With the U.S. lodging industry trying to save itself from another overbuilding binge, a la the 1980s, Europe, Asia and the Far East are hot spots on the global hospitality map. And hottest is Southeast Asia, because hotel developers say nations with emerging economies are the most attractive markets.
For now, most developers aren't concerned about overbuilding. Rather, they are focusing on building hotels and building brand awareness.
With diplomatic relations between the U.S. and Vietnam finally restored, BBI, a U.S. investment company based in Washington, is making its first foray into Vietnam with a $240 million resort complex in central Vietnam at China Beach. The resort hotel represents the biggest U.S. hotel investment in the country. Five hotels will be built on the beach once used by U.S. military for rest and recreation.
In addition, Mandarin Oriental International Ltd. has plans to develop a deluxe hotel in Ho Chi Minh City in a joint venture with two Vietnamese companies.
Also setting up shop in Vietnam is Paris-based Accor, with a small 50-room hotel, Sofitel Dalat Palace, a resort 150 miles from Ho Chi Minh City. The company, along with an undisclosed partner, is planning to expand that four-star chain from 100 to 200 locations, according to Sven Boinet, exec VP-hotel operations. The activity in Southeast Asia has spawned lodging growth in other parts of the world as well.
"The Far East is booming," said David Young, VP-international franchise sales and development for Hospitality Franchise Systems, Parsippany, N.J. "We are seeing markets open in China with Days Inn, and we are looking at Howard Johnson and Super 8 for China." HFS recently completed a nine-country deal in Southeast Asia for those two brands.
The Middle East peace process has opened up tourism in that part of the world as well, and HFS' Days Inn has signed a master license agreement for development of the brand in Israel, with a goal of five hotels in five years.
South Africa looks good to Hilton International, Watford, England, which said it will open its first South African hotel, the 323-room Sandton Hilton, near Johannesburg.
Despite Mexico's less than glowing economic climate, Grupo Posadas, Mexico City, Latin America's largest owner and operator of hotels, will expand Fiesta Americana and Fiesta Inn to 100 properties.
Demand is pushing Argentina's luxury hotel boom. Since the Hyatt Park Buenos Aires opened in 1992, that city is now home to at least a half-dozen five-star hotels, including Marriott, Park Plaza, Caesar and Inter-Continental Buenos Aires, which opened in March.
And as inbound tourism remains in a slump in Germany, hotels there are taking a new look at the needs of the commercial traveler. Two hotel chains, Inn Side and Hansa Enterprises, are developing extended stay hotel-apartments to cater to members of the business community.
Hotel developers are also watching Latin America's emerging middle classes, and the region's economy is booming. As a result, Choice International Hotels, Silver Spring, Md., just opened its top product, Quality Suites, in Guatemala City, and is signing master franchise agreements for the brand.
In India, which may replace China as the new tiger, the time may be ripe for development. "India has always had a lot of tourists," said Ron Murray, VP-international development for Choice. "The English have always gone there and now the Germans have started. Indian tourists have some disposable income and are no longer a bunch of backpackers."
India currently has 900 hotels and 52,000 rooms, which industry experts say are inadequate for the 5 million tourists expected in the next two years.
No new hotels have been built in New Delhi or Bombay since the 1980s, and facilities in those cities need to be doubled, according to research conducted by the Asian American Hotel Owners Association.
"India is definitely a market where we need to expand," said Joe McInerney, president and CEO of Forte Hotels, a London-based chain. "Being basically a European brand, India was not a focus market for us. Now we are thinking about increasing our presence in the Asia-Pacific basin."
Forte already has a small presence in India with its Le Meridian chain.
The Ladbroke Group, a London-based hotel and gambling concern, said its Hilton International hotels unit would enter India with an investment of $330 million. Ladbroke owns Hilton hotels outside the U.S., and has a deal with India's Bharat Hotels Ltd. to take over management of the Atlanta-based Holiday Inn Crowne Plaza chain, by the end of the year. Bharat will develop two new hotels in Bombay and Goa to be managed by Ladbroke. The agreement also includes the development of hotels in at least eight other Indian business and resort centers.
A Hilton VP, David Wilson, said there is a potential to build 11 first-class hotels with 3,300 rooms in India.
Hoteliers believe that travel, once considered a privilege of the monied elite, is now a basic human right. And lodging companies are counting on the appeal of flying to be discovered by new consumers and businessmen worldwide to help fill the new rooms coming online.
The rooms being added to the foreign market are important now, because by the year 2005, travel and tourism will have added 144 million jobs, according to the International Association of Travel Agents in Geneva.
The overseas lodging development picture is being painted mostly by U.S.-based companies, forcing others to reposition themselves to compete against the midscale and limited-service properties cropping up on their turfs.
As an answer, Nikko International's parent company, Japan Airlines, will soon open a limited service property in Japan, Hotel Jal City. It will be a small three-star hotel with 150 to 200 rooms. (Nikko, until now, focused on luxury hotels.)
"The Far East is one part of the world that has an abundance of luxury properties," said Robert Weller, president of Super 8. "There is a tremendous gap in the market for a North American economy property."
Super 8 and Howard Johnson, two HFS brands, are expanding into Asia Pacific through master license agreements with Singapore-based Hospitality Systems Asia Pacific. Officials of the two chains say they are entering the market confident that business will take off quickly.
The development fever has soared so high that Koppen Yan Zimmerman, hardly a household name in hotel circles, is pushing to become a force in Asia. The management company, based in Hong Kong, plans to add 16 more hotels to the 14 it already has by next year.
In Europe, the emphasis remains on five-star properties that have always distinguished that continent from the rest of the world. That might change with Holiday Inn now bringing its highly successful U.S. product, Express, to Europe. Express is patterned after the old Bass-owned Garden Court, which Bass sold after it acquired Holiday Inn.
It is the domination of luxury brands in Europe that hotel executives say leaves the door open for other lodging products.
"Europe is coming alive again," said HFS' Mr. Young. "But it is an expensive proposition in that Europe still is paying attention to luxury products."
Mr. Young believes Europe is now ready for limited service brands simply because people there are tired of paying luxury prices.
"In India, for example, a good five-star hotel is $200 [a day]," he said. "That is a deflationary matter as it relates to tourism."
HFS is in the final stages of completing an arrangement in the U.K., Germany, Switzerland and Austria, and just finished a Days Inn agreement in South Africa and the United Arab Emirates and Egypt for Howard Johnson.
Mr. Murray's view is that while Europe is a mature market, the French have tried to pick up the market even more and create a new niche with Formula One, a limited-service product.
"You can't go any lower," said Mr. Murray. "Everyone is looking to limited service, and we won't get as low as no service."
Mr. Murray added that Europe's limited service brands are improving.
Mr. Young backs up that claim and said Holiday Inn has done a good job of managing its European properties and that Best Western, which has been in Europe for a while, will make Europeans comfortable with limited service hotels.
Developers believe if they build it, the public will come. But they also know they need to build brand awareness.
Mr. Murray said building brand recognition with new U.S. brands in Southeast Asia, Indonesia and Thailand is difficult.
"In Asia, we will market to the travel agents and do little or no consumer marketing," he said. "We think we can create awareness through wholesalers and agents. People buy price and are not concerned about where they stay."
Mr. Murray said Choice will not break any consumer advertising campaigns any time soon, but added, "We will help tour wholesalers by co-opting their advertising campaigns."
Direct mail is also a favorite marketing tool for hotels.
Bill Hanley, exec VP-sales and marketing for Forte, said distribution goes hand in hand with awareness.
"Westin has good distribution in Asia and has high visibility there," he said. "The reverse is true in Europe."
One brand, though, has tried consumer marketing. Regent International Hotel, owned by Four Seasons, believed it was creating confusion not only among travel consumers but also with travel agents, wholesalers and tour companies over its two brands. So it decided to break a campaign by Leo Burnett Co., Hong Kong, designed to separate the two and emphasize business luxury with Regents' 13 brands.
"Four Seasons is established and has its identity," said Duffy Keys, VP-marketing for Regent. "The more difficult challenge is to communicate that Four Seasons and Regent are one, and it is important to have that understood at the distribution level: travel agents, corporate travel buyers, conference organizers. They also need to understand one company but two brands."
Mr. Keys said consumers don't care about the difference and that the re-branding is much more subtle.
"Consumers connect themselves more with a particular group of hotels," he said. "For a luxury hotel in North America they think of Four Seasons. In Asia, the brand is Regent. We hit a home run when they think of both."
The campaign, which began in September, actually is an extension of Regent's initial campaign of 18 months ago.
"That campaign didn't provide enough information and we overlooked, or took on the assumption, that our customers clearly saw Regent as a luxury business hotel," said Mr. Keys. "That isn't how it came out."
The original print Regent ads have a visual and headline but no body copy. New ads added copy to emphasize guest services and might depict someone coming out of the ocean to emphasize a guest has traveled to one part of the world and his luggage to another.
"The body copy says that when this happens to you, Regent will help you pick up the pieces through its infrastructure with basic things you must have, including a trace on the luggage," said Mr. Keys. "Regent will serve as your homing device."
Mr. Keys said he hopes the ad also drives Regent's leisure business.
While building brand awareness, the hotel industry also has to be cautious about overbuilding facilities. Mr. Murray believes overbuilding is already occurring.
"Bangkok is overbuilt today and a couple of other cities will be in a couple of years," he said. "In Bangkok, there are another 5,000 rooms ready to come into the market and it isn't ready for them."
Mr. Murray said Australia has already been through overbuilding and still is trying to catch up to the industry.
"We go through this every seven or eight years," he said.
Mr. Hanley takes a different view.
"Development tends to be acquisition rather than new build," he said. "Our Le Meredien falls into that category. You can develop without increasing the number of rooms."