Perils of The Booming Hospitality Industry

Congrats to all hoteliers who reached the target in the year gone by and for those who did not – well hate to burst the bubble but this year is going to get tougher.

Hotels these days are a business where the hotelier must juggle multiple hats. On one hand the hotelier tries to make sure his service standards are uncompromised, while he looks for ways to keep an eye on the competition. Well if you thought these are the only perils of the industry, there are newer versions of accommodations – welcome the likes of Airbnb and Service apartments that are expected to give hotels a run for their money. The story of the growth of a service like AirBnb is well known so I will stay clear of that and service apartment is whole new dimension that warrants a separate discussion altogether.

So back to hotels for the moment, new hotels are springing up constantly which means the “fair share” is getting thinner. To put a perspective here are some numbers of hotels in three major locations –

India, estimated to have close to 1,70,000 rooms to be sold and growing at 7-9%

United Kingdom, as per PWC report contains 6,20,170 rooms with 16,500 rooms slated to be added by 2016 end

The United States of America has recently crossed the 5 million rooms mark and expected to grow by 1.4% in 2016

One thing’s for sure, the industry is growing and these mindboggling numbers are set to grow.
So why are there hotels springing up ever so quickly? To say it in one word – there is an equivalent demand. For example, let’s to go back to the same countries mentioned earlier. As per IBEF, Tourism has contributed 42.8 Million USD to India’s GDP in 2015 and is expected to grow by 7% until 2025. As per Tourism Alliance, tourism generated 127.4 Billion pounds in 2015 and is expected to grow further. The industry is expected to mop up a whopping 2.5 Trillion US dollars by 2025.

Why is the industry still so competitive? Simply because hotels don’t sell room nights, they sell time. Now there are 4 variations of hotels that get affected because of this growth – small independent hotels, Large independent hotels, Mid- Sized Chains and finally the Large chains of hotels.
The maximum impact is on categories up until Mid-Sized. No one has a magic wand, but in the subsequent articles I will cover how these hotels are affected and how you could possibly beat the competition, so stay tuned!

In case of discrepancies or any queries, do reach out to me joseph.christopher@hotelogix.com or leave your comments below. Also, I would be intrigued to know what’s interest’s hoteliers these days!

Read the next part of the blog Beating the competition to improve profitability for your independent hotel