In the lead up to the 2020 Arabian Hotel Investment Conference (AHIC), we asked a number of industry partners how they are transforming their business for tomorrow.

TIME named their 2019 Person of the Year to be Greta Thunberg, a 17-year-old environmental activist from Sweden. If this is not news to you, then you probably know by now that the world is changing rapidly. It is being invaded by the young Generation Z, making baby boomers feel unwelcome on many occasions. This change does not concern policy makers and Greenpeace alone. Gen Z is undeniably becoming the targeted audience in every industry you might think of; and before you know it, it will constitute the biggest segment of travelers as well.

CHANGE IN TRAVELERS' BEHAVIOUR

Travelers today, stormed by Gen Z, have already started changing their behavior. They are no longer dying to snap a cliché picture while they hold up the Leaning Tower of Pisa, nor do they want to pretend to be on a call in one of London's red phone booths. Checking in at a hotel in a regular concrete building does not excite them anymore, even if the room is comfortable and the food is good.

Change is usually a threat to businesses, especially when it involves customer behavior. New preferences of travelers have no doubt put pressure on the hotel industry to accommodate a new set of needs and expectations. But what are those new needs that have surfaced, and how can we decipher them?

Many reports have emerged regarding what Gen Z mostly cares about, and the results were not surprising at all. Among other aspects, Gen Z wants to preserve the environment, seeks personal development in non-traditional ways, and values authentic human interaction. If we transfer those needs to travel experiences, we realize that Gen Z would want to connect with nature, learn something new when they travel, and immerse themselves in the local culture. Focusing on satisfying the above three prerequisites in the next decade could alone bring the travel industry to its tipping point.

THE MIDDLE EAST IN FOCUS

For some time now, the Middle East, predominantly Dubai, has been branded as the center of opulence, ultra-luxury and city high-life. While this is not far from reality, the region has a lot more to offer, from picturesque landscapes, beautiful sand dunes and most importantly a rich heritage. What is amazing about all this wealth is that it is still unspoiled, so there's a lot to offer to the Gen Z that is hungry for experiences rich in adventure, wellness, and culture. Even agritourism has recently been gaining popularity. Hence hotels in the Middle East have a strong foundation and countless possibilities to create meaningful experiences for guests that will be engraved in their memory, trigger them to snap a picture and post it on Instagram, and most importantly inspire them to visit again.

WHAT DOES IT MEAN FOR INVESTORS?

Around twenty years ago, investors and land owners rushed to develop luxury (and later upscale) hotels across the Middle East to capture the exponential growth in demand for hotel rooms. Today, while the market is maturing, it is become difficult for hotels to maintain, let alone gain market share. This is putting pressure on room rates, while occupancies do not budge. Whilst tourist arrivals to the Middle East and demand for hotel rooms is still growing year on year, it has become imperative for hotel owners to differentiate their products from the mass, and create unique and meaningful experiences that cannot be easily replicated for a cheaper price.

What is interesting in this proposition is that the pricing of a hotel night is not necessarily cost-based. While a luxury hotel room in the city center might cost an investor US$400,000 per key, it could be selling at US$120 per night compared to the unapologetic US$800 per night price tag for a remote tent that has cost US$100,000 to build. This is what I call smart investment.

If there are 3 main points that I want you to remember from all of the above, here they are:

  • Gen Z will be your biggest target market soon; understand their behavior and design products and experiences that meet their needs; do not simply follow the mass;
  • Build on the natural and cultural potential that every location and destination hold; do not copy concepts that don't fit; and
  • Create value by crafting memorable experiences, and not by dumping big money on frills.
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