2018 Hotel Industry Forecast

2018 Hotel Industry Forecast – Disruption is the Name of the Game

According to the forecasts of Cushman & Wakefield American experts, the year 2018 in hotel business will be marked by the development of new ways of competing with Airbnb and similar services. Hotels will pay more attention to customer experience, local culture and charm, as well as to the tendency of economy homesharing, popular among the millennials.

Although Airbnb and similar services are not so widespread in Ukraine, and in Kiev in particular they will have a more significant impact on the Ukrainian market of hotel services in future.

Ukrainian experts predict an increase in demand for serviced apartments in response to a shortage of quality supply in midscale and economy segments.


Eric Lewis, Executive Managing Director, Practice Leader, Hospitality & Gaming, Valuation & Advisory:

“Last year proved to be another one for the hotel industry record books: occupancy, average daily rate (ADR), and revenue per available room (RevPAR) all increased year-over-year.

And while the rate of growth is diminishing as the economy slows down a bit and new supply continues to hit the market, changes to the tax code appear to have breathed new life into the recovery.

Last year’s concerns over a possible decline in tourism to gateway cities proved to be generally unfounded, and we expect that to be the case as we move through this year as well.

The labor market is also incredibly tight with unemployment at a historically low rate of 4.1 percent. The good news? Wages are expected to rise as a result.

And with household paychecks before and after taxes increasing, and corporate after-tax earnings looking more robust, room night demand is expected to increase across the leisure, commercial and meeting/group segments. (Indeed, January 2018 showed a 2.9% RevPAR increase over the same month in 2017.)

The potential negative impact on the hospitality space is the specter of increased labor costs impacting property-level bottom lines.

Disruption will also continue to be the name of the game, as traditional hotel chains seek out new ways to compete with Airbnb and its ilk. As of the writing of this piece, Airbnb was worth an estimated $31 billion – a valuation that put it second only to Marriott International. (For comparison, consider this: Hilton Worldwide’s market cap is $24.7 billion.)

This year, Airbnb appears poised to aggressively pursue the lucrative business traveler demographic, and global travel platform Concur recently announced plans to display its listings on the company’s search and bookings tool, which is used by more than 70 percent of Fortune 500 companies. In response, hotels are launching new, innovative services (and in some cases, entirely new brands) to lure back travelers seduced by homesharing sites.

They’re creating experiences for customers that highlight local culture and neighborhood flair, and strengthening amenities and services to cater to the primarily millennial consumers who are most drawn to the sharing economy.

How tax reform and the threat of stricter government regulation will affect home sharing remains to be seen, but hotels are recognizing that these powerhouses are here to stay and pose a real threat to market share. At Cushman & Wakefield, we’re watching this competition with great interest, and are committed to providing up-to-the-minute insights to our clients about the state of the market.

To that end, we’re also incredibly excited to announce the launch of our new hospitality website, accessible at www.cushwakehospitality.com. Check back frequently for updates on the status of the hospitality industry across the Americas.”

 

Yana Lytvynchuk, Deputy Managing Director, Head of Valuations, Cushman & Wakefield in Ukraine:

“There’s an interesting tendency concerning serviced apartments being observed in Ukraine.

Today, hotels prevail (97%) in the general structure of hotel capacity in Kyiv while the number of serviced apartments amounts to only 3%. However, we witness an increase in developers' interest to this sector, which, from our point of view, is explained by the structure of the overall hotel supply in Kyiv and the presence of unmet demand in some market sectors.

Despite the significant share of midscale (33%) and economy (31%), these segments are mainly represented by properties with a high degree of functional and physical depreciation, while the quantity of modern quality supply is limited and amount to not more than ¼ of the market.

In the economy segment, the shortage of quality hotel properties is partly balanced out by private offering of rental apartments. In the midscale segment, however, this market gap remains unfilled, which contributes to the modern network hotels and serviced apartments entering the picture. Their market share is gradually growing.

With the general recovery of the hospitality market in Kyiv, an upward tendency in costs of accommodation in relation to serviced apartments is observed. Thus, the Rack Rate growth averaged about 15% in dollar terms during 2017.

About 50% of serviced apartments in Kyiv are accounted for by network operators, such as Reikartz Hotel Group, Senator Apartments and Royal Hospitality Group, etc.

As for high technologies, Airbnb and its ilk are not yet very popular in Ukraine. In the mid-run, however, the development of these services and the expansion of their target audience, along with the quantity input of modern residential facilities of various formats in Kyiv will lead to an increase in the number of accommodation places and will seriously compete with the sector of traditional hotels."

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