Backed by the current growth momentum, Travel, Hospitality, & Leisure (THL) companies are heading strong into 2015. Amid pent-up demand, it’s important that companies leverage technology to effectively respond to newer forms of competition and a globe-trotting wired customer. Guy Langford, Vice Chairman and U.S. Travel, Hospitality and Leisure leader, Deloitte LLP, shares his thoughts on the opportunities and challenges for the industry in 2015, as well as some steps companies can take to grow.
Where do you see the opportunities for growth in your sector?
US THL companies performed very well in 2014 and they are expecting continued robust growth in 2015. US visitor exports—the measure of money spent by international tourists—are expected to increase four percent to $200 billion in 2015, thanks to improvement in the global economic environment and increasing income levels in emerging markets.¹
A part of what Millennials want is a customized experience. The hotels that are best able to provide a customized, differentiated experience to customers will be winners in 2015 and beyond. Hotels have to find the right combination of personalization, design, ambience and technology to build lasting loyalty with the Millennial customer. Where Millennials are concerned, consumer engagement is not something that begins at the hotel’s front door; it begins with online search and must be ongoing and evolving.
Millennials also want transparency and the sense that they are receiving “value for money”. Generally speaking, fast casual restaurants get this and offer what most effectively cater to younger diners—fresh and locally sourced fare and tech-friendly, communal settings with the meal prepared in a way that the customer can literally see. This is what Millennials seek and they are willing to pay more for a meal at a fast causal restaurant precisely because they sense that they are receiving incremental value.
Millennials also have a robust appetite for innovative technology. For them, free Wi-Fi in a hotel or restaurant is ”table-stakes” and no longer a novelty. They are always testing the technology readiness of THL players and seeking out new digital payment platforms. Additionally, Millennials have used technology to shape a “shared” economy, an emerging trend that will continue to loom large within the THL space in the years ahead. This trend is finding expression in such platforms as AirBnB and Uber. AirBnB, for example, is more than a cost-saving social media rental site–it has become a gateway to thousands of personalized, one-of-a-kind lodging experiences in destinations around the world.
Emerging platforms such as AirBnB and Uber are gradually becoming mainstream and challenging established players. In the race of traditional vs. alternative, the winners will be those who can create value for customers that they can experience and measure. Time will tell how this battle unfolds. In response to AirBnB, for example, we may see the emergence of a residential boutique segment that truly reflects the trappings of home (beyond a kitchen), as well as new sub-brands that emphasize a more personalized stay experience with greater proprietor and concierge involvement that appeal to Millennials especially.
These disruptive and new technologies in THL present a key question for existing and long-standing market participants – compete, lobby to regulate/shut down or collaborate? How these challenges and new entrants are handled will ultimately shape who will be the key “next generation’ market leaders.
With the confluence of global expansion, emerging and disruptive technologies, and a rapidly expanding Millennial population, it is clear that the next five years will be very different from the past five years and new “winners” and market leaders will emerge.
What should businesses be mindful of as they plan for growth?
As important as growth is across the THL spectrum, it should not be pursued blindly. Yes, everyone must get the table stake attributes right—comfort, price, food taste, loyalty programs, among many other things. Yet, players across the THL spectrum must grow smartly, and not try to be all things to all people. In this regard, two key questions come to the forefront: What kind of brand engagement are they seeking—and with whom are they seeking it? Each consumer cohort is characterized by a unique set of preferences, even if they all want the basics.
But smart growth also means the highest standards of data privacy. Customers have different appetites in sharing personal information with companies; however, each customer wants to ensure that personal data find safe custody. The risk of cybersecurity breaches looms increasingly large, especially in consumer sensitive sectors. Whether THL companies’ legacy systems are good enough to catch up with innovative breaches is a question that needs deliberation.
Smart growth also demands a thorough and current understanding of the regulatory framework of each domestic and foreign market that a company serves. In the US alone, THL players must navigate an ever-changing labyrinth of federal and state regulations covering everything from food safety to pollution controls. As THL players expand globally and fall under the jurisdictions of foreign markets, that burden multiplies many fold. Global expansion also implicates additional US federal laws such as the Foreign Corrupt Practices Act, which governs relations between US companies and local government officials in foreign markets.
For its part, the gaming industry often experiences headwinds with the introduction of new regulations or changes to existing ones related to market entry. Macau, for instance, hosts the world’s largest gaming market with a notable presence of US gaming players. However, recent changes to Macau’s transit visa rules–accompanied by more stringent enforcements—are restricting visitors’ ability to visit as often and for as long as they like. Perhaps unsurprisingly, Macau’s gaming revenue was down 23 percent year-over-year in October, which is the fifth consecutive monthly decline.²
Finally, smart growth means situational awareness. Today’s geopolitical situation appears more fragile than ever before. From the civil unrest in Thailand and Hong Kong to the political disturbances in Ukraine and Egypt to the economic sanctions in Russia, geopolitical factors are likely to impact growth of THL companies in 2015. While looking for international growth avenues, especially in politically sensitive regions, THL players need to make sure that their risk management strategies are appropriate.
What’s the next big thing? What markets do you see emerging in the sector?
Any discussion of the next big thing must start with the generational shift that will drive all other emerging trends in the THL space. Millennials—those between 21 and 35—are now beginning to enter their prime earning years. The Millennial cohort will represent up to three quarters of the global workforce within ten years.³ To “win the Millennial”, any consumer-facing business must understand the needs and desires of this critical consumer demographic. The good news for THL industry participants is that Millennials love to travel, even more so than previous generations.
A part of what Millennials want is a customized experience. The hotels that are best able to provide a customized, differentiated experience to customers will be winners in 2015 and beyond. Hotels have to find the right combination of personalization, design, ambience and technology to build lasting loyalty with the Millennial customer. Where Millennials are concerned, consumer engagement is not something that begins at the hotel’s front door; it begins with online search and must be ongoing and evolving.Millennials also want transparency and the sense that they are receiving “value for money”. Generally speaking, fast casual restaurants get this and offer what most effectively cater to younger diners—fresh and locally sourced fare and tech-friendly, communal settings with the meal prepared in a way that the customer can literally see. This is what Millennials seek and they are willing to pay more for a meal at a fast causal restaurant precisely because they sense that they are receiving incremental value.Millennials also have a robust appetite for innovative technology. For them, free Wi-Fi in a hotel or restaurant is ”table-stakes” and no longer a novelty. They are always testing the technology readiness of THL players and seeking out new digital payment platforms. Additionally, Millennials have used technology to shape a “shared” economy, an emerging trend that will continue to loom large within the THL space in the years ahead. This trend is finding expression in such platforms as AirBnB and Uber. AirBnB, for example, is more than a cost-saving social media rental site–it has become a gateway to thousands of personalized, one-of-a-kind lodging experiences in destinations around the world. Emerging platforms such as AirBnB and Uber are gradually becoming mainstream and challenging established players. In the race of traditional vs. alternative, the winners will be those who can create value for customers that they can experience and measure. Time will tell how this battle unfolds. In response to AirBnB, for example, we may see the emergence of a residential boutique segment that truly reflects the trappings of home (beyond a kitchen), as well as new sub-brands that emphasize a more personalized stay experience with greater proprietor and concierge involvement that appeal to Millennials especially.These disruptive and new technologies in THL present a key question for existing and long-standing market participants – compete, lobby to regulate/shut down or collaborate? How these challenges and new entrants are handled will ultimately shape who will be the key “next generation’ market leaders.
With the confluence of global expansion, emerging and disruptive technologies, and a rapidly expanding Millennial population, it is clear that the next five years will be very different from the past five years and new “winners” and market leaders will emerge.
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1 Travel & Tourism Economic Impact 2014, United States, World Travel & Tourism Council, accessed November 11, 2014.
2 Monthly Gross Revenue from Games of Fortune, Macau Gaming Inspection and Co-ordination Bureau, accessed November 11, 2014.
3 Big demands and high expectations: The Deloitte Millennial Survey Executive Summary, Deloitte accessed December 14, 2014.