Prepare for the Arrival of Chinese Tourists

Due to rapid economics growth in China, the average standard living has been improved dramatically. Traveling has become the new popular ways of leisure, which people previously couldn’t afford. It is critical to look at Chinese’ travel pattern and capture this market in time.

A study said that “China is poised to become the world’s second-largest tourism market in the next two years. Chinese consumers, thanks to rising incomes and a bustling economy, are powering a travel boom that’s set to catapult China’s tourism market past Japan’s by 2020, the study says. According to BCG’s projections, China’s combined domestic and international tourism revenues are expected to increase 14% annually for the next 9 years — creating a 5.5 trillion-yuan, or roughly $838 billion, tourism market, up from 1.5 trillion yuan last year – with revenues from outbound Chinese tourism alone expected to grow a whopping 381% over that span.”

However, there is a big problem: few companies in or outside the country have equipped themselves to cater to the huge crowds of Chinese travellers. For example, many hotels and restaurants fail to use Chinese characters on signs and menus which are simple gestures that would help them attract China’s international travelers and keep them coming back.

I come from China and I know that Chinese travellers have many differences with other countries’. Chinese rely heavily on travel agents and tour packages and they tend to stick to hotel names they know and restaurants they’ve heard of. If the hotels and restaurants companies can do more advertising in China, they will attract more Chinese travellers. And unlike Western travelers, who think of staying in a hotel as an experience unto itself, Chinese typically see hotels as a place to sleep for the night. So the convenience to other resorts is a very important consideration.

If the hotels or restaurants hire Chinese-speaking staff to help them cater to Chinese travellers, they will be bring the Chinese tourists some homely feeling and of course will attract more Chinese to come in. http://blogs.wsj.com/chinarealtime/2011/03/31/study-prepare-for-the-arrival-of-chinese-tourists/?KEYWORDS=hotels

Intercontinental Hotel Group to Build Holiday Inns in India

Intercontinental Hotel Group has recently announced its plans to join a venture with Duet India to build 19 Holiday Inn Express hotels in India over the next five years. These new hotels are expected to add 3,300 rooms to Intercontinental Hotel Group's current development in India consisting of more than 10,000 rooms in 46 hotels and will be mainly located in major and secondary cities such as New Delhi, Mumbai and Bangalore. These hotels are expected to open by the year 2016 and will add to the 12 hotels IHG already has open in India.

IHG already has 2,075 Holiday Inn Express open hotels worldwide as well as 494 under development. More than 75% of the group's hotel ventures in India are with Holiday Inn, a mid-scale brand that mainly attracts business and leisure travelers.

The Duet Group stated that the mid-scale hotel brand category in India “offers a compelling investment proposition based on high demand and return on investment”. It seems that this venture really is a great investment opportunity, since it is responding to a high demand and need for more hotels in the country and therefore will experience lower risk.

IGH plans to expand its operations in emerging markets such as those of China, India and the Middle East within the next few years as it is taking advantage of the increase in traveling and global economic trends as well as increase in life expectancy, the use of low-cost airlines and Internet access.

Furthermore, Intercontinental Hotel Group will be taking a 24% stake in the India venture for a $30 million cash investment over three years. That is surely an enormous amount, but given that the company has taken all the above into account, it should be looking at great profit margins in the near future.

http://online.wsj.com/article/BT-CO-20110406-703236.html

Security Markets

In general terms, this industry has radically declined during the 2009, but slightly inclined after the global crisis.

One of the global reasons is a drop in overseas visitor arrivals. In 2009, a drop in overseas visitor arrivals exacerbated weak demand for rooms by US residents. Despite the weak dollar, overseas visitors to the United States fell 6% in 2009 to 23.8 million from 25.3 million in 2008, according to the US Department of Commerce’s Office of Travel and Tourism Industries. The United Nations World Tourism Organization (UNWTO) estimates that direct expenditures by all foreign visitors to the US (a category that includes spending on more than lodging and gaming) decreased 23% in 2009.

The other is local reason. On the consumer side, unemployment remains high and demand is bifurcated. High-income earners have continued to spend, but lower-income earners remain stretched and focused on bare necessities. Thus lower discretionary income, tight credit conditions, and a poor employment outlook leaded the declining of this industry growth rate. In 2010, Las Vegas Strip gross gaming revenue grew up to 4.5%. After the global crisis visitors from other countries and cities were increasing. However, this result was high volatility, with declines reported in most of the other months.

On the other hands, Atlantic City’s troubles increased last 3 years. Revenue of the gaming decreased 13.2% in 2009, 7.6% in 2008 and 5.7% in 2007. Also during 2010, Standard & Poor’s says this industry increased the competition from neighboring states. Unsurprisingly, 11 casinos were up for sale and Hilton Casino and Resort defaulted in 2009.

In these reasons, it is important to choose the stock compared with the location of the hotel and gaming facilities. Thus, analysts recommended more of the companies which were located in Las Vegas rather than were leading hotels.

The Rush to Boutique

The hotel industry has a new entrepreneurial aspect to contribute to the diverse hotel market. Recently, hotels in Urban areas have started to have a “boutique” or “chic” feel to them in order to accentuate a mood or feel to attract customers. Ian Schrager, the creator of the “boutique” concept has assisted in the development of the boutique feel to provide customers with the exact experience they are looking for.

Currently, boutique hotels account for approximately 3% of the hotels in the country, but within the next 10-15 years, the number is expected to rise to 10% in urban areas, and 6% amongst all hotels in the United States.

There was a quote in the article that helps to explain why boutique hotels are becoming more popular: “Everybody pays attention to design…People like things a little bit different, offbeat. And they make someone who may have a rather mundane life feel hip.” It was said that the boutique hotel industry may be successful in Europe and Asia as well.

There are also some benefits to operating a boutique hotel as opposed to a generic hotel. There are not nearly as many regulations as far as room size, building structure, and general brand standards. They can charge a higher price for their rooms, which makes it more appealing to an owner to own a boutique hotel as opposed to a generic hotel. While many hotel brands are owned by the powerhouse brands, some boutique hotels are as well.

I hypothesize that boutique hotels are more popular in urban areas than rural and/or small towns because urban lifestyles tend to be more “hip” than no urban lifestyles. The pace of urban areas allows for successful boutique hotels, away from brand name, regular, medium priced hotels. It is important to consider what this will mean for mainstream hotels, and for the hotel industry as a whole in the next ten years. Now that hotels are taking huge strides to differentiate themselves, where will the customers tend to flock to. We live in a time where people want more than the generic good. People enjoy being in places where they feel good, where a mood is being presented, and provides a change from the normal lives they live everyday. http://www.nytimes.com/2011/04/05/business/05boutique.html?_r=1&scp=4&sq=hotel&st=cse

Accounting and Financial Statements

The US lodging industry is the largest in the global hotel industry. In 2009, there were about 13 million hotel rooms globally at some 128,000 hotels. Global revenues were greater than $300 billion. We estimate that more than 450 commercial casinos operate in the US. . This excludes facilities that primarily emphasize bingo, as well as other facilities where casino-type activity is limited to gaming machines.

5 key industry players are InterContinental Hotels Group, Wyndham Worldwide, Marriott International, Hilton Hotels, Accor S.A.

This industry was radically declined during the 2009, because the global crisis dropped in overseas visitor arrivals. In 2009, a drop in overseas visitor arrivals exacerbated weak demand for rooms by US residents. Despite the weak dollar, overseas visitors to the United States fell 6% in 2009 to 23.8 million from 25.3 million in 2008, according to the US Department of Commerce’s Office of Travel and Tourism Industries. The United Nations World Tourism Organization (UNWTO) estimates that direct expenditures by all foreign visitors to the US (a category that includes spending on more than lodging and gaming) decreased 23% in 2009.

Adjusting Check-in & Check-Out Times

We have all experienced the hassles of hotel check-out times being much earlier than the departure of a flight. Often, a guest is left with the worry of where they will spend aimless hours before they have to catch their flight.  How about the scenario when you arrive to the hotel early, yet you are told you have to wait for hours until you can check-in. "Business travelers are very annoyed when they come in in the morning and have to go to a meeting and want to put their stuff down and are told check-in time is 3 p.m.," says Horst H. Schulze, Capella's chief executive and chairman and a former president of Ritz-Carlton.

What are hotels doing to better such rigid check-in and check-out policies? Recent hotel loyalty programs now offer an extra few hours after posted check-out times. The catch with the Hilton HHonors and Hyatt Gold Passport program, a late check-out is usually subject to availability. Starwood Hotels & Resorts offer a guaranteed late check-out at 75% of its hotels to gold and platinum members. This occurs because Starwood offers convention and resort properties that have a high demand of hundreds of guests checking in or out at the same time. Vice president of Starwood Preferred Guest claims that “an arriving guest wants to unpack, get into their bathing suit and jump into the pool."

One specific hotel brand, Capella Hotels and Resorts, have done away with set check-in and check-out times entirely. Capella Hotels and Resorts accommodate to guests who want to arrive and leave on their own schedules. After taking a survey of guest who stay in hotel chains, Mr. Schulze noticed the trend that travelers’ biggest pet peeve was the industry standard check-in and check-out times. The brand is a rather small hotel with about 200 rooms or less that keep a staggered cleaning staff in order to work around the guest schedule. Considered as “personal assistants”, the staff contacts each guest in order to learn their expected arrival and departure times. Guenter Richter, a managing director, claims that the hotel is able to adjust to a guest desired schedule “95% of the time.”

The incentive of late check-outs is a form of marketing for many hotels. Guests are attracted to the idea of having adjusted check-in and check-out times; therefore they decide to sign up for a hotel’s customer loyalty program. Accommodating to the guest creates better customer satisfaction and interests the guest to continue to stay at that hotel when traveling. Overall, the hassles of check-in and check-out times are finally being regulated through innovative programs that appeal to the customer.

http://online.wsj.com/article/SB10001424052748704013604576247091927336656.html?mod=googlenews_wsj#articleTabs%3Dcomments

Restaurants Test New Ways to Shop

In the competitive market, a single company does not have the ability to decide a price. In order to own maximum profit, companies should find the best way to control their cost. Those who are bad at controlling cost will obtain nothing from market.

Many restaurants try to use diverse strategies to blunt the impact of higher price of raw material. Starbucks, for example, wants to team up with other companies to buy milk, sugar and other essential food items. Darden Restaurants Inc., owner of the Red Lobster and Olive Garden chains, is moving to a system where it buys only what they knows they needs.

The unfavorable fluctuation prices of grains, meat, sugar and other essential ingredients will be a block for businesses to earn a stable profit and will bring the restaurant industry a financial risk. Especially, in cases such as the recent period of a rising global demand for protein, unfriendly weather in key growing regions, and government mandates to turn corn into ethanol.

There is a very useful strategy called commodity-price hedging to guard against large swings up or down. However, this can only apply for large companies like Starbucks and McDonald's, which have the capital to hedge effectively.

Another strategy, supply-chain management, is much more important and applicable for most companies. For instance, Darden faces similar risks with its plan to automate its supply chain where it buys and ships only what it needs, when it's needed. It might buy and store only the amount of biscuit mix its Red Lobster restaurants are expected to use in a given month.

Moreover, if Darden combine the two strategies together, it will create a bigger benefit. In regards to the biscuit mix Darden purchases for its Red Lobster chain, the company breaks down the cost of each ingredient, such as flour and shortening, as well as the packaging cost, so it understands exactly how much it should pay for a product. The company then hedges the price of the wheat that goes into the flour to avoid price fluctuation and earn a nice profit.

http://online.wsj.com/article/SB10001424052748703461504576230701451425990.html?mod=WSJ_Hospitality_leftHeadlines