North American Hotel Market: Challenges On The Horizon
-- Hotels, 8/1/2007
While the industry at large is still quite bullish about the opportuni-ties in North America, momentum is slowing a bit compared to record-setting 2006 figures. As a result, the atmosphere is one of more modest gains as increases in fixed costs and relative decreases in RevPAR could negatively impact margins. “So we have to watch our cost struc-tures more closely,” says IHG’s Kirk Kinsell, adding that another growing challenge is opening delays. “We’re a bit challenged by the number of delays in openings for reasons that are not directly in our control—zoning issues, planning approvals—and that’s across the en-tire real estate sector,” Kinsell says. “It allows for a bit of risk to enter into the equation and challenges investors, who could take more of a ‘wait and see’ attitude.”Yet while such challenges may not seem new, or even unexpected, in the last few years there has emerged a new threat to U.S. lodging gains: the lack of international tourism. Despite the relative afforda-bility of a trip to the United States, new passport requirements for travel to/from Canada, Mexico and the Caribbean and an extremely ar-duous visa process for many countries, in essence, discourage foreign visitors. According to the Travel Industry Association of America, overseas arrivals have decreased 17% since 9/11. The organization es-timates that between 2000 and 2005 the drop in international arrivals—who characteristically stay longer and spend more
money—translated into a loss of some US$94 billion. “The biggest challenge we have as an industry now is how tough it is for the international customer to come to this country as visitors, and that affects the lodging industry as a whole,” says Glyn Aeppel, senior vice president, development, for Loews Hotels, whose CEO Jonathan Tisch has been among the most vocal in the industry about this tourism crisis. “The American chal-lenge is that we have free access to travel the world but tremendous constraints for non-Americans to come here.”
While the passport issue remains hotly contested—in June the U.S. Government extended the passport deadline from January 2008 to summer 2008—to put it into perspective, a survey by the Hotel Asso-ciation of Canada found that 36% of Canadians planned at least one trip to the U.S. in 2007, with 24% indicating they would stay at least one night. However, when asked about the imposition of passport re-quirements for cross-border travel, 27% indicated they would likely cancel the trip.
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