Hotels seek emerging market check-in

PricewaterhouseCoopers’s latest European hospitality research suggests the strategies of many UK hotel companies are increasingly focused on emerging markets, with domestic markets competitive and growth slowing at home.

Those able to conquer emerging economies — Russia, India, China and Brazil, as well as South American and Central Eastern European countries — should gain significant competitive advantages.

PwC’s Robert Milburn says that ‘traditionally, emerging markets have been seen as a competitive source of labour, services and natural resources but increasingly they represent new markets in their own right, especially for the travel and hotel industries.’
Pressure on margins has prompted hoteliers to look to new markets for profitable growth and, tellingly, 78 per cent of chief executives in developed economies say that their companies are going global in an effort to find new customers.

On a cautionary note, PwC revealed that of every ten retailers entering Asia each year, seven are leaving, which indicates that the hotel industry needs to proceed with care. Emerging markets are notoriously tricky to do business in, with the World Bank ranking China 91st and Brazil 119th on its ‘Ease of Doing Business’ table.

‘Companies need to assess carefully each country’s strategic and market potential, its investment structure, management capability and infrastructure,’ advises Milburn, ‘and work put in upfront will help ensure that they don’t find themselves checking-out early.’ Although risks are high, rewards for those hotel companies that get it right in emerging markets could be higher.