The Economic Situation And Its Impact On Hospitality

Edited excerpts of remarks at the U.N.World Tourism Organisation Resilience Committee meeting, ITB Berlin.

Mr. Aidi began by expressing doubt that about the possibility of a recovery this year. He said: “Next year, maybe; two years later we will have more chance!!!” He added: “Why our economy is falling down? Why is our banking system going into bankruptcy? What's going on?

“In October 2008 the growing instability in economy and the fear of a great recession resulted in cheerless predictions for the performance of our industry. The RevPar went negative and is still negative in 2009. IH&RA predict a full decline in occupancy worldwide during 2009. Major hotel chains expect a fall in profits during 2009 resulting of reduction of travel expenditure. But remember people still need to stay in hotels and travel for business.

“This industry will continue its expansion with various degree of development following the regions. The construction of new projects will be delayed as banks become restricted to give loans and interest is uncertain. Capital investments will be held for better days even if the funds have been allocated. Many hoteliers will keep their cash for better days.

“Hoteliers will start to be less arrogant and more sensitive to the needs of their guests, and we still in better shape in 2009 than we were in 1999. Residences may be a substitute for hotels especially with their lower rate. Simplicity can replace luxury amenities. Services will be improved heavily to attract new clientele for low cost hotels and residences.

“As of beginning of September 2008, almost in parallel with stock market turmoil, occupancy at luxury hotels 5 stars worldwide start to go down 6% then 14% in October. RevPar fell 17% for luxury market toward 10% for 4 stars. Corporate business slowed down too. Executives cannot stay in a five-star hotel paying $500 when the company is laying off 500 employees. Major financial institutions advised their customer to use 4 stars and not 5 stars anymore to reduce costs.

“Let’s take a case of France that has the largest arrival of tourists in the world. Last month Feb 2009, income at the 4 stars deluxe went down to 30% from 60%, the normal 4 stars revenue went down to 15% from 30%. The hoteliers in France compare this crisis to the crisis after September 11 2001. Individual travellers now do prefer rooms instead of suites. Corporate companies do reduce the number of their travellers and they do prefer 3A stars hotels for their seminars... Everybody is looking to reduce expenses and make economy.

“Due to a reasonable rate, occupancy and arrival of tourists will not suffer a lot with an average slow down of 10-20% depending on region. Local & regional tourism arrival compensate for the (overall) tourist arrival drop down.

“Low cost airlines will be developed & national airlines will need to lower their rates to compete.

“3/ 4 stars hotels need to improve their services to attract more new clientele.

“First & business class travel will be reduced heavily, and shift to rooms rather than suites to reduce expenses.

Turbulent Economy

“If you look at history, worldwide economy was always turbulent. Stock market will grow in a period then it will fall down.

“In a healthy economy our industry was not sustained by business from high market customers, instead our industry was depending on corporate travellers including meetings and conferences, as well tours and FIT.

“Worldwide the falling dominoes effect in the banking system was strong. The development of local tourism is strong to reduce the expenses.

“The consumer today is becoming more and more educated and demand is growing for hotels applying sustainable practices to help protect our planet. This is a great opportunity to put our hospitality at the core of sustainable development and to advance our development in fighting climate change and creating new jobs

IHRA suggestions

“We should invest NOW in the hospitality as nobody is interested to do it. Excellent opportunities exist for generating great revenues at the end of this crisis. We do believe strongly its time for investment, conversion and construction as the cost for building is much cheaper now than before as the demand decreases.

Conclusion

“The remainder of 2009 and the early part of 2010 will be challenging but to our industry but not impossible to get over with. The hospitality industry as a whole needs to become positive and explore our unlimited opportunities. Please remember that our industry is the largest employer in the history and employ more than 950 million of workers and we are the last barrier and the major fighter against global poverty.”

Source: Travel Impact Newswire