Former Speaker of the U.S. House of Representatives Tip O’Neill was famous for the claim: “All politics is local.” The premise is easy, and rational: A politician’s success is directly tied to the person’s ability to understand and influence the issues of their constituents.
Although many in the hotel industry—myself included—approach and speak about hotels from a holistic perspective, fact is, hotels—as much as politics—is a local business, and the overall performance of a hotel tends to be up or down in relation to its local competition and ability to shift market share.
For someone who reports on hotels—again, me—there is no better way to understand what’s really going on then by going directly to the source: you, the readers of Hotel Management.
That is why I am so excited to be in Berlin, in March, for the International Hotel Investment Forum (see our pre-show IHIF coverage beginning on page 24), where I’ll be surrounded by a panoply of hotel industry-related executives—from owners and operators, to lenders and investors. With all that talent under one roof—that roof being the InterContinental Berlin—it gives me a chance to get the true pulse of the industry: what is going on broadly, and, yes, what’s happening on the local level.
Prior to the conference, we commenced a survey, posing a variety of questions to the delegates attending IHIF. I’m happy to report that the vast majority of respondents are excited over the prospects of 2015 as it relates to global transaction volume and overall hotel performance.
Asia-based investors, particularly from China, will make noise in 2015—since they ended 2014 with a bang! (See Anbang Insurance Group’s purchase of the Waldorf Astoria in New York for close to $2 billion as evidence.) China has relaxed the rules that companies have had to follow in regard to deploying capital overseas. As that happens, expect more China-based groups to snap up hotel assets—specifically luxury or trophy properties—as they come to market. Companies with billions to invest are bullish over the returns that hotels produce, unlike other classes, such as bonds or securities that, respectively, produce oftentimes lower and more volatile returns.
We’ve already seen companies such as China’s Wanda Group take huge positions in the U.S., and the thinking is that will continue. It will be interesting to see how this affects the buying power of U.S. REITs and private equity groups. They all should have ample buying opportunities, since many in the industry now feel that if you own a hotel, now is as good of time to sell it.
There’s no doubt that global hotel brands continue to play a large role, and a majority of those we surveyed said brands have never been more important in terms of what they provide owners and franchisees.
On the flip side, an overwhelming majority (81 percent) said they believed online travel agencies are now the top choice for consumers when booking hotels. It’s not surprising when you see how much they commit to spending on marketing—it plays out on your TV screen everyday in the form of Captain Obvious or a roaming gnome. While hotel companies may have in the past battled with OTAs, now may be the time to figure out how to work better with them to produce a more equitable, even-handed outcome. OTAs aren’t going anywhere; they are only going to get bigger and stronger.
One thing all the delegates can agree on—and evident from our survey—is that IHIF is an opportunity—a chance to develop business with existing and new contacts. It’s an exchange of ideas and discussions on market trends and their implications—and since it’s global, attendees are inundated with information from various markets and countries. It’s also a return on investment: sources of capital are well represented and open to discuss new deal opportunities.
For those who make their living on the ebb and flow of the hotel industry, information is crucial. That is the true value of a show such as IHIF: understanding your business on not only the global scale, but the local scale, as well.
Hotels, after all, are a street-corner business. Tip O’Neill would agree.