Financial crisis is unfolding, people travel less, airbnb is the first one to go!

Week 13 - With finacial crisis, certain political topics become hot potatoes. Airbnb causing housing prices to go up cannot longer be ignored.

TLDR: Too Long Didn’t Read

Economy is impacting our sector in most curios ways. Mostly having to consider the bigger picture before investing. China and US are not friends anymore and it will impact how the world economy with reshuffle it self. Airbnb is having a tough time in US, both in revenue and politically. Employee satisfaction will generate more cash, who knew.

1. Main Hospitality News

Core news related to the industry

If one is in the hospitality business, "RevPar" is a metric that is thrown around daily and indicates how much revenue a hotel makes per available room. Why is it so common? It's simple and considers a hotel's ADR and its occupancy - not just one of the two. But hospitality is a real estate business, in which "revenue per square meter" is the key metric; that is the real estate language. This Skift article motivates the industry to consider "revenue per available square meter" as the main metric. It accounts for the building as a whole, including event space, wellness facilities, co-working areas, and restaurants.

During the pandemic, hotels were delayed in construction due to supply shortages. In addition, few deals were made in the past year, and people have been traveling frequently after Covid. As a result, Hotel Investors predict a Long-Term Gap Between Supply and Shifting Demand. Millennials and Gen Z want something different, a memorable experience, so investors focus on distinct concepts instead of standard hotel room concepts. But due to the slowdown in deals and construction, and increased demand, returns look promising for innovative concepts.

Green, green, green, and ESG - everyone is talking about it and figuring out how to implement it in this traditional industry. Hotels can save money and the planet by not changing the linens daily, but what else is out there? The Global Hotel Alliance has launched the "Green Collection" based on research from the WTTC. According to the WTTC, 69% of all travelers actively look to reduce their carbon footprint when traveling. The "Green Collection" is a collection of 200 hotels that hold ESG certifications. Is there a possibility that in the near future, travelers will be able to filter on OTA for hotels with ESG certificates? We will see.

Airbnb in US is seeing a drop in reservations across the board as well as the long awaited government limitations that are forcing the closure of thousands of airbnbs across several states. Trying to protect living space availability as well as prices from being raveged by airbnb. A move, european cities have long implemented. Why now? With financial crising unfolding as we speak, affordable homes and their general availability has become a political issue, forcing the government to finally react. Question is does airbnb actually impact home prices? (more on that in academia)

2. Externalities

Econimics, finance, geopolitics. All have impact on the hospitality sector. This part summarizes those.

China is undergoing a major shift in policy for the past few weeks. If you remember from our last week’s post, the chinese prime minister has visited Putin and they made friends again! A wonderful occurance for some, not so much for others. But why? Any future dealings with Russia, will force western world to cut even more ties with the Chinese. This week, China has announced to strike a deal with Brazil on ditching the US Dollar as their reserve currency. Why does that matter? (check out this video for a 10 minute explanation). In short, it seems like China is planning to cut ties with the west entirely. Having reached a certain internal market maturity and now becoming almost the sole partner for Russia to trade with it has effectively gained independence from economic servitude to US and can use Russia as its infinite source of resources (that it so needs to be able to grow). Whether this is going to work out or not is as always a question of time!

US is however not trying to maintain the China & US relationship either. Sanctions on several Chinese firms that have been occused in Intellectual property thieft have been banned from purchasing things like semi conductors. US is planning to ramp up the sanctions against chinese economy and China will likely retaliate.

A very intersting article published by the economist this week illustrates the issue with “middle income countries” never reaching maturity and actually become a part of the rich countries club. In short, for a country it is fairly easy to reach the middle income group where GDP per capita goes from stone age to something like Russia. Not too rich, not too poor. But the economist have effectively observed is graduating from that group is virtually impossible. Meaning if you are living in that group of countries your best bet is to move first world, since it does not look good for growth in your region. Why is an infinitly complex question in this case, nonetheless a book called “How Asia Works” tries to answer it for the core group of countries like Korea, China & Indonesia. (here is the blinkist summary for those who only have 10 minutes to look at it)

In other part of the world old enemies are becoming friends again. Saudi Arabi has invited Syria to the Arab leaders summit. A move that might seem trivial to us, this however is just one step of many that several arabic countries have been making in trying to talk to each other. More conversations means more trade, more trade means more prosperity and more prosperity of course means more tourists (or less for us Europeans, since competition will be rising). No matter what, Middle east seems to head towards a more peacefull coexistence, that will likely benefit all.

3. Academia

Scientific papers are being published everyday. Including the hosptility sector.

Is limiting Airbnb in your city the right thing to do? Shouldn’t we just let the free market do what it wants? That is for the political gurus amongst us to decide, what we can however tell is that Airbnb presence in cities has shown direct correlation to real estate prices rising. Hence, airbnb is big enoug to impact macro economic factors, which some of us surely did not believe just a few years ago.

Does employee satisfaction matter? In the spirit of hospitality constantly scoring low in eNPS we thought to give you academic insight into whether a happy employee means higher profitability for the company. In short yes. Not enough? Here is a meta analysis of 7900 business that also conclused yes. Next time somebody tells you that people do not matter, tell them that 7900 businesses do not agree.

4. Readables

Books, podcasts & the big stuff.

Book tip: Atomic Habits - watch a 10 min animated summary of the Book here. In hospitality one combines intelligence and people skills. Its a fast and confusing environment at work, so building good habits is the base line for work life balance and fun at work.

5. Tips & Tricks Tools & SaaS

Any new software you can use? Industry tricks you missed? All of that summarized below once a week.

Skift this week had a forum on the future of hospitality industry. Several industry leaders were interviewed and those interviews were posted on skift’s youtube channel. Looking to hear what the thought leaders amongst us have to say? Check out skift’s youtube channel. Need some hightlights? Well we recommend watching the booking.com CEO’s take on how ChatGPT will influence the industry.

How to infleunce gen Z? Well apparently not through loyalty points. For a generation that has an average attention span of 10 seconds, loyalty points collection is just too much of a task to pay attention to. Consequence? Instant rewards and goodies personalized for your site’s visitors is the way to go. More on that in the article.