Hoteliers urged: Learn about airline trends

SYDNEY: Just as improved connectivity and increased air capacity can provide a growth injection to hotel trading, so the cancellation or reduction in air services can leave the hotel industry in tatters.

According to Jones Lang LaSalle Hotels’ research, FocusOn Aviation: Shaping Investment in Asia Pacific, events occurring over the last few years have not only highlighted this but also beg the question – what are hotel investors doing about it?

“The key issue for the hotel industry across the Asia Pacific will be managing and maximising the benefits from the expected boom in air seat availability,” said David Gibson, CEO Asia Pacific, Jones Lang LaSalle Hotels.

He added, “Increasingly, airplanes are the means to get the guests to your door, so why not plan ahead to leverage off this trend?”

Air travel has played a major role in shaping the scale and diversity of worldwide tourism. “Air travel is indispensable with approximately 40 per cent of international tourists now travelling by air, up from 35 per cent in 1990; a trend that will continue for some time,” said Gibson.

Compared to the US and Europe, Asia Pacific has been a slow starter, however air networks are expanding rapidly.

As economic prosperity grows, so does the number of potential travellers. The proliferation of low cost airlines across Asia Pacific has the potential to unlock substantial growth in tourist visitation.

“Moreover, with the aviation industry’s highly developed analysis of customer travel patterns and forecasting techniques to identify potential new routes, where better to look to identify future opportunities for hotel investment?” said Karen Wales, vice president research, Jones Lang LaSalle Hotels.

Providing hotel investors with better access to airline strategy could not only improve hotel trading performance but it could also hint at potential hotel development opportunities. “Particularly for ‘first mover’ advantage in previously unexplored markets,” said Gibson.

It may also reduce many of the risks involved. “With the limited availability of investment grade assets for sale, increasingly investors are starting to consider development of new assets as they weigh up the risk-adjusted returns of acquiring secondary assets,” said Wales.

For hoteliers, aviation developments will continue to impact their business models affecting traditional source markets and increasing competition both in terms of emerging rival tourist destinations and the structure of local economics.

As the relative cost of travel declines, people will have more freedom to determine where they spend their leisure time. “This will mean new source markets, new ways of booking, new partner relationships, cheaper travel, faster travel and potentially less domestic holiday makers,” said Gibson.

“Flexibility and ability to identify and capitalise on market trends will be essential for hoteliers moving forward.”

For hoteliers operating in a market reliant on air access, to mitigate the potential risk associated with a carrier pulling out or cutting services back, targeting a variety of source markets and business mix is important.

“Whilst perhaps foregoing some short term profits by attracting a higher proportion of lower yielding business, if air services are cut operators will already have a foot into alternate markets thus reducing the potential negative effect,” said Gibson.