Pi por Radio_004: Expansion of a hotel business

Pi por Radio_004: Expansion of a hotel business

Pi por Radio_004: Expansion of a hotel business 1600 899 The Innova Room

We share the video of the program n.004 of “Pi by Radio”, broadcast on 03/31/2016. From minute 16 our co-founder Francisco Gutiérrez intervenes with his opinion forum today: “The forces that intervene in the expansion of a hotel business”.

Hotel expansion: strategy or opportunity?

One must make hotels where people come through the door.

The closer we are to what is happening around us, the better business we can opportunistically generate. On the contrary, to generate business strategically, the first step is to listen internally to the business and learn about its own reality, positioning and its reality, and from there build expansion objectives.

From the tension between the client’s willingness to pay as little as possible, and the investor’s to obtain the highest return, the hotel business arises. The next point that must be analyzed is the suitability of the location, and then evaluate the suitability of the spaces for the business. If you had to choose, it is preferable to adjust a hotel that was too small through the rate, than to adjust a hotel that was oversized by occupancy (and it will never be profitable).

Some hotel investment data to assess the size of the sector internationally, from Top Hotel Projects:

  • As of today, there are 6,727 hotel projects onging (global pipeline).
  • With an average of 150 rooms/hotel, they correspond to 1,000,000 rooms to be incorporated into the market in the near future.
  • Considering an average investment of $100,000 per room, this represents an investment of $100,000 million.
  • If the industry is going to employ an average of 0.5 employees per key, the new hotels will create 500,000 jobs.

In South America alone, there are currently 869 hotel projects under construction, which will house more than 153,000 rooms.

Given these colossal numbers, it is especially significant to be very clear about the real business opportunity of our hotel investment when starting a project.

On a large scale, the big giants of the sector are leading telluric movements of M&A (mergers and acquisitions), which are going to change the ecosystem as we know it. Marriott and Starwood are advancing every day in their merger process, not without various shocks along the way, with an aggressive offer from China’s Anbang.

On a medium scale (Medium Development), at the end of March the alliance between NH Hoteles and the Chinese HNA was deepened, with the announcement of the joint venture for expansion in the Chinese market with 150 new hotels in China by 2020, in the middle segment. Compared to the global scale that has been shown, this seems a modest number, but when one considers that NH currently has 400 hotels, this process means increasing its capacity by a third in the next four years. Therefore, it is an aggressive goal marked by the market opportunity.

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