The Booming Hotel Business…Will It Last?

29 October, 2018
  • 10 min read
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While there seem to be clouds on the horizon due to some geopolitical unrest, the investment activity in our industry appears to maintain its positive levels and continues to grow; all supported by record breaking operational results (REVPAR) in many parts of the world. Global tourism has grown by a record 7% in 2017, reaching a total of 1.32 billion international arrivals. Travel numbers show continual growth in the years to come, especially to and from Asia.

Global tourism has grown by a record 7% in 2017, reaching a total of 1.32 billion international arrivals. Travel numbers show continual growth in the years to come, especially to and from Asia.

According to the United Nations World Travel Organization, the number of international tourist arrivals in Asia Pacific will reach 535 million by 2030 (currently at 323 million).

Hotel chain giants naturally tap into this growth by expanding their portfolio, either organically, or more likely, through mergers and acquisitions.  A hotel chain with 1000 hotels which used to occupy the nr. 1 position in the past, will currently not reach a top 10 position. This growth is not only shown in the number of hotels or active countries, but also through the expansion of brands.

To some experts’ surprise, instead of reducing the number of brands, we are actually seeing more coming into the market. This brand expansion is also taking place by the biggest player Marriott, who is currently already operating 30 brands.

So, let’s take a look at what’s happening…

Mergers & Acquistions

The industry, due to much activity thereafter, has not had much time to swallow the takeover of Starwood by Marriott. The $13,3 Billion takeover marked the beginning of a range of 'buys and sells', making the intentions of some of the big players very clear.

It is, however, not only limited to hotel chains taking over other hotel chains. What about the cross-border activity between hotel chains and home sharing companies?  When McDonalds witnessed Starbucks’ massive success, it only seemed logical to try to get some of the market share by introducing a new kind of coffee experience (McCafe).  At the same time, Starbucks saw opportunities to penetrate the breakfast market by offering more hearty breakfast items. Our industry is also attempting and taking similar actions, such as Hyatt Hotels’ activity in the home sharing business and Airbnb’s purchase of luxury retreats.

Accor has also ventured into many different affiliated businesses, one of them, among many, the purchase of a significant share of the Chinese based online booking platform Ctrip.

According to JLL, more acquisitions and mergers related to cross border activity will happen. Some of these possibly strongly related to technology. In 2017 alone, over 65 acquisition deals worth $17 billion were made in travel technology.


One would think I would elaborate on Marriott’s massive historic takeover of Starwood at $13,3 billion first. Yet one other hotel chain has been surprisingly active.  Accor, being the most active hotel chain these past two years; has been buying shares in various companies as well as taking over others. Under the leadership of CEO Sebastien Bazin, they are not looking to slow down any time soon.

Since the start of 2016, Accor has bought or invested in more than twelve companies!  After the takeover of Fairmont Raffles Hotels International, the company purchased Moevenpick Hotels and Resorts as well. Furthermore, they also bought Atton Hotels from Chile and have taken a 50 pct. stake in SBE Entertainment; known for its iconic hotels in LA and Vegas as well as some renowned clubs.

Earlier this year they added a few more; one of them being the Mantra Group, the biggest hotel group in Australia, acquired for 1,2 $Billion.

But it is the acquisitions outside of the primary process which has captured everyone’s attention. Less than a week after the purchase of a 50% stake in the South African-­‐based Mantis Group, Accor purchased the table reservation system ResDiary.  This company has developed a high-end table management solution with the use of technology to maximize revenues in Food & Beverage.

Accor has also invested in various other technology and digital marketing companies, including VeryChic, concierge service John Paul and events business Potel & Chabot.

Lastly, Accor has also partnered with the Chinese giant CTrip; a Chinese online travel booking platform, clearly showing their intention to tap into this massively growing market. Accor has also recently tried to obtain a minority stake in Air France.


Arne Sorenson, CEO of Marriott, recently mentioned that the merge is well on its way, but that a lot work is still to be done, including the technological transfer of the Starwood properties into the Marriott system. With Marriott already operating 30 brands, Sorenson has clearly hinted that it is more likely that more brands will be added than subtracted, including an all-inclusive resort brand. Analysts recently concluded that of all hotel rooms being built, one third of the rooms in the US, and one fifth worldwide, will be managed by or put under a franchise contract by Marriott.

Experts believe this merge has resulted in some brand-overlap. There is also some concern related to having enough appropriate brands within the Marriott portfolio and or other hotel chains directed towards the millennial generation. One of the brands which will get a massive overhaul is Sheraton. The 81-year-old brand, counting for 42% of the total takeover, scored low in customer satisfaction and will be receiving funds for a total revamp.


Two years ago, Intercontinental Hotels Group was the world’s biggest hotel chain in terms of total number of rooms. Due to other hotel chains’ buying spree, it has now slipped into a third position, following Marriott and Hilton. Some analyists have shown their disappointment in IHG only buying Regent Hotels; a small and once well-known luxury player.  Keith Barr, CEO of IHG, announced that they are currently on the look-out to purchase one or two more luxury brands. The company also plans to launch an upscale conversion brand in the Europe, Middle East and Africa market sometime this year.


One of the most profitable deals ever made by Blackstone was the Hilton deal. Blackstone’s mission is to buy, fix and sell at a profit. In March of this year, Blackstone sold the final portion of shares for a total profit of $14 Billion on the buy and sell of Hilton. Under ownership of Blackstone and with Chris Nasetta as CEO, the company managed to double its number of rooms and launch a range of brands such as Curio, Tru, Canopy and Home2. Hilton’s organic growth strategy paid off; they will continue to do the same with some 350,000 rooms in the pipeline. Just this week, Hilton announced a new urban-micro-hotel-lifestyle brand, Motto, entering the market of competitors Pod, Yotel and CitizenM.

Hyatt Hotels

Hyatt missed the boat in its attempt to purchase NH Hotels. Whilst Thai-based Minor group was making moves to take over 55% of the stock, the letter of intent from Hyatt came slightly too late. Nevertheless, investors seemed to have preferred the Hyatt/NH deal, resulting in a jump in NH share during this attempt. Hyatt has indicated that it would like to expand their fastest growing portion of the business, the select service segment, both in Europe and China. Their favorable balance sheet, along with the intention, will position Hyatt as a serious player in upcoming 'buys'.


The Chinese conglomerate HNA massively purchased various companies (Hotel and Air) a few years ago. A restructuring of debt has triggered a selling spree, unloading billions of dollars in assets. Among these were NH Hotels, Radisson, Hilton-shares and airlines. Radisson was sold to Chinese colleague Jing Jang Hotels, currently ranked number 7 of the biggest hotel chains of the world. The Taj based Minor Group, known for Anantara hotels as well as some 1800 restaurants, is aiming to get a 55% stake in NH Hotels. In light of the growth in Chinese tourism, Billionaire and CEO of Minor, William Heineke, aims for future company growth.

And then there is Belmond…

The UK based Belmond company, led by our Alumnus Roeland Vos, announced that they are open for bids a few months ago. Belmond is known for its iconic hotels such as Hotel Cipriani in Venice and Hotel Splendido in Portofino, as well as its luxury train travel, formerly known under the name of 'Orient Express'. This luxury company, valued at $2.5 Billion, hired JP Morgan Chase to explore the sale, resulting in a 60% increase in stock prices! All offers are to be submitted by the end of the month, with rumors circulating that big hotel investment companies such as Blackstone, Askenazy and KSL Capital partners are among the bidders. Hilton, Hyatt and Accor have also shown interest. Or will it result in a deal with IHG after all? Makes sense in light of their recent Regent acquisition.

Investment Volumes

2017 was a record-breaking year regarding both global tourism growth as well as investment volumes. Europe alone experienced an 11% increase totaling 20.9 Billion euro in hotel transaction volume. As we are approaching the end of 2018, we will probably see a moderate increase compared to 2017, with massive take-over transactions peaking in the UK, Germany and Spain.

Other regions around the world have shown similar growth. Mainland China remains an interesting and fast-growing area; however, we do see a shift towards South East Asian countries in both performance as well as investment volumes. In fact, South East Asia takes the global lead in terms of outbound capital for hotel investments, forming 30% of total global offshore capital.

Strong GDP growth in combination with favorable travel and tourism trends stimulate investors (private equity and pension funds) to allocate their resources more on hotel investments versus the more classical real estate options (such as office space) which yield lower interest rates.  This trend is expected to continue into 2019.

Performance & Future Outlook

Some experts believe that trade tensions, the increase in oil price and the declining value of the Chinese Yuan will put pressure on Global growth.  However, most consulting firms are optimistic for 2019 when it comes to the Hotel Industry.

Europe has experienced an exceptional year in 2017, and 2018 looks favorable as well. An increase in travel volume from European countries, the US and China, in combination with increased ADRs, are creating the growth.

London, Amsterdam and Prague have the highest occupancy levels, whereas the highest ADRs are still found in Geneva, Zurich, London and Paris, this resulting in the best performing cities in terms of REVPAR being: Paris, Geneva, Zurich, London and Amsterdam coming in 5th place.

Ranking from above is expected to stay the same. Even though Berlin, Lisbon and Prague show above average occupancies, the ADRs remain slightly lower when compared to the top 5 performers.

GDPs in China and South-East Asia top the list with a respective 6.3% and 7.6% growth forecast for 2019. US, Europe and South America are looking at around a 2% growth.

A growth in hotel supply will be present, but not at the pace previously seen.  Due to a slight slow-down in supply and an increase in travel volume, the increased supply will be absorbed leaving enough room to increase ADR and create an overall better performance. Asia and Africa remain on top of this list, with India being the most promising.

Challenges facing the Industry

As much as the industry outlook seems favorable in many aspects, such as for example in revenue growth, investment transactions and travel volumes, it still faces some significant challenges.

Sharing Economy

In the past years we’ve heard many experts noting the dangers of our industry’s Sharing Economy, negatively affecting  the mid and lower range of our spectrum in particular. On  the other side of the spectrum, there is, however, also evidence showing little or no impact on hotels.  JLL claims the sharing economy has “induced” travel; making it possible for travelers to go to places they were never able to go to before.  It is estimated that the sharing portion of hotel nights will count for roughly 5% of our total business by 2025.

Hotel chains venturing into this business and vice versa may pose a very interesting situation in the near future. This, however, leads to the second big challenge for our industry.


Some relatively “small” cities such as Amsterdam, Barcelona and Venice are facing growing resistance among residents to an increase in tourism, in turn leading to stringent supply regulations and firm limitations on Airbnb activity.


A lot has been said and written on the OTAs’ impact on our industry. Fact of the matter is that growing popularity of customer friendly sites such as leads to significant cost increases for hotels. Revenue growth is often eroded due to the increased cost of acquisition. The hotel industry needs to find its way in this new playing field. Where some hotels decide to take on the fight, others decide to accept the changed dynamics in distribution and thus reduce their sales force to save costs. Others, such as Accor, have decided to invest into this business themselves, therefore also becoming part of it (Accor invested in the Chinese based online booking platform Ctrip).

According to Marriott’s CEO Arne Sorenson it is not the other hotel chains or Airbnb posing the biggest threat, but really the tech giants such as Amazon, Facebook and Google.


This week published the results of their global research based on 163 million reviews as well as 21,500 international travelers. The results give us some insight into the needs, wants and trends for 2019.

The research results indicate that adding more purpose to a trip is especially significant for Generation Z. 56% of travelers is looking to learn something new, and 68% of global travelers would consider participating in a cultural activity such as learning new skills or volunteering. This trend already existed and is expected to increase even more. It is to no surprise that technology is at the top of the list; however, a strong focus on “user friendliness” is becoming increasingly important.

As much as we have become self-reliant when arranging and booking our travels, an increasing percentage of travelers is looking for some form of assistance; especially when it comes to receiving recommendations that tailor to individual needs.

Travelers are becoming more and more conscious of global social issues and will make their decisions accordingly.  Millenials and GenZ are critical and “picky” when it comes to a company’s level of sustainability, this being reflected in the choices they make. We can expect to see an increasing in the number of sustainable start-ups to address this need.

Our industry is facing exciting times. The tourism business is good and is likely to continue to grow in light of the upcoming global markets. These markets, and their new generations, require different products, creating great opportunities for larger hotel chains, but most certainly also for smaller start-ups, who fill the niches and are more agile in addressing trends.

Would you like to find out more about current trends in our business? Would you like to pose questions and/or discuss relevant topics with a CEO of a hotel chain? On the 29thof November we look forward to once again welcoming 5 CEOs and 15 International Hotel Schools to participate in the Genio Worldwide Innovation Summit hosted by Hotelschool the Hague, in Amsterdam. By means of a forum discussion, we will be given the opportunity to learn about their strategies as well as gain insight into their views on our wonderful business.

About the author

Paul Griep

Paul is not only an Hotelschool The Hague Alumnus (1994), but is an industry veteran as well. Paul has more than 15 years of experience, working for various hotel chains such as Marriott, IHG, Hilton and Rezidor. Paul held a variety of positions, ranging from Sales and Marketing to Operations Management. After having spent a few years as an entrepreneur in the US, Paul returned to The Netherlands and started working for Hotelschool The Hague. Besides being a Lecturer in Revenue Management and Sales, Paul had been the General Manager of Campus Amsterdam for a few years. As of April 2018 he has been named as the Director of Industry and Alumni Relations.

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