Week 7 - Solar Eclipse impacts ADR
Thailand to reverse cannabis law (6000 shops due to close), NYC ADR for Hotels increases due to Airbnb regulatory issues, Wyndham loosing money due to potential M&A and more!
TLDR: Too Long Didn’t Read
In this follow-up, Thailand experiences a conservative shift in cannabis laws, potentially impacting its cannabis tourism industry 🇹🇭🌿. Wyndham grapples with distractions from a potential merger 💼💭, while Marriott and Hilton showcase competitive strengths in loyalty programs 🏨🔄. The upcoming solar eclipse in North America promises significant revenue for hoteliers 🌞🌑💰. SMG Holding facilitates Sircle Hospitality Group's IPO 💼📈, while the Gault & Millau brand faces legal disputes in Germany ⚖️🇩🇪. New York City's hospitality sector booms amidst regulatory changes, while airbnbs close 🗽🏨, and China's economy shifts towards value over growth 🇨🇳💼.
Academically, Iranian tourism challenges are explored 📚🇮🇷, and in tips, the private equity deal drought is discussed 💼🏦, along with practical applications of AI in travel 🤖✈️ and insights into hotel franchise fees 💰🏨.
0. News snippets
Not important enough to expand on, but worth hearing about
ITB, a major tourism exhibition is coming up, here is a recommended list of stands you should visit | Bob W gets 40 million funding in their round B | Tripadvisor might be sold soon.
0.5 Follow up
Where we follow up on news from previous weeks
Thailand's Cannabis Conundrum: A Legal U-Turn
Thailand's progressive cannabis legalization faces a conservative backlash, with new government proposals aiming to restrict use to medicinal purposes only. With 6 thousand weed dispensaries, this means a lot of people are going out of business. This shift, motivated by concerns over regulation and youth exposure, could significantly impact the burgeoning weed tourism industry and the country's liberal stance on cannabis (forecasted to be worth 8 billion USD in 2030). The potential reclassification as a controlled substance suggests a cautious future for cannabis in Thailand. A shift that shows that political changes, once again, can impact entire industries in months.
Wyndham distracted from the noise around the merger
Wyndham reports spending $75 million on preventing a hostile merger, affecting its fourth-quarter performance with net income down 18% and net revenue down 6% year-over-year. Executives cite regulatory reviews as a significant distraction, including responding to antitrust queries from the U.S. Federal Trade Commission and requests from four U.S. state attorney generals, impacting franchisee commitments and deal flow. Uncertainty surrounding the potential merger has led to a more challenging sales environment, with slower commitment from potential franchisees and alleged competitive actions from Choice Hotels, resulting in a significant decrease in new contracts awarded. More on Yahoo.
1. Main Hospitality News
Core news related to the industry
Marriott and Hilton: A Competitive Edge in Hospitality
In the fiercely competitive hotel industry, Marriott and Hilton stand out, showcasing robust growth in loyalty program memberships, with Marriott leading at 196 million members and Hilton not far behind with a 19% year-over-year increase to 180 million. Despite Hilton's aggressive expansion, Marriott's loyalty program remains more extensive. This is very likely supported by the fact that Marriot has effectively spent triple what Hilton did for guest rewards. Financially, both giants have seen significant profitability increases over the past six years, with Marriott's adjusted EBITDA margin soaring by approximately 11 percentage points. Hilton's diversity and inclusion efforts are notable, with a workforce composition reflecting global inclusivity standards. However, both chains primarily generate revenue from the U.S., hinting at a less global presence than advertised. Overall a great take by Skift, that compares to hospitality giants!
Solar Eclipse, can it bring more guests than a Taylor Swift concert?
The 2024 Total Solar Eclipse promises a significant boon for hoteliers across North America, expected to surpass the economic impact of 2017's event. Occupancies effectively doubled during the previous eclipse and RevPars almost tripled (244%). With a longer duration and covering more extensive hotel markets, anticipation builds for a substantial increase in demand. The event takes place on April 7-8, and while not too long, missing it could mean thousands of dollars of lost revenue. A great lesson in how Revenue Management planning can expand on things that perhaps can seem unconventional.
SMG Holding Facilitates Sircle Hospitality Group's IPO
SMG Holding, as IPO sponsor and investor, facilitates the IPO of Sircle Hospitality Group, a pan-European lifestyle hotel group, with a planned listing in the second quarter of 2024.
Sircle Hospitality Group boasts a portfolio of 37 hotels in 23 cities, including brands like Sir Hotels and Max Brown, with a total value of hotel real estate surpassing EUR 400 million.
The merger agreement with SMG European Recovery paves the way for Sircle Hospitality Group to emerge as a leading independent lifestyle hospitality group in Europe, aiming to open 100 hotels and elevate culinary offerings under the leadership of renowned chef Eyal Shani. More on Stock-world.
The Gault & Millau License Dispute Escalates
The Gault & Millau brand, known for its prestigious restaurant and wine guides, faces a legal tussle over its German licensing rights. Despite the Düsseldorf Higher Regional Court's dismissal of accusations against the licensee and affirming the contract's validity, Gault & Millau International insists on ceasing unauthorized use of its brand in Germany, signalling a shift of legal battles to Switzerland. If you thought your country is tough with copy rights, Germany is even “greater”, especially given its recent case where Gutenberg project (a website that promotes free ebooks, mostly of authors long outside the modern copyright laws) was sued by a local publisher.
“Optimism” in Hospitality Despite Inflation
A survey reveals 72% of Americans plan to maintain or increase hotel stays in 2024, showcasing resilience in travel desires. While hotels remain a top choice for leisure and business trips, inflation challenges the sector's full potential, affecting decisions around travel and lodging. The survey also provides insights into what accommodation types Americans prefer most and for what purpose (Leisure or Business). But we think, the key here is framing. One can, just the same way write that a whopping 28% of Americans are planning to travel less this year, which can mean a drop in RevPar for all! Perhaps what matters is, if you are an optimist.
Apaleo sets ‘new record’ for tech rollout after moving 7,500 citizenM rooms to new PMS in just 8 weeks
Apaleo successfully migrated all 7,500 rooms across citizenM's US and European operations to its property management platform in under two months, completing the switch at sites located in 18 cities worldwide. The migration was deemed the fastest onboarding for any mid-sized hotel group to date, facilitated by modern, self-service architecture, plug-and-play onboarding, and scalable project management techniques. Apaleo and citizenM collaborated closely, employing state-of-the-art program management techniques to remotely manage installations across various cities, showcasing the potential of API-first platforms to future-proof businesses and enhance guest experiences.
Luxury merch sold in hotels: your way into the “club”
New York Times has written about how fashion designers and hotels are creating “Merch” together that is a way into cool kids’ club. Marisa Coulson's move to Majorca with her cherished collection of branded hotel items unveils a narrative where luxury and identity intertwine. From Sunset Beach Hotel's cozy sweatshirt to Chateau Marmont's vintage sweater, each piece whispers tales of past glories and shared experiences. This trend transcends mere physical belongings, morphing into badges of belonging to an exclusive circle (who knew, you just had to buy a cool bathrobe to get into the club). The allure of hotel merchandise, as Brett David of Spring Street Vintage reveals, lies not just in its aesthetic appeal but in the stories it embodies and the status it confers. As hoteliers and collectors alike attest, these items are more than souvenirs; they are keys to a shared history, tokens of an exquisite lifestyle that stretches beyond the confines of a hotel stay.
A Resurgence in NYC's Hospitality Scene: A Ripple Effect of Regulation?
New York City's hotels are experiencing a significant boom, with December showcasing the highest occupancy rates among the top 25 markets in the U.S. at 86.6%. This surge, coupled with a nearly 11% increase in the average daily rate to $393 and a 15.6% rise in revenue per available room, starkly contrasts the national average. The downturn in short-term rental availability, from 13,500 listings in August to under 3,000 in December due to stringent rental laws, appears to play a crucial role. This, along with heightened holiday demand and a rebound in international tourism, paints a vivid picture of NYC's unique allure and its hospitality sector's vibrant comeback as we usher out 2023. While some lose their business, others benefit. Contrary to what the city promised though, the final ADRs will be covered by city visitors.
2. Externalities
Econimics, finance, geopolitics. All have an impact on the hospitality sector.
China: From Growth Marvel to Value Proposition
China's transition from the world's leading growth narrative to a value-oriented market underscores a seismic shift in economic expectations. With consumer confidence at a low, the Chinese government prioritizing security over sheer growth, and businesses adjusting to a new normal of moderated gains, the landscape for investors and companies globally is changing. Amidst regulatory crackdowns and a real estate sector in distress and a GDP growth ratio that is nearing Western Country levels, it can perhaps mean that China has reached its equilibrium. Hard to say, since the source above as well as others mostly base their forecasting on current data. Except for a Geopolitical expert we sourced previously, who addresses topics like demographics, which can last much longer than anything else.
Bridging the Employment Gap for Black Workers in America
A recent take by the Economist goes into America's labour market and how it has recently become a beacon of hope, significantly narrowing longstanding employment and wage disparities for black Americans. Thanks to a robust economic stretch, the unemployment rate for black Americans has dramatically reduced, reaching a historic low that nearly matches that of white Americans. This shift is attributed to various factors, including increased labour-force participation, better job prospects, and significant gains across both blue-collar and white-collar sectors, showcasing a promising trend towards reducing racial inequalities in employment. The bad news is perhaps that the entire goal of the Fed’s increasing interest rates is to decrease inflation and with it increase the costs of wages for businesses, which in a way can reverse the results above.
3. Academia
Scientific papers related to the topics above. For those who want to know for sure ;)
Problems of Iran tourism, from the eyes of local academics
Academia can often be a source of rather peculiar information. This time around a few fellow tourism industry specialists have published a paper on how Tourism is developing in Iran. Discussing the main problems government strategy had and proposing solutions. A very weird paper indeed, given the political image this country has in the eyes of most Westerners.
4. Readables
Books, podcasts & the big stuff.
Navigating the Deal Drought in Private Equity
The current deal famine in the private equity sector is driving significant evolution, as discussed in a recent podcast by Reuters. This challenging environment is pushing private equity firms to adapt and innovate, seeking new strategies for sourcing deals and generating value in a landscape marked by scarcity and competition. If you have time and are interested in how investing in “whatever” is evolving, look no further.
5. Tips & Tricks Tools & SaaS
Any new software you can use? Industry tricks you missed?
AI in Travel: Beyond the Hype
The travel industry's anticipation for generative AI to revolutionize the sector was met with scepticism in 2023. Some are indeed predicting an initial AI bubble (similar to the initial dotcom bubble), which would then be followed by the long-term growth of AI companies. Despite doubts, industry experts highlight AI's potential to enhance traveller experiences and address operational challenges, stressing the need for practical, data-driven applications. The focus shifts towards identifying valuable use cases for AI in travel, from improving operational efficiency to personalized customer service. So if you are interested and have the knowledge to implement it yourself, check out the source above.
Hotel Franchise Fees: The HVS Guide
The HVS U.S. Franchise Fee Guide, 2023 Edition, offers an in-depth analysis of the hotel franchising industry. It examines fees across 91 hotel brands, aiding investors in making informed decisions about franchise affiliations. Whether you are a property owner yourself or a new start-up that wants to compete in a world of pain that is franchising, this is it. Except, of course, there is a fee.