communication, and strengthening their brands through an emphasis on green principles.

In its market reports and in-depth analysis of the main lodging segments, The 2009 Lodging Report carries an overview of global, including US, hotel sectors. The report also features ten main areas on trends and issues to watch in this sector in 2009. Here are some highlights:

With further contraction in the economy, hotel values will continue their decline in 2009. Expect cash-rich buyers to exercise their advantage and buy commercial real estate at fire-sale prices with numerous transactions before year's-end. Hotel companies moving quickly to pare overhead at the corporate and property levels will not only save money, but will position their enterprises to be more dominant players for the next cycle.

A recent Google survey suggested that one-third of travelers made accommodation decisions, based on reviews found online. This year will see wise hotel operators improving their Internet brand presence.

While no region of the world is immune to financial turmoil, regions such as. Hotels in Asia Pacific, the Middle East and North Africa, and Latin America may offer stronger investment alternatives during this slow down. These regions have large and growing economies and populations with a relative scarcity of lodging. Look for China, India, Vietnam, and Brazil to have the leading future growth markets.

Green hotels are gaining momentum throughout the world. Cruise operators have downsized their offerings, cutting some expensive international routes in favor of cheaper and shorter routes from Baltimore and Miami. US hotels will benefit from the funneling of additional federal dollars into US infrastructure.

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