Why hotel developers need to think ahead

Mediterranean Resort & Hotel Real Estate Forum

When developing a resort or destination, the lack of a long-term view can impact a project—and its surroundings—even well after it's been completed. And while investors want quick returns, ministers want foreign direct investment and economic development, and hotels want new markets to grow in, the absence of forethought that can create negative social or environmental impact on a community also usually will tend to accumulate over time and become a problem—someone else’s problem—many years later; it's a worldwide dilemma.

Protecting Your Product

But the global context is changing rapidly. Leading businesses now recognize that external stakeholders have become more influential, and shareholders and consumers expect businesses to act responsibly and transparently. This means having a regard for the viability and well-being of a destination. This does not require a philanthropic desire to do good in the world, just a desire to do good business—protecting tourism product, brand reputation and the value of tourism assets.
 
So it is perhaps surprising that, while hotel brands, tour operators and REITs routinely consider geopolitical, security, health and safety and other macro-factors when making longer-term decisions about a destination, some give little or no weight to other fundamental issues. For example, whether the water supply will meet the future needs of tourist and resident populations or how they will manage increased waste and energy use. If such risks are identified in early assessments, mitigation measures can be incorporated into resort development plans. Ignoring such issues can lead to a situation like Boracay in the Philippines, which earlier this year reached crisis point (its president, Rodrigo Duterte, called the island a “cesspool”) and had to close to tourists for six months in order to take urgent remedial action.

Missing Opportunities

Similarly, early consultation with local businesses and communities can often uncover opportunities to make small changes to resort development plans that will have benefits for both sides. For instance, locals may wish to use the services provided by the resort or benefit from its infrastructure, and can become a new customer base. Or perhaps their priority is employment and supply-chain opportunities, in which case this is an opportunity to provide authenticity and a sense of place that will enhance the customer experience. Conversely, where local requirements are not well-understood or met, residents can become increasingly alienated from, or resentful of, the tourism in their midst and the political mandate for tourism development wanes, as has happened in “hot-spot” cities such as Barcelona and Dubrovnik.
 
So opportunities are being missed and risks are being overlooked. One of the reasons is that in order to have a long-term view, you need data and analysis of what the future may hold (as well as enough of a stake in that future to care). At the Travel Foundation, the research organization is aggregating such data. For instance, in 2015 it worked  with PwC to measure the full impact of hotel operations on a destination (Cyprus). Last year, it developed and ran a trial of a sustainability risk-assessment framework for TUI Group to enhance its existing destination selection and management processes. And it currently is working with the Tenerife Tourism Council to measure the impact of different tourism types and identify what it terms an “optimum market mix” that achieves the best possible outcomes from tourism.
 
If “short-termism” is part of the human condition, so is the ability to understand the world, adapt and innovate. And it’s this ability that will bring the change needed to offset negative development impact.
 
Salli Felton is CEO of the Travel Foundation, and will be part of the panel “Destination Development: Creating Destinations in a Changing Travel” at the Mediterranean Resort & Hotel Real Estate Forum (MR&H), taking place in Athens this month.

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