CPN’s Hotel Leaders Roundtable: Potential in Foreign Travelers–but Improvements Still Needed

The rate of U.S. travel by foreign consumers has increased steadily during the past six years but remains below pre-Sept. 11, 2001, levels, noted Bjorn Hanson (pictured), partner in the hospitality and leisure practice at PricewaterhouseCoopers L.L.P., during CPN’s sixth annual Hotel Leaders Roundtable. The conversation among eight leading hotel sector executives, which took place this morning while executives were in New York City for New York University’s International Hospitality Industry Investment Conference, focused on challenges and opportunities in the current economy but spanned an array of areas of the business. While inbound overseas travelers provided 12.8 percent of revenues in 2000, they made up just slightly over 8 percent last year, he cautioned. And their travel has tended to influence the gateway cities, added HEI Hotels & Resorts senior vice president Russell Urban, with little impact on secondary and tertiary cities. Long term, their potential contribution is “extraordinary,” Hanson said. But roundtable participants warned that the United States and its hotel companies will need to become more accommodating. U.S. Customs and Border Protection requirements and airport navigation are already more difficult than those of other countries. In addition, the level of service is much greater in overseas hotels, noted Matthew Sparks, senior vice president of global development for the Americas & Asia at Fairmont-Raffles Hotels International. “They can do that because labor costs are a fraction of what they are in North America,” he acknowledged, but hotels in the United States will nonetheless compare unfavorably. U.S. hotel companies, meanwhile, continue to find opportunity overseas—and no wonder. Growth in revenue per available room has been in the double digits this year throughout Asia, Europe and Africa, whereas U.S. RevPar has grown just 2.5 to 3.5 percent, according to Hanson. With developers eager to benefit from such performance as well as to diversify their economic investments, the development pipeline in the Asia-Pacific region totaled 2,200 projects at the end of last year, according to Lodging Econometrics Inc. president Patrick Ford, while the Middle East had 516 projects in its pipeline. The United States figure was 5,500, but it represents a larger and more established market to begin with. Still, emerging economies also sport emerging legal, tax and other systems, warned Hanson, raising the degree of risk required for investment. Other roundtable participants included Rockbridge Capital L.L.C. managing director James Merkel, Carlson Hotels Worldwide executive vice president Steve Mogck, PKF Capital Inc. executive managing director Bob Eaton and Noble Investment Group managing principal Dave Weymer. Look for more excerpts from the discussion in CPN and at www.cpnonline.com.