Since the US market is somewhat saturated, hoteliers are exploring growth opportunities abroad. International markets offer greater potential based on the higher pace of economic growth that they currently enjoy.
The US-based companies are targeting fast-growing emerging economies. Given the lackluster US economic growth prospects, industry stalwarts such as Starwood Hotels and Resorts Worldwide Inc. and Marriott International Inc. are eyeing the Asia-Pacific and Latin American regions as they promise solid growth going forward.
The stellar performance from the Asia-Pacific region is expected to continue in the near future. Major growth markets within Asia-Pacific, China and India, remain more or less unaffected by the global economic turmoil and are enjoying rising economic growth rates. The availability of local capital is another positive factor.
China is set to bring about a recovery in global tourism, and by 2020 is expected to be the world’s largest travel destination. Both Starwood and Marriott derive their second-largest revenue chunks from that country.
In the past, hotels in China were mainly occupied by western travelers, but today more than 50% of the guests are Chinese. This is indicative of China’s fast-growing domestic travel market. Moreover, according to an analysis on the enrollment and travel trends of Starwood Preferred Guest members, around 100 million outbound travelers are expected to visit China by 2015, but the country has only a fraction of high-end hotels ready to serve them.
Apart from China, India is another hot spot for the western hoteliers. India has a compelling investment proposition with its rising importance as a global business hub, where the demand for moderate-tier, as well as upscale branded hotels will considerably outpace the supply for the next three to four years.
Moreover, western hoteliers also find the built-cost to operating returns favorable. All these factors testify to the longest development pipeline that the hotel companies have in India. Marriott and Starwood should benefit from their global pipeline.