When financial crisis hits, there are few sectors as vulnerable as tourism. Travel expenses are usually the first to be slashed, by both companies and individuals scrambling to cut costs.
Indeed, the hotels and tourism sector has been among the most hard hit by the most recent crisis, according to data from greenfield investment monitor fDi Markets. After the number of global crossborder investments into the sector peaked in 2008 at 603, a year later they decreased to 416. By 2011 the number of new projects was half that of 2008. Preliminary data for 2014 shows that the year, with fewer than 200 projects announced, might bring the worst result on record.
Starwood's staying power
Yet, even though the sector has been spluttering since 2011, in the three years since then more than 300 companies have launched in excess of 900 tourism-related projects and invested an estimated $10.3bn worldwide. So who is investing despite the downturn in the sector? The most prolific investor in this period has been Starwood Hotels & Resorts, a Connecticut-based hotel group that owns high-profile brands such as Sheraton, W Hotels and Westin.
Starwood has launched 36 projects since 2011, investing particularly heavily in China, which accounts for two-thirds of the company's new ventures. The company has also expanded in India where it launched a regional headquarters and customer contact centre in Gurgaon, a city close to capital New Delhi.
This new centre is, however, only a prelude to Starwood's planned building spree in India. By 2016, the company is planning to open 16 hotels across the country, betting big on the whole Asia-Pacific region. And on top of its Chinese and Indian projects, it also plans to launch another 27 hotels by 2016 in countries such as Indonesia, Malaysia and South Korea.
Starwood’s main competitors, Accor and Marriott International, have also been expanding. Indeed, both companies have launched 27 greenfield crossborder projects since 2011.
Unlike Starwood, Accor – a French hotel group that owns the Ibis, Mercure, Novotel and Sofitel brands – balanced its expansion between developing and developed markets. The number one investment destination for Accor between 2011 and 2014 was the United Arab Emirates, where the company launched six projects across Dubai, Abu Dhabi and Fujairah. Accor’s second most popular destination in this time was the UK, where the company announced plans to build four hotels, as well as a training and career development centre. While in the UAE Accor expanded Novotel and Sofitel, its midscale and luxury brands, the focus of the UK expansion was on Ibis, a budget brand within Accor’s portfolio.
Marriott has almost exclusively focused on expanding in emerging markets, with India, Qatar and China its top investment destinations between 2011 and 2014. In India, the company opened sales offices in Chennai, Hyderabad and Pune, and built Ritz-Carlton and Marriott hotels in Jaipur, New Delhi and Manesar. In 2011, the company also formed a joint venture with local hotelier Samhi Hotels to expand Fairfield Inn, Marriott's midscale brand, across the country.
In Qatar, Marriott set its eyes on Doha, the country’s capital. The company launched three projects there – the Hotel Renaissance, the Courtyard and the Marriott Executive Apartments – which became focal points of Doha's rapidly changing city centre as it aspires to become a similar tourist and business magnet as Dubai. In China, the company expanded its Ritz-Carlton brand to Chengdu and Nanjing, and invested in a global reservation sales and customer care centre in Guangzhou.
Beyond the big three
While French and American hotel chains have traditionally led the global expansion game, companies hailing from emerging markets have come to the fore, according to data from fDi Markets. The fourth most prolific global investor in the sector between 2011 and 2014 was Rotana Hotel Management Corporation, an Abu Dhabi-headquartered company, while the fifth largest was Banyan Tree Holdings, a Singaporean firm.
Founded in 1992, Rotana currently has more than 80 properties across 26 countries and is well on the way to accomplish its aggressive expansion plan aimed at operating 100 hotels by 2020. Since 2011, the company has launched 21 crossborder projects, predominantly in the Middle East. Saudi Arabia was Rotana’s number one investment destination between 2011 and 2014, followed by Qatar and Bahrain. In Saudi Arabia, the company expanded in Riyadh, the country's capital, as well as Dammam, Jeddah and Al Khobar.
In Qatar, Rotana announced three new projects located in Doha. In Bahrain, Rotana also plans to launch three projects. Apart from Manama, the country’s capital, which will be home to two projects, the company also announced in November 2014 that it will build a hotel in Amwaj Islands, a group of man-made islands located 20 kilometres north-east of Manama.
As with Rotana, Singapore-based Banyan Tree Holdings restricted its expansion almost exclusively to its own region. The company, which was established in 1994 and runs 170 operations in 26 countries, invested predominantly in mainland China where it launched 10 projects between 2011 and 2014. It has also launched hotels in Macau and Malaysia. In the three years to 2014, Banyan ventured outside of Asia only twice, launching projects in Portugal and Morocco.
Ho Kwon Ping, the company’s founder and chief executive, says the company's near-term expansion plans will still revolve around Asia, albeit the focus will be moving from upscale operations to facilities that can cater to middle-class tourists with its newly launched brand Cassia.
“[In] my children's generation, people travel all the time... you have got a whole differentiated market now. You can go first class or you can go on [budget carrier] AirAsia. You have got the whole democratisation of travel,” Mr Ho told South China Morning Post in August.
With hotel groups from UAE and Singapore expanding aggressively in recent years, particularly when compared to their bigger and more well-established rivals such as InterContinental, Hilton or Carlson Rezidor, it seems the tourism industry is widening its spectrum too.