In the Hot Seat
Travel CEOs spoke with Travel Weekly’s Arnie Weissmann during the WTTC Summit. Click here to read the Q&A.
BEIJING — Concerns about the sovereign debt crisis in Europe took a backseat to the stunning opportunities for growth in Asia at the World Travel and Tourism Council’s 10th Global Travel and Tourism Summit here last week.
A stream of global travel and tourism CEOs described their fast-track investments in the region, and Goldman Sachs analyst Anna Stupnytska underscored why: It’s not only that China is predicted to surpass the U.S. as the world’s largest economy by 2027, she said, but the world will also see 2 billion additional people elevated to the middle class by 2030.
And most of them will live in the so-called BRIC countries (Brazil, Russia, India and China).
"Tourism will rise as income levels rise," Stupnytska said. "This will last."
Some of the 1,200 tour operators, hoteliers, travel agency executives, aviation CEOs, destination marketers and other industry leaders who had registered for the summit had apparently already heard the message before arriving.
Expedia CEO Dara Khosrowshahi said he now employs more people in China than in Europe, but he added that although "China tends to get the headlines, I don’t want to lose sight of the greater Asia opportunity. A mistake I made five years ago was that I targeted the large countries too much. But we’re now seeing Vietnam and Malaysia developing at incredible speed."
During a press conference at the summit, Marriott International Chairman Bill Marriott said he was "betting big on China. We have 45 hotels here now and will have 60 by the end of the year." That number will double in 12 years, he said.
Marriott International President Arne Sorenson added that Marriott was pondering development of a "moderate-tier" brand specifically for China, equivalent to a Fairfield Inn or Courtyard in the U.S. (The Courtyard brand is currently in China but has been developed to higher standards than elsewhere.)
On the day before the conference began, Carlson announced that it was opening Radissons in Chongqing, Wuxi and Huizhou as well as a Park Plaza in Chengdu.
"Asia plays a critical role in our future," said Carlson CEO Hubert Joly. "It’s 30% of our pipeline. For Radisson, it’s 40% of the pipeline. We currently have 10 hotels open in China, another 11 under contract and seven memorandums of understanding."
But even ambitious growth plans like these will be dwarfed by demand, said Arthur de Haast, CEO of the global hotel investment consultancy Jones Lang LaSalle Hotels.
Noting that there are currently almost 1.6 million rooms in China vs. 4.5 million in the U.S., he said that if one approximated the potential demand by extrapolating from the two countries’ populations, there would need to be 15 million to 20 million rooms in China’s future inventory.
Despite the overall optimism, however, a few notes of caution were sounded. De Haast said he was concerned that there was too much growth in upper-tier properties in China at this point.
Mandarin Oriental CEO Edouard Ettedgui agreed, warning that in the short term, "the biggest risk is overcapacity. I see luxury properties leading the new construction, and it concerns me. Look at India, beginning 15 years ago. They’re still paying the price for overcapacity."
A parallel theme of rapid development and growth emerged in discussions involving technology.
Charles Petruccelli, president of global travel services for American Express, predicted mobile technologies would have as revolutionary an effect on travel agency business models as the elimination of base airline commissions and the emergence of the Internet.
"It gives a traveler the ability to get information, make a decision and act immediately," Petruccelli said. "We are forced to integrate it into our business model," as opposed to making it just an offering to clients.
On the same topic, Expedia’s Khosrowshahi said, "We’re a child of technology, but we’re seeing technology change in ways that are surprising to us. And it’s transformational change. Mobile technologies and social media technologies are hitting us at the same time, and we want to be there when this one explodes."
Alan Parker, CEO of the British restaurant and food service giant Whitbread, admitted that "for people of my generation [rapid changes in technology] are scary. But the fundamentals of bringing good food and service are still important. It doesn’t matter how fast you book your trip; it’s the experience that counts. That ultimately relies on human service, not technology."
This report apperared in the May 31 issue of Travel Weekly.