It was the best of times, it was the worst of times.” Charles Dickens’ iconic opening to “A Tale of Two Cities” may aptly describe the global economy today. Yet, the title would be more contemporary if it was “A Tale of Seven Continents, 195 countries…”— you get the point.
Revitalization is, of course, a major theme in Dickens’ novel, and in today’s global economy, collaboration is the artery that fuels revitalization. That’s why the theme of this year’s International Hotel Investment Forum in Berlin is “Global Collaboration.”
Having recently joined Questex as EVP of the hospitality group, I am a firm believer in the importance of timing in business. I say that from personal experience made all the more visceral by my own business scars caused by, among other things, timing. In 1999, I joined the dot-com frenzy in Silicon Valley. Three weeks before the events of 9/11, I started a new career in aviation. And then, in 2010, I joined the media industry just as the global recession was decimating marketing budgets all across the globe.
Despite my previous pitfalls of professional timing, I am extremely optimistic about the global outlook for tourism and hospitality.
Yes, there are headwinds: The World Bank has cut its forecast for global growth to 3 percent, down from 3.4 percent, with a warning that the world economy remained overly reliant on the “single engine” of the U.S. recovery.
In Europe, the EC projects the Eurozone will grow only 1.1 percent this year, down from the 1.8 percent forecasted in March last year. Meanwhile, Russia is faced with capital outflows and falling energy prices, compounded by a lack of access to foreign markets and its own geopolitical problems. GDP in Russia is now expected to contract between 3 percent and 5 percent this year.
And as we’re going to press on this issue, the leftist Greek Syriza party has just won in a landslide victory on the promise to end the country’s austerity program and renegotiate its bailout.
So, what’s there to be optimistic about you might ask?
Our strength as an industry to be both local and global is a great place to start. According to EY’s “Global Hospitality Insights: Top Thoughts for 2015,” the hospitality industry is a strong factor not just in local or regional economic growth, but globally, particularly as investors cross borders to target foreign and secondary markets. Cross-border investment has been a major factor in M&A activity recently with overall hospitality transactions increasing 8 percent in 2014 year-on-year and cross-border capital accounting for 41.2 percent of global hotel investments in 2014 compared to 34.7 percent in 2013.
As expected, the Asian market is leading the charge with Asian investors, primarily from China, Japan, Singapore and Hong Kong, representing over 43 percent of all M&A transactions in 2014. These capital flows from Asia are fueling the incredible growth in Manhattan, Hawaii and London, which combined accounted for 48.5 percent of all Asian hotel investment through October 2014.
This in turn has boosted the overall European hotel transaction market with volumes forecasted to hit $24.7 billion in 2015, the highest level since 2007.
The emerging market is another reason to be optimistic. Africa, for example, has been among the world’s fastest growing continents for the past decade, with an average annual rate of more than 5 percent. Historically, where commodity prices go—so too goes Africa, but this time the continent appears to be holding strong to falling prices due to a thriving tourism sector. The number of foreign visitors to Africa doubled and receipts tripled between 2000 and 2012.
Africa’s increasing economic diversification has been supported by an increase in foreign direct investment (FDI) of 5 percent in 2012 and 10 percent in 2013. These increases are due in large part because governments have improved the conditions for which FDI can occur. The World Bank’s annual “Doing Business” report revealed that in 2013/14 sub-Saharan Africa did more to improve regulation than any other region. Rwanda is now considered friendlier to investors than Italy.
A number of countries in Latin America and Asia are also experiencing continued economic growth due to similar conditions in Africa; a diversification of GDP away from commodities and friendlier environments for FDI to occur.
A wealthier emerging market is reason for global optimism. Just as financial crises can be infectious across countries, so too can strong economies transmit an economic lift to other countries, as well.
IHIF may be in Berlin, but our perspective—and that of our speakers and attendees—is decidedly global. So, as the IHIF global community representing over 75 countries from six continents gather again to focus on this year’s theme of global collaboration, let’s pair it with an equal dose of global optimism—our shared success may very well depend on it.