01/07/09, 22:54:18 UTC

  e-mail this article

Are Full Hotels desirable or beneficial to the Tourist Industry?

hospitalitynet.org

100% occupancy can be damaging to your wealth.

The immediate response to the question of whether 100% occupancy is desirable would probably be an unequivocal ‘yes’ from both Tourism authorities and Hoteliers.

Examined in a little more depth and the answer is not such a reassuring positive. In cities like London high occupancy rates have three effects:

They increase hotel profitability
They stimulate new investment in the market, with new openings both compensating for substandard hotels leaving the market and moderating prices by making more rooms available
They deter visitors with stories of ‘rip off rates’ and the expense of visits.

What happens if new hotels are not opening with frequency? Oslo, for example, has a very restrictive approach to the development of new hotels, the development of the new Grims Grenka boutique hotel being an exception as the government tries to push tourists away from the city into the countryside. Whilst the desire to spread tourism income over more of the country may be admirable, there are drawbacks to this approach. The most obvious one is that tourists want to go where they want to go, and this kind of ‘visit engineering’ only works if there are visitor attractions available. As one tourism professional said:



“it is all very well saying come to the country and learn to milk our goats, it amuses the first morning. Faced with doing it again the next morning the reaction is different”

If the aim of planning is to satisfy demand then hotels need to be built where the visitor wants to go. In cities such as Oslo or London, much of the visitor traffic is often business oriented, or mixing business with pleasure, there is no alternative but satisfying the demand. The lack of conference facilities of International stature in London is subject to continual debate (but not resolution as the politicians fiddle) whilst in Oslo accommodation for delegates is problematic with on occasion delegates to Oslo conferences being put in hotels in towns as far away as Lillehammer. With networking such an important part of Conferences the dislocation through travel is unacceptable to delegates.

Other side effects are hotels struggling to cope when always full, with no slack in the staffing requirement, pressure of facilities exposing any design flaws or weaknesses in housekeeping and the non-availability of downtime for maintenance or refurbishment. Staff absence or holidays become problematic whilst management can become complacent and lose sight of brand or hotel standards and only worry about coping with demand. It is important in this scenario that hotels do not lose sight of standards or become content to just fill their rooms because alternatives will present themselves, or a whole market may shift whilst still keeping demand high.

Thus in Norway the rise in domestic Tourism (up 2.5%) is at the expense of tourism from outside the country, which has fallen a full 3.7% (figures from Norwegian Ministry of Foreign Affairs). Whilst improvement in transport infrastructure may make it possible for tourist number to grow strongly (against of course a background of exceptionally strong international tourist numbers growth)through easier access (cheap flight to and from the UK for example, for the building of a road and rail bridge across the Ǿresund making car-borne tourism increase for Sweden and Norway). For market share of foreign tourism to fall whilst international tourism generally is increasing suggests that there is a problem with Tourism for Norway. Most often it will be the independent traveller and business man that lose out as the block bookings for tour groups take up the available capacity. They do this because Travel companies book more than a year ahead where as independent travellers who book direct with the hotel will not work so far in advance. If a five star hotel is accepting booking predominantly from tour groups (at a discounted rate presumably) in place of wealthy individuals this will inevitably both change the nature of the hotel and also deter the more discerning of the individual travellers.

In the case of Norway, with over 25,000 kilometres of coastline, many of the tourists will switch to mobile hotels – no, not caravans or mobile homes as these are sensibly barred from many Norwegian roads, but onto cruise liners. These remove much of the revenue from their destinations, as they eat on board the boat, sleep on board in their staterooms, and leave the ship only to photograph the tourist sites, adding to urban traffic without necessarily contributing markedly to the local economy in the way a hotel guest will do.

For Norway with its immense oil revenue and a per capita income that is second only to Luxembourg in the global indices this many not represent a problem (local description of the younger generation as the ‘dessert generation’ because all they want is the sweet course of life, indicates that such problems do exist), and the government may be sanguine about the decline of their third largest industry (after Oil and Fishing) but this cannot be the case in other cities. In London the latest Tri survey suggests hotel rates of occupancy are nearing 90%. In tandem is the news that US travellers, frequent wealthy individual travellers, are in numerical decline as a part of the London tourist market. Are we seeing a replication in London of the problems in the Norwegian market?

If so this is a serious problem and needs to be seen as a wakeup call to Tourism and planning authorities in the UK. Over 30 years the hotel development industry in the UK has seen a steady building programme, but all this has done is to replace bedroom stock leaving the market with new stock. Bedroom demand is beginning to outstrip supply .Not only do we have the Olympics in prospect in 2012, which will generate a huge uplift in visitor numbers, but Tourism is one of the UK’s largest industries, largest employer, and vital to the health of the economy, in London in particular.

100% occupancy can be damaging to your wealth.

 Printable Version  | published Sep 10, 2007