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Analysis

#GLF19 | "What is the future of the hospitality trade? Or: Who will operate the assets?"

What are the major trends in the sector? What is the outlook? MKG Consulting Insight by Vanguélis Panayotis, CEO.

Air traffic

Asia's share of global traffic is growing. In a global rebalancing the major American hubs have been caught up with and are no longer leagues ahead in the game. European hubs are above all regional. Depending on their location, they can be a source of value creation for the hotel industry. One element must be taken into account when looking at the statistics. In Europe there are many countries, which multiplies the number of international tourists, it is not a New Yorker travelling to Las Vegas or San Francisco, but a German going to France or Italy.  Asia has also caught up with Europe in terms of the number of rooms.

OYO

Looking at the ranking there have not been many changes. Marriott is experiencing strong organic growth, Jin Jiang is growing; an interesting fact: the Chinese are less Asset Light than western groups. For Jin Jiang: acquisitions, including Radisson Hotel Group, have sent Jin Jiang into second place in the ranking. Big surprise: OYO, with its phenomenal growth, upset all forecasts.

We thought it would take time, massive investments; we were already impressed by the Chinese, then Indian groups entered the scene. The founder of OYO is 25 years old, he started at 22. They have a crazy vision, they began with 10 rooms in 2013, and today they have half a million rooms, both franchised and leased, and they have an ambition to be leaders. Like Jin Jiang and Marriott. The market is thus challenged. OYO means 4% of CAPEX and between 5 and 14 days to rebrand the hotel. An operator that is not originally Chinese but opening 250,000 rooms in China is very rare. OYO is one of the rare players to succeed.

OYO operates 50 hotels in England, and is coming to Germany and France. SoftBank invested 500,000 million euros. Airbnb invested 200 million dollars in April, and OYO will be distributed via Airbnb. Today, the subject is commercial accommodations and not just hospitality. There is a blend of apartments, hotels, rooms.

Another new concept: NIIDO. Here again Airbnb is a partner, and the question arises: what is an operator? We know what an owner is, what an asset operator is, but an operator? Today there are technological tools to calculate how to best exploit the platform and rooms.

Mixed-use

Being disruptive when offering just a bed and a desk is complicated. Service is what needs to be improved. Think Mixed Use, take Villa M: a hotel, but also coworking, student accommodations a health care center, a restaurant and a bar that open onto the street. We increasingly see highly hybridized products with a lot of meaning and differentiation. These places become real destinations in and of themselves including the airport in Singapore, and represent 2 billion in investments. An airport that is more like an amusement park, with gardens, attractions, and bears less resemblance to an airport. Service is what changes real estate.

This needs to be tied to the super cycles of real estate. Construction is increasing the density of cities. The industry spreads. Today, real estate development is returning to city centers. It is important to stop focusing on the hotel aspect and also look at the square meters.

Who will operate these assets? The actors own less and less and manage more and more. Marriott remains a leader while Airbnb is coming into third place. Airbnb for furnished apartments, then Niido for co-living, OYO for accommodations, and GAEST for cooking. There is thus a diversification of sources of revenues and margins. And, of course, the Wellness sector is developing. In Europe, Covivio has decided to be increasingly involved in the operations of its projects and not just owner.

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