Hotel Groups Seek Fast Check-in to Emerging Markets

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. October 14, 2008

OCTOBEWR 30, 2006. With domestic markets becoming more competitive and with slower growth at home, hotel groups are looking to conquer emerging markets in order to gain competitive advantage.

According to the latest Hospitality Directions Europe from PricewaterhouseCoopers LLP, doing business or even just thinking about doing business in the emerging markets has become an integral part of many hotel companies' strategies.

Robert Milburn, UK hospitality and leisure leader at PricewaterhouseCoopers LLP, said, 'Traditionally, emerging markets have been seen as a competitive source of labour, services and natural resources but increasingly they represent new and important markets in their own right, especially for the travel and hotel industries. Emerging markets now account for over half the world's population and have achieved an average economic growth rate of 7 percent in recent years.'

Many developed countries' economies are slowing, global competition is intense and growing pressures on operating margins have forced organisations to look to new markets for new customers and profitable growth. This is reflected in the fact that 78 percent of CEOs in developed economies say their companies are going global to find new customers.

Robert Milburn of PricewaterhouseCoopers LLP added,'India, for example, has an estimated demand for up to 125,000 hotel rooms over the next five years which more than doubles the existing capacity. It will be those companies that plan successfully now and get in early that will reap the rewards. But there are many risks to consider. Out of every ten retailers entering Asia each year, seven are leaving so the hotel industry needs to heed this warning.'

It is widely recognised that the emerging markets are difficult to do business in and the World Bank ranks China 91st and Brazil 119th on its 'Ease of Doing Business' table. But that shouldn't mean that with appropriate planning companies cannot be successful in emerging markets.

Robert Milburn UK hospitality and leisure leader at PricewaterhouseCoopers LLP commented, 'A systematic approach to key risks can allow companies to focus effectively on opportunities to drive growth and profitability. 'Companies need to assess carefully each country's strategic and market potential, its investment structure, management capability and infrastructure. Work put in upfront will help ensure companies don't find themselves checking-out early.' While the risks of developing a business in emerging markets are high, the rewards will be even higher for those hotel companies that get it right.

Note: Emerging markets refers to the fastest growing countries of Brazil, Russia, India and China as well as other countries like Turkey, South Africa and the other Asian, South American and Central Eastern European countries that are showing growth.