Later this month, on September 27, people around the world will mark World Tourism Day as they have every year since 1980. That’s the day the United Nations designated as the one on which we recognize the positive contributions that global tourism makes each day to the world’s economic, cultural, political and social life.
Tourism today is a trillion-dollar industry involving the movement of more than one billion tourists across borders and another five to six billion travelers domestically every year.
As we currently experience serious global uncertainties on many fronts, tourism has the ability to help make things better. It generates socio-economic opportunities that help narrow the gap between rich and poor and gives rise to a robust middle class that benefits everyone. By promoting interaction between the tourist and host community, it provides a wonderful opportunity to sample a different way of life. We taste new foods, hear new music and explore the world’s cultural and historic heritage when we go abroad. By enabling these experiences, tourism lays the foundations and builds the bridges that lead to tolerance and understanding.
Ask any beauty contestant what they most wish for and the reply almost certainly will be “World Peace”. In fact, the majority of the world’s citizens want peace because we know we all can do so much more once we have peace. Yet, sustained peace is probably the one eternal desire among all mankind that has been out of reach since time began.
In my opinion, the very best catalyst toward our achieving our cherished goal of living in a peaceful world is Tourism.
We live today in a world of misconceptions and miscommunications. Many in our global community believe that what they see on TV or in movies are meant merely to entertain, not to inform. The lines between the news and editorial sections of our daily print media have become blurred. Social media bombards us daily with disparate bits of information—rarely in a context that makes it meaningful. Time was when folks were confident that pictures don’t lie; but now almost everyone knows that pictures can be photo-shopped. Often, all we know about an event is a 15-second sound bite caught on the run or what an acquaintance said they heard somewhere. Many of our fellow citizens around the world grow up in environments peppered with propaganda often spread by governments or organizations eager to influence their beliefs and opinions and, ultimately, actions. It’s hard for anyone anywhere to know what to believe anymore.
Nevertheless, we all form our opinions and prejudices and develop animosity based on this misinformation. None of this is new, but the warp speed of today’s global media and the quest to be “first in the know” almost always ensures that the first headline is not the “whole story”.
As a result, we all have a view of the people around us, but we seldom have all the facts. Although 25% of US citizens now carry a passport, almost a third of those that do venture abroad stay in North America, visiting Canada, Mexico and the Caribbean. A relatively small percentage visits any of the emerging countries like the BRICS (Brazil, Russia, India & China), and Korea, the UAE or any of the other emerging countries—all of which are having a profound effect on the world and the global economy.
Just consider this: combined, consumer spending in the emerging countries has outpaced that of the developed ones every year since 2000 and is expected to continue on its rapid growth trajectory for years to come. The emerging countries now account for more than 50% of the global GDP in purchasing power and, in less than 10 years, the BRICs will add a combined $3.3 trillion to their consumer spending—a figure that equals adding another France and Germany combined to the marketplace.
The emerging countries are home to 85% of the world’s population and 90% of these people are under the age of 30. The total population of these countries is expected to grow at three times the rate of the developed economies now through the end of this decade. These projections are mind-boggling and we all need to sit up and take notice because the world as we all know it today will certainly be a far different place a decade or so from now.
This is where Global Tourism can play a huge role. We don’t really know what we haven’t seen and personally experienced. The world is out there for anyone of us who wants to learn and explore.
Everyone agrees that there is no better way to learn about a new culture than to experience it first-hand. And when you truly learn about other people by investing the time to meet them face-to-face and learn about their history and about what they cherish the most, you come away a far better, more informed and discerning person. You will be able to put what you hear from others into the context of your own life experience and make your own, informed opinion. Bolstered by your empathy and understanding of the world—as you have experienced it, you will become an advocate for how best to resolve the inevitable political and economic conflicts that arise. Most of all—you will have your own ideas on how best to achieve peace rather sitting in your arm chair, simply reacting to what others tell you.
No two ways about it: Tourism is our best bet for a peaceful, bountiful future. So, let’s all celebrate the many contributions Global Tourism has already made. More importantly, let’s all go out into the world and explore, learn and enjoy yourself!
When I joined Marriott Corporation in 1972, the company’s portfolio consisted of 22 properties—three franchises, one managed property and 18 company-owned hotels. As a business model, Ownership was easily understood. The Marriott corporate culture and values applied. Capital decisions and development were in Bill Marriott’s hands. We were growing, so considerable focus was placed on developing our associates. The company had clear objectives and direction.
At the same time, similar experiences were being replicated at Hilton, Sheraton, Western International and the other early giants of the U.S. hospitality industry. Most started with a focus on Ownership; while others, like Holiday Inn, focused on Franchising.
During the 1980s, in a quest for more rapid expansion, many of the Ownership companies began their transition to Management contracts while others moved into Franchising as their preferred growth strategy. By the 1990s, major branded chains had reduced their Ownership portfolio to a minimum and continued to operate with a combination of Franchising (Hilton, Wyndham, Quality Inn and others) and Management contracts. They started to create and acquire brands and aggressively applied the Franchise model in the economy and select service categories.
Today, the Management model is fast giving way to Franchised operations in the United States, Europe and parts of Latin America as all the major branded hotel companies pursue aggressive growth strategies and move into new markets abroad. Franchising has become a proven route to successful expansion and now accounts for turnover of US$300 billion in Europe, US$850 billion in the U.S. and US$130 billion in Australia. This trend will continue into the remaining global markets when local market conditions are right.
While Franchising allows the brand companies to attract strong local investors and local market insight and know-how, it takes the management of the brand culture, fulfillment of the brand promise, consistency of product and quality control of assets out of their direct control and places them in the hands of a mixture of operators with divided loyalties and priorities.
So, as Franchising becomes the dominant business model in the industry, who will win and who will miss the mark?
Winners will be:
1. Brand companies like Marriott who have a strong culture and are able to integrate their culture into the operating teams by reinforcing the culture at every turn.
2. Brand companies that focus on training for their franchisees and develop specific training programs that encourage brand loyalty and by conducting annual conferences for executive management and senior operators (general managers).
3. Brand companies that maintain strong, clear, effective and motivating communications between themselves and the operating companies, that use the rule of “selling,” not “telling,” and ensure that their message reaches all levels of the operating hotels.
4. Brand companies that differentiate their brands to the point that they are clear to the brands staff, the operators and the consumer.
5. Brand companies that enforce customer and brand standard audits. Underperforming operations reflect poorly on the entire portfolio.
6. Brand companies that focus all their efforts on reaching individuals who serve the customer so that they understand and can deliver on the brand promise.
The transition to Franchising is impacting almost all major brand companies and it will take several years to reach every corner of the world. But, the trend is accelerating faster than expected.
Whether you are a brand associate, brand company executive or operating company manager, the winner will need to excel at all these attributes.
The world has become increasingly global and interconnected in the past 10-15 years. And while people have been on the move since time began, welcomed immigration has tended to move in step with economic conditions—rising when the local economy is strong enough to accommodate the influx of new people and dropping when it is weaker.
Today, it is estimated that more than 200 million people globally live outside their home countries, a number that has increased by more than 40% in the past decade, according to the United Nations. Immigrants now comprise 3.1% of the world’s population, up from 2.9% in 1990. No one knows for sure how many of the global immigrant population is illegal, but the International Organization for Migration in Geneva estimates the number to be between 15% and 20%.
Here, in the U.S., which at 42 million has more immigrants, legal and illegal, than any other nation, the media reports bits and pieces of the situation, but doesn’t seem to look at the big picture. Congress seems not to want to make the hard decisions and choices in an election year that are needed to address the issue and our President, well, he just doesn’t seem to want to deal with real issues except to orate or to use his “phone and pen.”
Today, across the globe, while the nationalities of the migrants may be different, governments in developed nations are facing huge local public pressure to increase border enforcement and security, even as they welcome legal immigrants to help combat a shortage of skilled labor, such as in Canada, or to back-fill a rapidly declining population, as in Japan.
Over the years, America has prospered through legal immigration. My relatives were German and my wife is Italian. Past legal immigrants to the U.S. and their families have helped make this country great. Recently, I read an article in the Los Angeles Times that described the positive impact Asian immigrants from Korea and Japan to Bangladesh have had on Orange County where I live. They noted that in a county of 3 million residents, today nearly 600,000 Asian Americans make their homes here, up more than 40% since 2000. They discussed the resulting diversity of restaurants, shopping malls, languages spoken and the transformation of sleepy communities into bustling commercial centers as all positive developments.
No matter where you live, positive legal immigration refreshes the community. The problem we face today is illegal immigration that has no true regulation and generally invites immigrants who often include the criminal element trying to escape from the pursuit of the authorities back home. Several years ago, I served on a Federal Grand Jury in Orange County. About 30% to 40% of our time was focused on deportation cases of illegal immigrants who had committed crimes in the U.S.
Many of our citizens see the negative impact of illegal immigration on the infrastructure of our country. It’s a fact that schools, medical facilities, police, related local services and other community resources are stretched well beyond capacity today even without the added burdens of illegal immigration.
When immigrants are legally living and working in the community they too look on the current situation with dismay. A friend of mine, June Farrell, told me the following story:
”My housekeeper is a citizen and a native of the Dominican Republic. She recently asked me what I thought about what’s happening on the border. She is totally perplexed. She came here legally, earned her citizenship, reared a fabulous 21-year-old son on her own as a single parent and now feels threatened by this onslaught. I told her the kids involved are pawns and regrettably must go home because they are here illegally and that maybe we can help them in their own country. I was thinking maybe we could devise something like a Marshall Plan. She asked how and where these kids are getting the money to come here in the first place if they’re so poor…and I asked her what mother sends a child on such a journey in the first place. She asked how we can stop this. I told her we have an election in November and we must ensure that the Congress is Republican so that maybe we can fence in our current President. She agreed. She’s worried about her own son’s chances in this country if we don’t stem the tide of illegals.”
The fact is illegal immigration needs to be stopped and stopped now. The White House can take immediate action to seal the border as Texas has tried by mobilizing its National Guard to assist the border patrol. If we are going to be global, we need legal immigration; but, first and foremost, we need immigration that’s legal, measured and that meets our country’s long-term needs and strategic priorities.
For more than three centuries now, noted philosophers, historians and politicos of the day from Edmund Burke to George Santayana to Jesse Ventura have all told us to know the history of a place or a people or “be doomed to repeat it.” Seems like simple enough advice. Yet a quick look through recent global headlines, particularly those related to events now unfolding in the Middle East, and it makes one wonder if anyone is paying attention.
Less than 25% of all Americans have passports that enable them to travel abroad to explore other cultures. Most of our children are exposed to very little history in their schools. Our universities tend to not include history in their required curriculum. Our national leaders seem to not focus on, or think about, the history of a people when making strategic decisions that are consequential long into the future. Nor do they seem to invest time in understanding the culture of the countries with which they want to ally or even to go to war.
In my lifetime, I’ve seen Hitler fail to learn from Napoleon. Both not only attempted a two-front war but were so foolish as to allow their armies to become bogged down deep in Russian territory as the brutal Russian winter set in. Like Napoleon a century earlier, Hitler’s armies also went down to defeat.
After World War II, America had an opportunity to ally itself with Mao Tse Tung but chose the wrong Chinese leader. In Vietnam, our leaders underestimated the radicalized passion of Ho Chi Minh, who, inspired by the U.S. Declaration of Independence, was among a group of Vietnamese nationals who unsuccessfully petitioned the Versailles Conference to help his country shed French colonialism following the First World War, 50 years earlier. Soon thereafter, Ho embraced communism and the rest is “history.”
In recent days, a lot of global media attention has centered on the 100th anniversary of the start of the First World War and its aftermath. Nowhere were its repercussions more keenly felt than in the Middle East, where the dismemberment of the Ottoman Empire following the war caused national borders in the region to be arbitrarily redrawn with little to no regard for local tribal, religious or cultural sensitivities.
William Faulkner once wrote, “the past is not dead; it’s not even the past.” So, today we reap a whirlwind born out of decades of simmering tensions and tribal and sectarian hatreds. It often seems like our national leaders have not studied the Middle East or taken the time to understand its culture. Of course, brilliant historians and leaders abound, they have counseled wisely. But, our leaders, including our current President and our most recent State Department Secretaries, have not heeded their advice or simply have chosen to ignore the realities.
We’ve all read or heard that the root of today’s problems in the Middle East can be traced to the sectarian bad blood between the Sunni and Shi’ite factions of the Muslin faith. The tensions date back more than 1,400 years when the Muslim community had to decide who would lead after the Prophet Mohammed passed away. Some supported the idea that succession should run directly within his family (the Shi’ites) but other Muslims believed a pious individual who would follow the Prophet’s customs was acceptable (the Sunnis). Today, Sunnis represent 85%-90% of the global Muslim population.
But others, today, believe there is more to the story than a one-to-one correlation between these doctrinal differences and what is happening now in the region. They suggest the fighting now is more a fight for power than the variations in beliefs held by the Sunnis and Shi’ites, and the dwindling presence of the U.S. in the region means there isn’t anyone who can broker a deal or keep the tensions in check.
Thus, the region is in turmoil today. Our allies wonder if our words have any meaning anymore, and we, as a nation, seem to be floundering on the world’s stage, chasing after straws blowing in the wind.
As subsequent events have proven, the Arab Spring turned out to be far more complex than first reported and portrayed.
Today, in Iraq, the U.S. installed and still supports a Shi’ite majority government, while the country’s Sunni minority population, which ruled the country since the end of World War I until Saddam Hussein was toppled and now fears a Shi’ite backlash, seethes. Over in Afghanistan, one has to wonder what those in that country, who cooperated with us over the past decade, are thinking as we prepare to exit that theater too.
The Tunisian revolution, meanwhile, was economic, not political. Egypt’s revolution (I was in Cairo as it unfolded) began as an economic protest and evolved into an effort by the Muslim conservatives to gain power.
Syria’s conflict began as an attempt to overthrow a Shi’ite minority government by a Sunni majority population. The U.S. considered supporting the Sunni insurgents, but didn’t follow through. Now, this conflict has erupted into something much more menacing as the ISIS insurgents try to establish a caliphate throughout the region.
And the examples continue to grow. We supported Saudi Arabia when it moved its troops into Bahrain as the country’s majority Shi’ite population challenged its Sunni minority government. In Libya, we supported the overthrow of the dictator in what was an internal tribal conflict.
Today, there is a Leadership vacuum in the Middle East due in part to our government’s failure to understand and to be sensitive to the region’s history, culture and people. We appear inept and feckless when dealing with the new/old regional power brokers of Saudi Arabia/Qatar and Iran. All this is enough to make one’s head spin. It’s like listening to that classic Abbott & Costello comedic skit, “Who’s on First.”
You’re probably wondering why I’ve devoted an entire column to events now unfolding in the Middle East. It’s because we must learn from others’ and our own mistakes. However complex the events may seem, what’s happening now in the Middle East will have far-reaching global consequences if we don’t get it culturally and historically right this time.
Closer to home, cultural understanding can play a key role in your personal and business life as well. It can improve your relationships with your employees, partners and customers. And if you work for an overseas company, either in the U.S. or abroad, it will serve you well to make the effort to learn its culture and heritage. So do your homework, be realistic about what you learn, use what you learn to your advantage and be flexible as long as you’re not violating your own basic values or breaking any laws.
You’d be hard pressed to identify a culture that isn’t proud of its cuisine or doesn’t make a big deal out of dining. But nowhere is this pride more evident than in the Chinese culture where dining is an art form that extends well beyond the food being consumed, and is the garden in which most relationships, both business and personal, can take root and flourish.
Over the years I’ve been fortunate to attend numerous lunches, receptions and dinners in China. I learned early on that the act of dining in the Chinese culture is where relationships are built, where business deals ultimately get done and where respect is shown. Dining provides the stage where you can get to know associates, colleagues and potential partners while celebrating a holiday, a wedding or other event. After all, as the local thinking goes, if you can’t find common ground in a setting like a festive dinner, how can you expect to have a deeper relationship when serious issues are involved.
I quickly learned the basics: show respect by being on time; bring business cards with details in Chinese and present the card with both hands with the Chinese face up and to never write on someone else’s business card. I learned to greet my host first, not to overlook anyone, and to try to create small talk throughout the event by sticking to safe topics like sports, the weather, travel destinations, food and hometowns, sightseeing, how much I enjoy Chinese hospitality and their city (the one I’m currently dining in) and not to talk about business specifics unless my Chinese host raises the issue first. Lastly, I learned to anticipate the long-haul (Chinese dinners can extend well beyond three hours), stay engaged and animated throughout, and to never leave the meal first even if everyone else has finished eating except in an emergency.
Recently, I attended an official Chinese banquet for 7000 guests here in Southern California. It was a dinner recognizing the high achieving participants in the largest Chinese incentive travel group to ever visit the US. I was seated at the head table – a setting that sat 30 people! This honor and recognition was not given lightly.
The head table was populated by the group’s key executives. I was seated to the right of the chairman and the former Chilean President. How did this come about? It was in recognition of my relationship with the Chinese tourism industry that reaches back decades. Our hosts were simply giving “face” to a long-time friend. It was an honor and I was deeply appreciative.
Like most occasions, dining in the Chinese culture has its protocols. Take seating arrangements. Aside from indicating hierarchy, seating arrangements give “face” to attendees, especially those who are guests of the host. At a round table, the seat directly facing the door is usually reserved for the most important or highest level attendee—whether or not he or she is host. The second highest level attendee sits to the left of the highest and the third highest level attendee sits to the right of the highest level attendee. From there, the seating continues with left taking precedence over right when distance is equal.
Toasting also has its “rules of the road.” Usually, the host offers an initial toast to the group as a signal that the meal is starting. After several rounds of toasting, you should toast back at least once to the host and party. As you make your toast, be sure that your glass touches a lower part of the others’ glasses, taking care not to touch the bottom of anyone’s glass.
As the dinner winds down, take your cue from the host. He or she will signal an end; and, if you are invited to linger after dinner, take advantage of this additional chance to further develop the relationship in a social setting.
Finally, plan to bring a small, inexpensive gift, but with significant meaning and appropriate to the occasion, for the host and his party.
As China globalizes its economy and plays an ever larger role on the world stage, business in China will more likely be conducted in its secondary and tertiary cities where it likely will follow local traditions. It will be even more critical for you to develop ”guanxi” with your potential partners. Remember, to be successful doing business in China has little to do with your power point presentation, the company you represent or your wardrobe. It depends on the “guangxi” you forge and who you build this relationship with. And even though, today, expansive and expensive dinners are being scrutinized in China because of the perception that these can be a form of a bribe, there still remains no better venue for building a relationship than over a good dinner – no matter where you are, but especially in China.
So, what do sea turtles and China’s economic prowess have to do with the rest of us anyway? … Plenty! It’s time that we take notice and welcome the sea turtle presence among us.
Since 1978, more than 2.6 million Chinese students have gone abroad to study and America’s elite universities and colleges have ranked among their top choices. Last year alone, these institutions claimed more than half of the 400,000 Chinese students who went abroad – positioning China as the top sender of international students to this country for the fourth consecutive year, beating out Japan, India and South Korea. China’s Ministry of Education reports that about half of these students return and, over the years, have made a huge difference in the country and to its people. They point out that whereas earlier returnees such as Jiang Zemin and Li Peng revolutionized China, todays are globalizing the country.
In today’s China, these returning students are often referred to as haiku, or “Sea Turtle,” a term that means a returnee to China who has studied or worked overseas. They have long been applauded for bringing back advanced skills. They are well-educated, young, hold degrees from foreign universities, often in the sciences, and they represent the brains China needs to power its continued growth.
Sea turtles are not a new Chinese phenomenon. Some 1,300 years ago, imperial China sought out the best and brightest people to become its civil servants. For centuries, these Mandarins ran the world’s most advanced government of that time. The modern-day tide began with the Industrial Revolution in the 19th century and each wave of returning scholars since then has left its imprint on the industrial or political life of the country. The present wave is by far and away the largest and has the potential to have the most impact on the future political and economic life of the country.
Once back home in China, today’s returned students find opportunities especially in the Internet sector. Others find places in local divisions of multinational firms. If they are returning top scientists, they can participate in a Chinese government program called the 1,000 Plan that provides financial aid and assistance. If they want to start their own companies, they can take advantage of any number of “incubator” parks established by local governments. Even if they don’t make use of these tangible opportunities, the returnees are in demand by local employers simply for the insights and breadth of world experience they bring to the table.
Even so, about half of the students who study abroad elect not to return, and if they do, many make the trip back only to leave again within six months or less of coming home. The National Science Foundation recently found that 92% of Chinese graduates with American PhDs still lived in the US five years after graduation. For Indians, the figure was 81%, for South Koreans 41% and for Mexicans 32%. For whatever reason, when it comes to this cadre of China’s sea turtles, it appears Thomas Wolfe may well have been right when he titled his posthumously published 1940 novel, “You Can’t Go Home Again”.
Whether the sea turtles among us today stay here or ultimately return to China, we and all the other countries that host these students have a tremendous opportunity to make a positive impact on how China’s future leaders view and respond to our cultures, social values and business practices.
While living in our countries and attending our universities, these students are not a burden on local tuition aid resources. For many, the daily discourse between them and our young people provides mutual insight and understanding even as each culture influences the other—giving both sides an opportunity to appreciate and learn from the other’s point of view.
We need to be mindful of the fact that increasingly we live in a borderless world. It was reported recently that the unprecedented growth of the Chinese middle class in the coming decade will fuel a surge of 500 million outbound travelers, not the 200 million that was predicted just a year ago. Many of these future visitors will be the sea turtles among us today. The quality of our welcome and the hospitality we extend while they are students in our country now will influence the tenor of the relationship we will have with them down the road – whether as business partners, deal negotiators, friends or simply tourists. I say, “Ni Hao” to them.
The numbers are mind-boggling. Social networking reportedly now eats up more than three hours of the average American’s day. Google logs more than one billion searches each day. On YouTube, 60 hours of content gets uploaded every minute, and over at Facebook, more than 800 million updates are recorded daily. We are becoming so wired technologically 24/7 that before we know it we’ve lost track of time and, sadly for many of us, we learn we’ve lost touch with some of our most important relationships both personally and professionally.
In 1990, United Airlines ran an award-winning TV commercial called “Speech” whose message – one on one is how business gets done – resonates to this day. From a customer perspective, the more transactional the relationship you forge, the easier it is to simply walk away. The deeper the bond between customer and service or product provider, the harder it is to break, and, over time, the more satisfying the relationship becomes for both parties.
In the US where relationships tend to congeal fairly rapidly, it still takes time and effort to reach a solid level of trust. The challenge is much more complex overseas as US companies operating in China today can attest. These companies operate in a business environment best described as “constant flux”. Signed and sealed contracts may be suddenly repudiated as a new partner jumps ship for a richer offer. Local and/or national regulations may be in full force one day and ignored the next. As Marriott discovered early on, the best way to keep abreast of upcoming changes in the Chinese business community is to nurture good Guanzi—good relationships—with those in the know.
To cultivate your relationships, you need to reorganize your time and schedule to make time for personal, face-to-face contacts. It takes a conscious effort to overcome the pressure of everyday problems and deadlines.
In my case, before heading out on a business trip—whether across the sea, or across town—I put together elaborate itineraries that expose me to the maximum number of people in the minimum amount of time. Along the way, I may be a trouble-shooter, a representative for my company at largely a public relations event, a salesman, an empathetic associate to a business colleague who recently experienced a set-back, a celebrant at another’s professional success. It’s the time you take, the personal nature of the service or concern you provide and the very real way that you show you care that matters most.
In a world that daily becomes less personal as technology expands its grip on the medium of human exchange, forming productive relationships with business associates can give you a competitive advantage. Outside the US and a few other Western countries, relationships are the single most important badge of entry into the realm of successful businessmen and–women. Become adept at relationship building and you will have an easier time solving problems, building your business and increasing your profits.
As I write this, I am leaving for Beijing/Shanghai and Dubai to press the flesh, build relationships and visit my overseas offices. I hope to have additional insights on my return.
Today’s educational community is often accused by the industry of not keeping up with the changing needs of the workplace and of churning out graduates who are ill prepared. The fact is, however, that today’s academic community holds the key to developing our future leaders–whatever the industry.
Nowhere is this perception gap clearer than in the hospitality industry. Time was, not too long ago, when our employers offered unbeatable opportunities to focused individuals who welcomed the chance to work their way up the proverbial ladder–from doorman to general manager, housekeeper to chief operations officer, lifeguard to president.
But times have changed and the U.S. hospitality industry has been undergoing a massive structural change. The lucrative opportunities it once offered the eager and willing are not available without proper and adequate educational preparation at all levels of the enterprise. And considering that our industry last year created 38,000 new jobs every month, the gap between its needs and the perceived level of preparation its future leaders receive at all levels must be bridged with alacrity.
Consider today’s operational shift from a focus on property ownership and management to an emphasis on franchising. This business model change has turned the old order upside-down. It has created new ownership groups such as Asian-American franchisors–almost half of all U.S. motel franchisees now are Indian-Americans. They have led the growth in the select service sector and continue to expand the franchising model of the largest brand companies.
Today’s franchise operating companies simultaneously run portfolios of hotels for a number of major hotel brand management companies like Hilton, Starwood, Marriott and InterContinental, and have been instrumental in developing successful prototypes for these brand companies.
Coupled with the new ownership structures such as the Sovereign Funds from the Middle East and China, this structural shift is resulting in the reduction in management responsibilities of the major brand companies.
Then, there’s technology. It seems like we’ve been talking about technology and its impact on our industry for almost two decades now. In the past few years, however, the impact has been so dramatic that it has influenced operating systems, source market marketing and distribution channel development.
Technological breakthroughs have also served as the foundation for leveraging operational services such as accounting and reservations, for the development of operating structures such as the ability to leverage multiple brands with one operating team, as well as for creating service centers. Sophisticated systems require sophisticated management to maximize the system’s value. Developing these systems requires new skills and highly-educated experts with an understanding of our industry.
Our global source markets are also undergoing a sea of change. Global markets have been the driving force behind the U.S. economic recovery. In the past, these markets traditionally were our neighbors (Canada and Mexico) and long haul, developed markets such as Japan, the United Kingdom, Germany and France. Today, visitors from emerging markets like Brazil, Russia, Korea, India and China are making their mark. By 2020, China will be the largest traveling public in the world, generating more than 200 million travelers. We must develop services and products that appeal to these new visitors and be flexible in our offerings to gain market share.
Labor and related costs are the single largest growth expense category in hotel operations. Last year, these costs accounted for 45 percent of all dollars spent operating a hotel. Add in turnover costs that AH&LA estimates can run from between 25 percent to 50 percent of annual salary for each exiting employee and it quickly becomes clear that these costs are formidable under any circumstances. So much so that they are now influencing staffing levels and the brand design as well as the products and services. In years to come, these costs will challenge our industry to find new incentives, labor models and technology to compensate for labor.
Significantly, today the most visible impact of these operational and structural changes is the demand that existing brands remain relevant and the demand for new brands to enable the brand companies to expand and seek new market segments. Branding carries the responsibility, as never before, to define product development, design and positioning. Brands must ensure operations can deliver the brand promise. The growing complexity of managing the branding is paramount.
But it falls to marketing and sales to meet some of the biggest changes–constantly evolving technology and the way today’s consumer wants to shop; the dramatic, global cultural changes; and the emergence of new generations of consumers. These and other business channel alterations have resulted in tremendous changes in the group, transient, MICE markets and emerging source markets. The primary media has switched to digital and social media while revenue management dominates marketing and sales strategy. Leaders today need to be prepared for the evolving global influence because consumer needs across the board won’t be the same and the marketplace will be ever shifting.
What all this means for hospitality education remains the biggest challenge. Undergraduate degrees will continue to provide operators for the industry, but placement will be more difficult since it will be the franchise companies who will be doing the bulk of the recruiting rather than the brand companies.
The challenge for the university is the same as for the hotel brand executives–to ensure that their graduates are perceived as having the most cutting-edge preparation which exceeds that of the competition. More importantly, hospitality educators need to ensure their graduates are prepared to perform successfully in one of the most complex industries around.
For their part, students need a desire to learn, a focus on business in general and a great deal of preparation for “leadership” in the broadest sense of the word. The graduate can’t count on receiving the “on-the-job” training previously provided by the brand companies to fill in the gaps. They will find themselves in a supervisor/management role sooner than they think. Along the way in their careers, they will have to be quick, perceptive and responsive to the many changes coming their way. Constant learning will be the order of the day and there may not be any opportunities for second chances.
Students will also face another big decision–executive leadership in the brand companies as well as the operating companies will require an MBA. This industry is no longer an operations driven enterprise. The major brand companies today are almost all led by non-operational executives who have advanced degrees. The combination of a hospitality degree and an MBA will be the future and that future is now.
In a previous article I discussed how having good personal business relationships can often save the day when something goes awry.
But, successful relationships don’t just happen over night; they are two-way affairs. Partners and associates must believe in the honesty and good faith of their leaders, and vice versa. When and how trust develops between business partners or between leaders and the people they lead depends on previous experiences, the personalities involved and the specific situation. By rights, the degree of trust should correspond with actual performance, but life is more complicated than that. Our individual quirks, feelings and prejudices often come into play.
Maintaining strong ties can be as simple as making a quick stop to pay respects when you’re in town. Here’s what I mean. A problem at one of our Thai hotels a few years ago required me to make several quick trips to visit the owner over the span of several months. As I should have expected, two other Bangkok owners heard about my visits and e-mailed to complain that I hadn’t dropped by “to spend some time with us.” They were looking for what I call a relationship visit.
The disgruntled Thai owners were reminding me of the first rule of relationship maintenance – everyone needs face time. Notes and phone calls can buy you time, but they are only stopgap measures. To do the job right, you must meet in person, face-to-face. Nothing less will do. You’ll find the payback is well worth the trouble.
Reassurance was what our two Bangkok owners were looking for when they raised their complaint. Their confidence somewhat shaken because Marriott was opening new hotels in their city, they needed to hear that their properties would not be pushed to the sidelines. While our Asia executives made special trips to see them, the owners wouldn’t feel completely relieved until I spoke to them directly – face-to-face.
On my next trip to Bangkok, I arranged to have dinner and a lunch with each of the owners separately. As is our custom, the conversation during the meal was relaxed, friendly and devoid of business issues. Later, when we got around to business, I let them know that I understood their anxiety. But I also reminded them that Marriott manages multiple properties in major cities all around the world. For example, in the Atlanta area alone, Marriott operates more than 100 hotels under various Marriott brands. Finally, I pledged to continue marshaling our superior resources in support of their particular properties.
Since that minor rift, our well-tended relationship garden has continued to produce a cornucopia of mutual benefits.
Here are some lessons I’ve learned about building relationships:
Tend to your garden. Business associates need to know you haven’t lost interest in their challenges and successes.
Schedule it. No matter how sincere you are when you promise to visit your associates or clients in their places of business, it’s doubtful that you will fulfill those commitments unless you put them on your schedule and stick to it.
Enjoy the benefits. You don’t have to personally like your business associates, but you do have to maintain regular contact with them if you hope to prosper. Strong business relationships can give you a competitive advantage, and face-to-face contact is especially valued in an era when impersonal technological communications dominate.
China’s hoteliers achieved a dramatic milestone earlier this year –one that signals a profound change in the dynamics of our industry globally.
For the first time, not one, but two China-based hotel groups leaped into the ranks of the world’s top 10 hotel companies. Shanghai Jin Jiang International Hotels with 1,243 hotels and 193,334 rooms now ranks ninth in the world as Shanghai-based Home Inns & Hotels Management with its 1,426 hotels and 176,824 rooms came in at 10th place—joining long-time industry stalwarts IHG, Marriott, Hilton, Wyndham, Accor, Choice, Starwood and Best Western as the industry’s dominant players.
With its population base of over 1.3 billion people, China’s huge domestic tourism market and expanding middle class have generated a 10 percent tourism growth rate every year over the past decade. This phenomenal expansion has enabled Chinese hoteliers to lay a solid foundation for entering the hotel business on a global scale. Domestic Chinese tourism now contributes about five percent to the country’s GDP, greatly enhancing local employment, consumption and economic development. Today, over 80 million Chinese tourists a year travel to far-off places like the US, Australia, the UK, Canada, Germany, Italy, Spain, Brazil and Mexico. This number is expected to increase exponentially as the Chinese government recently announced plans to boost its tourism sector another 10 percent. By 2020, Chinese mainlanders are expected to make 200 million cross-border trips annually.
The Chinese path to international expansion is not unlike that which hoteliers in North America and Europe followed in the second half of the last century when western hotel chains built their domestic portfolios then turned their attention to tapping international markets.
Today, while western chains continue to expand their reach into China through franchising, management contracts and new brand introductions, Chinese hoteliers are employing a variety of strategies to gain a firm foothold in markets beyond their borders. Along the way, they are fine-tuning their experience with various business models.
For example, over the past couple of years, New World Hospitality bought Dallas-based Rosewood Hotels & Resorts, China’s HNA Group took a 20 percent stake in Spain’s NH Hoteles, and Shenzhen New World Group bought the Sheraton Universal Hotel and the Los Angeles Marriott Downtown Hotel in Los Angeles. China’s HanTing Inns and Hotels is similarly reported to be interested in expanding its operations by looking at hotels in the West.
Perhaps, the most aggressive among China’s expansion-minded hoteliers has been Shanghai Jin Jiang Group which joined with Thayer Lodging to buy Interstate Hotels & Resorts in the US. Jin Jiang recently struck a deal with France’s Louvre Hotels Group in which Jin Jiang Inn customers will be able to make reservations for Campanile hotels in five French cities and Campanile customers can book rooms in 15 Jing Jiang Inn hotels in China. In addition, Jin Jiang also entered into an alliance with Spain’s Sol Melia as a first step in forging a larger partnership.
It’s clear western markets offer attractive opportunities for these hoteliers.
In the past decade, China’s hotel industry has developed in quality and quantity. China Hotel Association reports there are about 300,000 hotels in the country, with approximately 11,000 of these hotels holding a four-star rating. The booming Chinese economy has enabled the big domestic hotel groups to build their networks and to grow in popularity. As mainland Chinese tourists and businesses become the world’s dominant travel group, they will become a solid customer base for these chains as they move into western markets, including Africa.
Meanwhile, the difficult economy in many western countries has created an attractive environment for mergers and acquisitions as well as for other forms of consolidation and integration as ways to instantly penetrate new and emerging markets. And, franchising is proving to be a potent engine for global brand distribution.
In the years ahead, Chinese hoteliers will continue to build their global reputation and to increase their brand value internationally. It won’t be long before a Chinese-flagged hotel opens its doors on Main Street, USA or the Champs Elysees.