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Rising costs of land and labour is not news. What is news is the rapidly drying pool of talent in an industry that is expected to sell warmth, kindness, understanding and comfort.

Technology was once thought to be the knight in shining armour did arrive but not to save the industry. The knight came bearing news of alternative entertainment (uber eats, etc), better paying and more comfortable jobs and of course, more price-and-quality competitive value for the guest’s entertainment dollar. The slow slip for over-head-ridden hotels into the abyss of history has long since begun (see their slant toward serviced apartments?) and for restaurants, albeit with lower over-head, it is a question of redefining quality. Over the next 5 years only the smartest will survive.

F*** Off. Don’t Think for Me!

“The Queen of England may be your fan! Good for her! I’m secure enough not to want to bathe in the reflected glory of a monarch grown rich(er) on pillaging the weak,” said Dwight Arnolds, British frequent flyer and ardent all round impresario.

“I regret spending top dollar on the Mandarin Orientals of the world when in hindsight, I have rarely got as much for it. I hardly spent any time in the room, nearly always ate out with friends and/or business partners and hardly ever brought any back women to the hotel for a night cap far less anything to follow.”

“Today, I ensure I pay for what I use and no, I don’t miss the plastic smiles. I’ve grown wise and those toffee-nosed bastards are not getting any more of my hard earned money in exchange for their overpriced, fake hospitality.”

Well into his spiritual journey, Arnolds is a wild-life photographer and fashion brand consultant.

“I think the Internet has opened up the possibilities and I’d much rather spend on what I’m getting. It’s the same thing with the Shangri-La brand too. You drive half a million miles to get to most of their large hotels most of which I don’t use at all. I’m tired of their cunning pricing and the quality chefs they used to have are long gone. Now, its just run-off-the-mill cooks selling range rather than quality.

“Mary Mathews, a food critic for the American press also laments the fall in quality across Asian hospitality. Hotels are now united in abusing the mainland Chinese markets, like they poured scorn over the non-Chinese markets for years. Soon, the China guest will also begin to demand value, then lets see how the industry responds. I think it boils down to a chronic lack of quality training or a shortage of manpower. There are too many bosses and increasingly less workers. The more interesting question is...why?”

The Fall from Grace

“Greedy owners demand more profit. They wouldn’t know what the ‘spirit of hospitality’ was if it was the Eiffel Tower that fell on them. They threaten General Managers (GMs) when not stoking their already inflated egos. GMs in turn stay loyal to their #1 priority – building their own resume. Get photographed with as many celebrities as possible, hog the press at every opportunity, ensure your staff likes or fears you, retain as much control while giving the opportunity of staff empowerment and use the property to your personal advantage in every way with every discretion. Pay staff as little as possible and squeeze as much as you can from them in exchange for a photo opportunity with you, empty (and insincere) praise and little else – that’s what makes a successful GM,” says Thomas Mier, a retired veteran Swiss hotelier who has worked in Asia, Europe and the Middle East over 35 years.

“The whole idea of what a hotel should be has been eroded over the years. Today, hotels are just fancy brothels and which self-respecting young person wants to work like a dog there for a few coins? The industry better embrace automation sooner. That’s the only way because creativity requires intelligence and effort both of which there’s a scarcity of.”

But, Business is Booming...for now!

As an overview, here are some major market trends in the Asia Pacific hospitality sector with the recent flourish of tourism inflow in the region. The major reasons include the increase in household income and the rise of the middle class. Also, this trend is mainly lead by the increment in the Chinese outbound tourists. However, Chinese tourists spent less on accommodation while the overall occupancy for traditional hotels has been decreasing and unconventional and budget accommodation such as Airb&B is on the rise.

The compound average growth rate (CAGR) of tourist arrivals for the Asia pacific region from 2008 to 2015 was 5.3% which is much higher than the global average of 3.1%.

As per United Nations World Tourism Organization (UNWTO) statistics, 279.2 million tourists arrived to the Asia Pacific region. Among the region, Japan experienced the strongest growth with 47% on y-o-y, due to the low cost carriers, easier visa processes and depreciation of Yen during 2015.

Australia and New Zealand also benefited with increased tourist arrivals with currency depreciation. Yet, the author also noted that the weakening of several currencies in the Asia Pacific against US dollar has caused a disproportionate increment in the tourism receipts totaling $418.3 billion in 2015. However, still a 4% y-o-y growth rate was recorded after adjusting to the currency exchange fluctuations.

Accept for Hong Kong, most Asia Pacific markets experienced a rise in tourist arrival growth with increased visitors from China in 2016. Although, the overall tourist spending in Japan declined due to the appreciation of Yen in H1 2016 despite the continued inflow of tourists from Greater China and South Korea.

The UNWTO forecasts positive long term trends for Asia Pacific tourism market, and as per Tourism Towards 2030, the region is expected to experience the strongest growth with 5.7% in the next five years. Tourist arrivals are estimated to grow up to 355 million by 2020.

Market Flux

The boost in the Asia Pacific tourism is mainly the result of expanding middle class and increase in household income encouraging people to take overseas vacations. The middle class with a daily discretionary expenditure of $10 to $100 is expected to reach 1.7 billion by 2020 in the region, research shows.

With an estimated growth of 286.3 million trips by 2020, intra-regional tourism will be the main demand driver as most people will travel within the region for their first overseas trip.

Research also highlights the decrease in hotel performance despite the upsurge in tourist arrival. As per CBRE research, the average occupancy for hotels got stagnant and remained at 68% since 2011, while the Average Daily Room Rate (ADR) got flattened.

Most notable weak markets during 2015 were listed as Kuala Lumpur, Hong Kong and Singapore which were also impacted by lower visitor arrivals and currency depreciation against USD. Unlike these markets, Osaka, Melbourne, Sydney and Auckland, recorded positive ADR growth with constant tourist arrival growth. Despite the bomb in 2015, Bangkok also recorded strong growth in H1 2016.

Full Service Hotels Losing It?

The traditional full service hotel segment has been facing challenges in terms of higher fixed costs and premium pricing strategies making it one of the reasons for the disproportionate hotel performance in spite of the robust tourist arrival growth.

Moreover, the weaker demand for Meetings, Incentives, Conferences, and Events (MICE) tourism from multinationals which are more cost concerned poses negative impact on revenues of hotels in that category. Meanwhile, boutique hotels has been gaining popularity.

However, the overall hotel performance in the region will grow at a slower pace. According the STR Global and CBRE research, the number of hotel rooms will improve by only 2.6% in the region during the next five years which will be much lower than the expected annual tourist arrival growth rate of 5.7% for the Asia Pacific.

Chinese Outbound

Tourism in the Asia Pacific will continuously flourish with the growth in outbound tourism from China. Chinese outbound tourism grew by 10% y-o-y reaching 128 million in 2015, while tourist expenditure rose by 26% which accounts for US$292 billion.

Factors behind this boom in outbound tourism from China includes increasing household incomes, appreciation of RMB, relaxation of visa policies and the enhancement in the international air connectivity.

A large majority of intra-regional travel still comes from Chinese outbound tourism, as China was among the top three source markets for 10 out of 12 key countries in the region in 2015. With weakening of Yen and relaxed visa processes, Japan experienced doubling on y-o-y of Chinese arrivals in 2015. Notably, still being the top destination for Chinese travelers, Thailand accounted an increment of 71.7% y-o-y in Chinese tourists for 2015. The author expects the trend to continue as 134 million trips within the region is expected to be taken by tourists from Mainland China in 2020.

Moving further on the spending patterns of the Chinese tourists, research indicates that shopping accounts for the largest portion of their budget while accommodation only accounts for a smaller portion.

As per the statistics of the Singapore Tourism Board, tourists from China ranked as the lowest spending market on accommodation (18%) which is far behind the Australians (28%), Indians (35%), Japanese(35%), and South Koreans (36%). Although, a survey undertaken in 2013 indicated that only 10% of the respondents noted price is the most important factor when selecting accommodation in an overseas trip meaning that Chinese tourist are less concerned about price. Rather, the survey revealed that star rating and facilities offered are most important, followed by reputation of the hotel, suggestions by friends, family, or travel sites.

Thus, as word-of-mouth has continuously been one of the most effective tools in the service industry, there are several online websites and forums for rating and commenting. A survey carried out in 2015 by TripAdvisor affirmed that 83% of the site users always or usually check reviews prior to a hotel booking. Also, the study found that about half of the hoteliers are planning to invest in online reputation management in 2016.

Reaching Across Cultures

The survey also indicated that cultural and language barrier are key concerns for tourists from China as “Mandarin speaking staff, signs and literature” was ranked as the third most important factor. Chinese travelers are increasingly seeking hotel services that are tailored to their culture while assisting them to overcome the language barrier. Hence, it is widely suggested that hoteliers provide such services to Chinese tourists including Chinese speaking front line staff, Chinese television, newspapers and cuisine.

The top most services required by travelers from China on international trips according to the study were free Wi-Fi and China Union Pay/Alipay. This is because free Wi-Fi enables travelers to connect with their family and friends, while the most popular two electronic payment methods in China are very convenient for them.

Though, in overall, even if the spending by tourists from China on accommodation are comparatively less, the industry is hopeful that given the huge number of Chinese outbound tourists, there is room for growth. Also, that the consumption pattern of Chinese tourists will be sophisticated in the future resulting in a higher spending on accommodation.

Share My Room?

While the influx of Chinese outbound tourists will drive the demand for accommodation, the rising shared accommodation facilities will create major challenges to the traditional hotel segment.

Technology advancement has created online platforms for hosts to easily offer rooms and apartments on short-term rentals. Airbnb is the market leader in this category currently covering 191 countries renting over 2 million rooms and apartments. Other notable players in the segment include HomeAway, FlipKey, Rommorama, and operators within the nation such as Tujia in China and Homie in Singapore.

These short terms rentals often act as substitutes for hotel rooms and interestingly, a survey in 2015 by AlphaWise and Morgan Stanley Research, 12% of the business travelers chose Airbnb over the past year. Also, among those, 40% opted to use Airbnb over traditional hotel accommodations.

The CBRE Research analyzed the data provided by STR Global and AirDNA (a company providing data on Airbnb) to find out the impact of shared accommodation on Asia Pacific hotel sector.

There were more than 130,000 active listings (used within the last 30 days) in 25 major Asia Pacific cities listed on Airbnb as of August 2016. Australia was the leader on Airbnb with 28,000 active listings, followed by 20,493 by japan, 16,295 by Indonesia while China is far behind with 9,890 as Airbnb is new to this market and many domestic alternatives are available.

With around 60% of the active rentals on Airbnb for entire apartments, this is equivalent to approximately 2% of hotel room supply in the Asia Pacific. It was identified that the ratio is highest in Manila where Airbnb supply is equivalent to 70% of the hotel room supply in the city, which is 8000 rooms.

The lower prices are the key competitive advantage for Airbnb, and in most of the Asia Pacific markets, the prices offered by Airbnb is much lower than traditional hotels. The price gap was more than 200% in 6 markers when ADR for hotels and 1-bedroom entire apartment type of accommodation was compared. And, in addition to the lower prices offered, accommodation facilities on Airbnb often comes with amenities such as washing machine and kitchen, etc., which are not usually provided by traditional hotels.

One of the weak angles of Airbnb is that only a small percentage of the listings are available for rental throughout the year. Yet, owners have the flexibility to list their properties on Airbnb whenever they prefer and this way, they will be able to manage the seasonality of demand. This seems to be reflected as the number of listings on Airbnb increased by 19% in the three preceding weeks of a 31 particular events that were specified by Airbnb. Hence, during high demand seasons and when there are specific events that drive tourists to a particular city or location, the rise of such alternative accommodation could reduce the potential hotel revenue and profitability. Airbnb also offers tourists unique experiences and unconventional accommodation in local neighborhoods that are far from traditional tourist zones. And sometimes even tourists can stay in places such as tree houses or yurts which are not usually offered by traditional hotel chains.

Nonetheless, there were some concerns and doubts with shared accommodation among tourists. Safety and security issues are a major concern for users of these types of accommodation facilities as identified by a survey from CWT Travel Management Institute in 2015, while the users are also concerned about the product and service quality.

Shared accommodation are often managed by inexperienced people and might not comply with the government regulations on property use, safety and hygiene. As there are no centralized service management, users of such facilities are forced to rely on user reviews and hosts’ reputation on quality of product and services. Due to such reasons, some shared accommodation platforms in China now offer strict security checks on hosts backgrounds and quality of the product offered.

Create! Innovate!...Hurry!

Based on the findings, some insightful recommendations to hoteliers in designing their services is called for. Even though, with the continued increment in outbound Chinese tourists, and the Chinese tourists being not willing to spend much on accommodation, there were signs that they have started to be more keen in hotel quality and services. Therefore, hoteliers are suggested to make sure that the services offered to this important demographic segment to be as per their requirements.

The potential long term threat by shared accommodation especially on peak seasons to traditional hotels is clear and present. This trend had impelled hotel operators to review their operational models. Several multi-brand hotels have been already addressing the issue by portfolio expansions to more affordable segments targeted at young travelers. Some popular examples include the Moxy Hotels by Marriott introduced in 2015 and Tru by Hilton. Offering a lower price, these hotels offered innovative services to tourists such as mobile check-in and more open spaces and common areas for guests to gather and socialize. Hoteliers have included more homely elements in their hotel designs taking note from the “live-like-a-local” and “feel-at-home” preference by users of shared accommodations. An example of this is the Hyatt Houses by Hyatt Group which are apartment style suites that have full kitchens and separate living areas.

It remains to be understood that the main tool for gaining market share is the quality and consistency of the services provided. Loyalty programs are crucial too as a survey by TripAdvisor showed 42% of respondents said that they consider such programs when booking accommodation. Hence, it is proven that successful loyalty programs can be a motivator for tourists to visit again. And, in a recent study by PwC, it was identified that tourists are willing to pay a premium to stay in their preferred hotel brand.

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If you only get one chance to make a good first impression, then (in Shanghai) you can’t do better than the Mandarin Oriental Pudong, Shanghai. At the helm is the no-nonsense general manager Pierre Barthes, loved as much as feared for his trademark ‘no-excuses’ brand of management.

“Serving the M.I.C.E market offers a hotel the best, most exciting and most challenging opportunity to advertise the quality of its product and service and make satisfied customers your best promoters. Yet, this market can also be your millstone simple because upon the quality of your service rests your customer’s reputation.

“The M.I.C.E customer wants precision, perfection and quality amidst a range of variables and a service provider that can walk this tightrope between seen and unforeseen to take an event from start to finish seamlessly. No excuses. That’s what the top-tier market wants. That’s the reality. We’ve got to love it and live it. Period,” says Barthes.


Blessed by location, the hotel stands on the banks of the Huangpu River in the heart of the Lujiazui Central Financial District. The tower of luxury is a picturesque wonder both outside and in, featuring 318 rooms, 44 exquisite suites and an opulent Presidential Suite. Brilliantly apppointed, every room offers the famed Mandarin Oriental aesthetic blend of colour, form and feature with just that right hue of ethnic chic.

The hotel’s range of food and beverage outlets offer exhaustive fare and the hotel boasts a luxurious spa that’s got to be experienced to be believed.
To serve the M.I.C.E segment, the hotel offers 1,928 sqm of state-of-the-art meetings and events venues, a pillar-free 625 sqm Grand Ballroom featuring 8-metre ceilings and able to host 800. A wireless control room offers state-of-the-art lighting, music and audio-visual functionality.

Eight multifunctional meeting rooms are available for smaller events and perhaps the most luxurious Presidential Suite offering 360-degree city views.
“We’ve access to a 5,000 sqm outdoor event space that’s landscaped beautifully to host glamorous events, cocktail receptions, weddings, brand launches and fashion shows against the world-famous Shanghai skyline,” adds Barthes.

“Our offerings go beyond just hardware and facilities. We bring to bear the knowledge and experience of our team to help our customers plan and execute events -- regardless of size and complexity -- to perfection. Often, our team acts as a consultant to our customers offering them suggestions on getting the most out of their events dollar. This is the value-added component M.I.C.E customers get when they book with us.”


How can any hotel guarantee flawless execution, though?

Short of ‘acts of God’ Pierre Barthes guarantees his team will exceed expectations.

“We cater to the top-most tier of the luxury segment for both M.I.C.E and leisure travel so in a word we thrive on – quality! Every part of our offering from reception to farewell has to be perfect. This includes flawless housekeeping, fresh and innovative food and beverage choices, business lounge facilities, rest & relaxation amenities while of course our overall guest attentiveness forms that cohesive bond that our brand is so known for. Every guest checked in offers us an opportunity to turn that guest into a fan of the Mandarin Oriental signature service.”

Staying open to guests’ suggestions has taught us a lot about market trends,” says Barthes.

“The competitive state of the industry, shortage of hospitality talent and growing consumer sophistication means we as professionals have to embrace innovation, adapt to suit trends, keep abreast of international market trends, keep pace with social media and think long term when it comes to interacting with the guests.”
“At the Mandarin Oriental Pudong, Shanghai, we adopt ‘continuous improvisation’ as a way of life. We believe that the quality of our service is a reflection of our abilities and in so saying, I hope my staff agrees that I lead by example.”

A known team player, staff at the hotel testify, that Barthes is a leader par excellence.

“He is a known perfectionist but isn’t that the kind of leader we need and want? It is thanks to his leadership that this hotel achieved the Five-Star Hotel rating from the influential Forbes Travel Guide just within a few months of starting operations,” says Marta Otrebska, Club Lounge Manager.

“Guests who walk into Mandarin Oriental hotel have standards and it is our job to exceed those standards so attention to detail, sincere guest relations and quality across every part of our offering, is essential. This is why our brand has a huge fan base world-wide and with that comes the responsibility to live up to the standards we set and continually raise the bar.”


“Social media is changing the way we live and work across all major sectors and the hospitality industry is no exception. News via social media today travels faster than print or TV leading a new era of transparency.”

“Good news spread fast today and bad news faster. Travel sites like TripAdvisor are serving as good performance indicators as well as providing us with a bird’s eye view of the competitive state of the industry.

“The trick is to act as one closely-knit team. Every department does its part in sync with the whole, a bit like an orchestra where it is crucial for each instrument to come in just at the right time to produce an enthralling overall harmony for the guest to enjoy!”

“It is a time in our industry when management has to be more people-centric than it ever was. You have to be motivational, demanding, understanding and you’ve got to command respect by leading from the front. We’ve achieved that at the Mandarin Oriental Pudong, Shanghai, thanks to teamwork. The challenge is to keep improving and providing that ‘wow’ factor that our guests have come to expect from us,” concludes Barthes.

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