Hotel Economics: Hotels plan growth as global economy recovers

Is the hotel industry ready for a rebound? Based on the recent news of expansions and new properties from global hotel groups, it seems the hospitality industry is poised for a pristine few years.

InterContinental Hotel Group is continuing on its quest to keep the title of ‘world’s largest hotel operator’, recently announcing a global expansion that would increase the amount of its hotel rooms around the world by nearly one-third in the next three to four years. InterContinental, which owns various hotel brands including Crowne Plaza, Hotel Indigo, Holiday Inn, Holiday Inn Express, Staybridge and Candlewood Suites, currently operates more than 4,400 hotels and has 1,400 more in the pipeline, the majority of which will open in Europe.

The hotel group’s expansion means more hotels, but also more jobs. More than 100,000 jobs worldwide will be created in the InterContinental family. In the UK, where InterContinental plans to set up at least 36 new hotels, the hotel will hire an additional 3,500 employees to service the new properties, according to a statement from the hotel company in The Scotsman. In addition, the paper reports the InterContinental is putting plans in place for Scotland’s first five-star InterContinental-branded hotel.

InterContinental’s expansion isn’t the first we’ve heard about. JW Marriott announced plans to build 40 hotels in India by 2013; Kimpton and Hyatt are opening various hotels throughout the U.S. and earlier this year, Ritz-Carlton President Simon Cooper gave us some insight into new hotels emerging in Asia and the Middle East. But the question remains: can the hotels sell the rooms? According to a recent study of hotel room prices in Europe from trivago, more rooms are already selling for increased rates, which means more travelers are loosening their purse strings.The study shows the average price of hotels in Europe has increased 12 percent from March to April 2010, the highest point since October 2009.

What’s this mean for hotels?
The travel industry stays afloat due to basic supply-and-demand principles. Based on these numbers, the demand for hotel rooms has risen causing hotel operators to raise their rates – a good sign for a rebounding economy.

Trivago reports that most European cities have experienced price growths of 10 to 20 percent, and in popular tourist destination cities such as Rome, Barcelona and Istanbul, prices rose by as much as 42 percent. Additionally, occupancy in the three- and four-star hotels – which make up the majority of the properties in the InterContinental Hotel Group – rose 2.7 percent in Scotland, against increases of 3.8 percent in regional UK, 3.7 percent in England and 9 percent in Wales.

If the numbers continue to increase across the pond, the InterContinental and other hotel groups could be right on target with their global expansions.