5 Contrarian Implications for
Global Hospitality in the Trump ERA
The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger - but recognize the opportunity.
John F. Kennedy, Speech in Indianapolis, April 12, 1959
1. A New Talent War in U.S. hospitality: Under “America first,” changes to employment Visas, trade agreements such as NAFTA result in higher costs, fewer qualified hotel executives operating properties and ultimately lower service levels. Moreover, conflicts between owners, brands and unions will intensify on issues such as wages, health care benefits and job definitions especially in full service properties in gateway cities. As the public learns more about the staggering inequality of income distribution between owners, brands and employees, the hotel industry will be required to fundamentally change its labor practices. An industry whose employees are already seriously challenged by quality of life and relatively low compensation and rewards will face new challenges;
2. A Sharp Decline in Brand Equity for U.S. Chains. We often talk about REVPAR index, share of hotel pipeline and percentage of direct hotel bookings. But a key measure of a hotel brands equity is the ability of a brand to attract, develop and retain talent. In the coming years, despite their scale, U.S. based hotel brands will lose their “soft power” or cultural attractiveness as a training ground for international talent. European and Asian based brands and smaller brands and independents will become employers of choice along with international boutique and lifestyle brands;
3. Decline in U.S. Inbound Travel/Boom in Intra-Every Other Region and Domestic Travel. President Obama’s introduction of a 10-year Visa for Chinese visitors may come under challenge. Long immigration lines, strong currency and a politically unstable U.S. political environment will become detractors. The unintended consequence may be greater wallet share and trips for intra-Europe and Intra-Asian travel, as well as domestic U.S. travel. For example, Greater Chinese travel to Japan will surpass 10mm annual visitors or over 60% of inbound arrivals well ahead of expectations. The new U.S. administration may build new airports but it’s quite possible they will experience less international traffic;
4. Significant Growth in Pipeline of Women and Minorities as Hotel Managers and Corporate Executives. According to our research, women and minorities represent over 70% of hospitality employees but less than 20% of GMs, 10% of the senior corporate management teams and less than 5% of boards. These figures are even more glaring in regions such as Asia and the Middle East. I love our business, but this has to be the worst diversity track record of any major industry. According to Mckinsey, the business case for change is compelling: Studies show that for every 10% in managerial diversity generates 1.5% increase in profitability. Just as they have in travel technology, consumers, citizens and activists will demand social change not just in the U.S. but around the globe. Brands and owners that lead the way will be winners;
5. The End of Hospitality Education As We Know It. We will witness a sharp decline in Asian students in the U.S. (who are primarily from China and India) from its current high of almost 450,000 to half this amount in 4 years. This alone will spur innovation in pedagogy. Hospitality schools will shut down and others will evolve into a functional areas such as marketing or finance. And yet it will become more important than ever to foster a global perspective. Graduate schools of business, law schools, information technology and other disciplines will partner with hospitality experts to create new curriculums and programs that train future hotel managers across disciplines. Demand for such multi-disciplinary programs will grow tremendously as the industry upgrades its standards for talent.
In every crisis, there is opportunity for leadership. At Cachet, we are external optimists and see great opportunity in these forthcoming structural changes in our industry and the world economy. I welcome your thoughts and comments on these prognostications about the future of our remarkable industry
- Alex Mirza, Co-Founder & CEO, Cachet Hospitality Group