Behind the Scenes of the Hospitality Boom
Throughout our lives we use services that are provided by the hospitality industry.
Whether we are eating out, staying at a hotel overseas, or pumping iron at the gym, in some form or way the hospitality industry is involved. When we talk about the numbers, the travel and tourism take up around 10% of the global GDP and people say that around 72 million jobs will be added to the industry allowing it to grow by more than 10%.
The industry is important to us because it is ever changing and is one of the few industries that affect us directly. Here are some of the changes that have been going on.
1. The Rise of Digitalization
This may be a pretty obvious one but many people are relying on the internet to find where to stay, what to do or how to get there. With many people online, we see OTA’s or Online Travel Agents such as Booking.com and Expedia providing hospitality. They definitely took some value away from the hotels, but at the same time strengthened their brand name. Many people nowadays see “Expedia” before the actual hotel name thus replacing the brand. We have also been seeing the boost in CRM activities which helps build a solid relationship. Aside from OTAs, people also tend to look everything up before trying. Social networks such as Tripadvisor and Yelp helped bring in more transparency into the industry which encouraged hospitality companies to step up their quality to earn the stars and good reviews that they deserved.
2. New Generations
The way these new generation think and the way they accomplish things are starting to change... and very quickly. This is most likely because of the recent growth in the sharing economy. Older generations may rely on hotels and car rentals but younger generations will tend to check out AirBnb or Uber first. As you probably know companies such as AirBnb is truly disrupting the hotel industry because they can provide services to a wider range from low budget to high class. The high class hotels run on the asset-heavy business model meaning that they cannot cover all the classes.
In Japan, AirBnb is still fairly new since home sharing was only legalized a few years ago. This means that most visitors are still heavily reliant on hotels at the moment rather than taking part in the sharing economy. Uber shares a similar story with the ongoing struggle against the Japanese government. They have yet to disrupt Japan’s enormous taxi industry.
With the recent boom in inbound tourism and the Tokyo Olympics coming around the corner, we have been seeing a significant number of international tourists. This is allowing many hotel chains opening new properties not just in around Tokyo but in other attractive areas as well. US giant Hyatt Hotels is said to open 10 new properties by 2020. Another such as IHG started to take reservations for their new location in Hakone, which is a major tourist location. Cities such as Osaka and Kyoto are popular as always, but we see others such as Beppu in Oita Prefecture gaining some attention. Before, there were not many luxury brands in the area allowing some companies to step in. Also with some of the Rugby World Cup matches playing in the area, we will mostly likely see more rooms being created.
But even still many feared that there will not be enough for 2020, until non-hospitality business started to join the boom. By the Olympics and Paralympics start, there will be a 30% increase in rooms for the major cities in Japan. One of the companies that are helping with this increase in rooms Is Ryohin keikaku which is famous for the Muji Store. Although the Muji Hotel only has close to 80 rooms, it is located in the center of Ginza and very close to the major shopping areas. Although it has a minimalistic look, it keeps the unique Muji style and is attracting many tourists.
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With the drastic increase of rooms and the home sharing economy starting to gain popularity, some fear the oversupply of accommodations which then could lead to a price war. On top of this, we can expect to see many jobs open up in this industry not just in hotels but other areas as well. If you are a hospitality professional or are interested in the hospitality industry, please feel free to reach out to us at any time.