Mid-range hoteliers must change business model for survival: Analyst
The mid-range hoteliers in Sri Lanka should switch to a completely different business model to survive, a London-based international research agency said.
“Luxury and budget in the next 5 years are going to squeeze out mid-priced hotels. Hence any company in travel and accommodation who’s looking at the mid-price should re-evaluate their business model,” Euromonitor International Senior Research Analyst Shabori Das said.
Speaking at the Cinnamon Future of Tourism Summit, she noted that Euromonitor has come to this conclusion by observing the consumer trends being formed.
“One of the consumer trends we have observed is that either travellers are going out and spending an immense amount of money for luxury and quality service, or else they’re going for no frills and budget accommodation,” she said.
Das said that even though world revenue from tourism is expected to grow by 3.5-4.5 percent, average spending per trip will decrease, showing that the mass market would go for budget accommodation.
She added that since Asia Pacific is both exotic and will be the engine of growth for the world economy for the foreseeable future, budget tourism to Asia Pacific from other parts of the world would rise, and said that such patterns are already emerging in China and India.
“In India and China, budget makes up over 40 percent of accommodation,” she said.
In Sri Lanka, the case is similar. The unregulated informal sector which makes up budget accommodation soaks in around 48 percent of the tourists according to the government. Local industry sources say that of the 3-4 star mid-range hotels and the luxury 5-star hotels which make up the formal sector, occupancy levels are at 45-55 percent for the former and around 85 percent for the latter, which cements Das’ argument.
Industry leader John Keells Holdings is banking on the economic growth of Asia Pacific to bring in business to its luxury operations, as reported by Mirror Business recently.
India accounts for 16 percent of Sri Lanka’s tourists and China accounts for 12.32 percent from January to August this year, recording growth figures of 27.9 percent and 76.8 percent respectively.
Other experts speaking at the summit agreed with such sentiments. India’s Cox and Kings Relationships and Supply Management Head Karan Anand attested that Indian tourists will become high spenders.
Tourism Futurologist Dr. Ian Yeoman said that the West, which had seen the majority of world wealth till now is moving away from luxury to simpler propositions, while growing China is looking for more materialistic luxury.
He added that economic crises too promote budget tourism, since holidays are the ultimate luxury, which would lead to those affected seeking cheaper means of enjoyment.