HICAP opens with talk of overtourism, negating NUG, growth hot spots

SINGAPORE — When asked about the effects of overtourism around the world, Alan Watts, president of Asia Pacific for Hilton, said what’s happening in Europe in places like Spain and Greece can be considered an example of an outcome the hospitality industry doesn’t want.

“You’re talking about tourism planning and government strategy and our roles in industry in liaising with sensible planning,” he said. “Europe is sort of the test case for us, having looked at stronger GDP growth, and having looked at encouraging tourism… Then we accelerated it immediately, with unlicensed homestay rentals to triple the size in some industry markets and, of course, infrastructure build hasn’t kept up.”

Watts said tourism can benefit hospitality, but it can also expand into a curse that will not go away. “Tourism can be a poison chalice if the infrastructure build is not keeping up… and the opportunity for us on stage and in this room, in general, is to make sure that the industry has a meaningful voice in strategic planning and not be in the situation that we’ve seen in Europe now where it’s just too little, too late,” he said. “If you do end up with an anti-tourism sentiment, then all of a sudden you have an over and under correction.”

Watts was speaking at a “View from the boardroom” panel on the first day of the Hotel Investment Conference Asia Pacific (HICAP) event at the Fairmont Singapore and Swissotel The Stamford. The event is run by Northstar Travel Group's The BHN Group. He was part of a panel including Peng Sum Choe, CEO of Singapore-based Pan Pacific Hotels Group; Chin Fen Eu, CEO of Singapore-based Frasers Hospitality; Yoshiki Kaneda, president and CEO of Tokyo-based Seibu Prince Hotels Worldwide; and Jean-Jacques Morin, group deputy CEO and Premium, Midscale & Economy Division CEO of Accor. The panel was moderated by James Chappell, global business director for New York City-based Horwath HTL.

Choe said he is also worried about overtourism (he mentioned Japanese authorities installing barriers to block popular viewing sites of Mt. Fuji after residents complained about mostly foreign visitors littering, trespassing and breaking traffic laws) but for a different reason.

“I’m more concerned about how governments react,” he said. “I’m sure we can build more infrastructure, which is a government reaction and is important, or they can do worse things, like a moratorium on building hotels.

If you just look at our numbers last year, the number of signings was flat in numbers, but the value in fees that would be generated in the future from what was signed was up and that’s what we try to provide — value generated.

Jean-Jacques Morin

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“I like what Japan is doing, and I don’t know how successful it is, but what they’re trying to do is say, look, besides Tokyo, Osaka and Kyoto, there are so many other places to see in Japan… So, if they expand their marketing… if it is done right, we could solve this problem rather than trying to stop it,” he said.

When the panel was asked about large publicly traded hotel companies’ almost insatiable desire to show contact net unit growth (NUG), Morin said he hopes the industry will try to move in the other direction. He said Accor has been following that philosophy.

“We’ve been trying to shy away from net unit growth. Why? Because net unit growth is not the translation of value. It is just the easy way for somebody [to show growth],” he said. “If you just look at our numbers last year, the number of signings was flat in numbers, but the value in fees that would be generated in the future from what was signed was up and that’s what we try to provide — value generated… I think it’s going to take some time before people get there."

Morin also said companies with an ESG mindset in development also face additional hurdles. “I would try to elevate the discussion a bit on the ESG dimension. You may open all kinds of rooms, but they may have no value because they were signed on the wrong basis in terms of what the requirement will be, either by law or by practice on the various places in which you develop,” he said. “Thinking this way, not looking purely at the financial, but also looking at what we call extra-financial, and not using the customer responsibility type of metrics, is something that the market will have to [change] at one point.”

When the panel was asked about dealmaking, Eu said ultimately, it comes down to how to best deliver value to the stakeholders with the money. “Ultimately, we want to draw our attention to the fact that this is a hotel investment conference. So, regardless of what we do, I always tell my team it is all about delivering value to the most important stakeholder in this equation, which is the capital stakeholder,” she said. “Whatever brand, whatever operating models that they put in, it is all about developing the P&L juxtaposed against investment costs… it’s always about the transaction capital and how cash flow is priced in the market based on your hotel risk profile.”

When asked about current hot spots for growth, Kaneda didn’t have to look far. “Asia Pacific has the biggest potential to grow, especially with people changing from spending money on goods to spending money on experiences,” he said. “Talking about Japan, we are in a very good position due to the increasing incoming visitors… Growth in Tokyo is about 20% more than compared to before the pandemic, and that growth has been driven by rate and not occupancy. In Tokyo, the rate is up 30% compared to the pandemic, while occupancy was down by 8%, which means, I believe, we still have a lot of opportunities [for growth]… that’s a good problem to have.”