Chief executives of global companies in six industry sectors -- hospitality, retail, cruise, technology, destination marketing and tour operations -- offer their assessments of the business environment they expect to be facing next year. Factoring in economic and geopolitical conditions, consumer and market trends, technology developments and the peculiarities of their individual sectors, these six executives offer analyses that are at times complementary and at times contradictory, but they form a basis for better understanding the conditions under which we’re all likely to operate during 2016.
The interviews were conducted by Editor in Chief Arnie Weissmann.
Let’s start with the United States, the biggest economy in the world, the most important for Marriott. Our view is we’ll continue to muddle along with moderate but positive gross domestic product [GDP] growth, in the 2% to 3% range. I use “muddle” because it’s not exciting when you think about it in historical terms, but it’s positive enough to continue to drive demand growth.
2015 was the strongest year we’ve seen in Europe since the recession, and in some respects that has made us more optimistic. On the other hand, Europe faces probably the most critical geopolitical environment it has seen since World War II. You’ve got a refugee and migrant crisis of historic proportions and some rise of nationalism related to that. You’ve got a number of countries questioning the strength and relevance of the European Union, and you’ve got recent terrorist events. So, if you put a relatively stronger economy next to real anxiety about the future of Europe, I think you end up with a question mark there. We’re hopeful that we’ll still see positive revenue-per-available-room growth, probably a little bit lower than in the United States.
As regards terrorism generally, we live in a risky world. In the short term, those events can have a very negative impact on our business in those [affected] markets. But I think in the long sweep of things people pick up and dust off and get on with their lives eventually, including travel.
When you think about the Middle East from a political rather than travel lens, you’re immediately focused on Afghanistan, Iraq, Syria and Libya. Those are not particularly relevant to the hotel business or the economic assessment of the region, which tend to be driven more by Saudi Arabia, the Emirates and Qatar. And there you’ve got a mixed set of questions. Oil revenues are down, but they have enormous resources and continue to invest in their economies.
We’ll roll up our sleeves with owners and franchisees and talk about what is the best thing to do for each [Marriott and Starwood] brand portfolio.
Saudi Arabia, I think, will continue to see good growth, and good growth in travel. Dubai has got a significant supply-growth story that overlays what’s happened on the demand side [and] makes the performance there look weaker than I think it fundamentally is. I would guess that we’ll see continued political uncertainty where it exists today, but continued modest growth in the markets that are more relevant to the hotel business.
Our Africa business is biggest in South Africa, with our acquisition of Protea. The South African economy has been pretty anemic this year, but the business has done reasonably well because there’s been zero supply growth and because you have a growing middle class in South Africa. We’re guardedly optimistic about South Africa. It’s probably the one country that’s worth talking about by name.
Generally, a hotel economy ought to perform commensurate with the underlying economy, but I think China will perform a bit better than its broader economy. It’s a huge market, and some cities will perform better than others. Shanghai has been the best performer, by far, in 2015. I suspect we’ll continue to see Shanghai perform better than Beijing.
I know that the popular view about China is to focus on its slowing economic growth and a number of the complexities that the government is wrestling with. But I think when you look at the hotel business, what you see is a relatively positive story because of the growing Chinese middle class. I suspect we’ll see a decline in newbuild construction starts because of some of the macroeconomic forces at work, but existing hotels should be OK.
India remains a relatively optimistic story. And Australia, Indonesia, Malaysia, these are relatively big markets and are growing. I would expect them to be fairly positive stories next year.
As far as advanced bookings for 2016 go, they are a bit higher on the group side than they were at the same time a year ago. That’s a bit of a tailwind, which we hope will continue. Our approaches to distribution will continue into 2016 much as we’ve seen them evolve in 2015.
We expect trends that are already powerful to continue into 2016, and that includes a host of technology issues. We need to make sure that the apps and the booking process are intuitive and simple, that the rewards app, particularly, allows folks not just to book reservations but to dream about travel and to share travel experiences.
And the use of technology in the hotels: How do we use mobile devices to have services requested from us and to deliver services? How do we communicate with guests on their mobile devices to market to them in a personalized way when they’re in the hotels? How do we allow guests to use those devices to either connect to entertainment systems in rooms or open guestroom doors?
I think there are food and beverage trends that are also powerful, and the more we can deliver against some creative goals, the more we’ve got the possibility for some upside. We’ll continue to see the influence of design, and the desire of customers to connect with design. We’ll deliver experiences which are worthy of being shared.
That whole set of trends drives the growth and creation of lifestyle brands and the rejuvenation of [existing] brands. We’re rolling out a new Marriott Hotels and Resorts guestroom, which we’re extraordinarily excited about.
Since we announced our acquisition of Starwood, there has been a lot of industry chatter about the importance of consolidation. A number of voices said this is emblematic of a trend that should see other big consolidations occur. And that may happen. To the extent people are seeing our deal with Starwood as an exciting and powerful transaction and want to do something similar, I suppose we should take that as a vote of confidence.
On the other hand, Starwood was broadly for sale for six or seven months, and there aren’t a lot of other big companies that are out there saying they’re for sale. And so it’ll be interesting to see whether there are companies that really want to be involved aggressively in consolidation and if there are opportunities available at economic terms that make it rational for them to proceed. Net-net, I would say, it’s at best a 50% chance that you’ll see other significant consolidation. Think about the word “significant” for a second there. By that I mean big consolidation. There will clearly be some bolt-on deals [such as Fairmont], but I don’t know of anything else that is out there, meaningfully, for sale at the moment.
In 2016, one of the main messages that we’re trying to communicate, both on the Marriott and Starwood sides of this great merger, is “Keep your eye on the ball.” We’re separate companies until such time as we’re closed. It’s really important that the sales forces continue to sell rooms and book meetings. It’s really important we continue to tend to the brands and invest in our technology platforms. We’re trying very hard to make sure that we are, on one hand, dedicating substantial resources toward integration but to also remain focused on running the business.
The brands of significance will continue to grow as distinct brands, and we’re going to try to keep and make each of those brands as strong as they can be. We have owner and franchisee partners that are really our most important customers, that have made real estate investments deliberately, with a particular approach to branding of their assets. It is not in our power to tell them that the brand of their hotel will change. We’ll immediately roll up our sleeves with our owners and franchisees and talk about what is the best thing to do with each brand portfolio.
We’ll want to make sure that [the brands] are as distinct as they can be in terms of product and services.
We’ll also continue to have conversations and analysis about the impact of potential disrupters. The [OTAs] and Google and Alibaba and a number of different kinds of technology platforms are one kind of disrupter that can impact our business, and then you’ve got Airbnb and HomeAway and the others. But I don’t expect it to be a meaningfully different story than the one that we’ve talked about in 2015.
I would guess that if something is announced [in the way of a partnership between Airbnb and a hotel company] it wouldn’t be very fundamental. It could be something around a marketing alliance or something, not all that significant and probably experimental. The fact of the matter is, while they’re in a somewhat different space, Airbnb is a new competitor, broadly speaking. I don’t think you’ll see a firm merger of programs between two competitors.