Learn about the opportunities and risks for the hospitality industry doing business in emerging destinations and with mega events.
Emerging destinations and emerging travelers
The changing dynamics of international travel trends, driven by the increased investment in BRIC countries and the rapid expansion in travel from emerging economies, will create new opportunities for investors and operators around the globe.
According to Airports Council International, the five countries with the largest growth in airlift in 2011 were India, Brazil, Turkey, the Philippines and Malaysia, while airports in emerging destinations, such as Istanbul, Shanghai, Buenos Aires, Lima and Moscow, are driving global growth in tourism with double-digit increases in airlift in 20116 .
Despite these positive indicators for growth, industry analysts cite continuing impediments to increased tourism in emerging economies. These range from power outages and unavailability of water in India to uncertainty regarding Government regulation and property rights in China7 .
Mega event opportunities
As this decade once again will bring a number of mega events (e.g., the World Cup and Olympic Games) to both established (e.g., London) and emerging (e.g., Brazil and Russia) tourist destinations, investors need to consider the complexities involved with investments related to mega events.
For the lodging industry, creating an “oversupply” of lodging space is an ever-present risk when preparing for mega events — especially in emerging destinations. Assessing supply and demand dynamics related to the particular event, in addition to other regional and macro lodging indicators, is especially critical.
Outside of the supply-side risks, investors and hotel companies need to consider the intricacies of the local market when evaluating potential investment. Two of the most pertinent risks are regulation and transparency, always most prevalent in emerging markets.
Investors evaluating opportunities in host cities should be cognizant of each city’s post-event plans as the bridge to a sustainable mega-event legacy.
6 Quarterly Traffic Bulletin Q1 2011, Airports Council International, April 2011.
7 "Land Seizures and Farmers’ Rights in China,” factsanddetails.com, October 2011.
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