Mr. Donaldson

Luxury Travel

The Emerging Luxury Markets

By Edward Donaldson, VP Marketing, Small Luxury Hotels of the World

The outlook for the coming years show countries such as India, Brazil, China & Russia having the largest impact on the consumer market. China is the largest population in the world and recent statistics indicate that 1 out of every 6 people on earth are living in China. This will have a drastic effect on the travel industry and the luxury market. Analysts also forecast that China will be the world's most important luxury market by 2011. As more products become available to more people, the pressure increases to offer something truly special.

For the luxury boutique sector, there is a positive outlook to be able to grow equally as well within these markets. Within the last few years, countries such as Vietnam, Cambodia and Laos have entered the boutique sector with exceptional offerings and equally eager travelers anxious to explore the spectacular offerings of such exotic destinations.

Equally, the luxury boutique sector has seen a shift in both luxury inventory and demand in markets that just a few short years ago were not on the radar. Former Soviet Block countries such as Poland, Czech Republic, Estonia, Russia and Hungary are enjoying new records of arrivals of luxury hotel guests. In brands such as Small Luxury Hotels of the World as an example, Poland has seen over a 1000% increase in arrivals of guests in the first six months of 2005 over 2004 with limited addition to inventory. As these countries continue to grow and flourish with the inbound tourist dollars and new potential markets to attract guests, the luxury boutique sector, along with the entire luxury goods market, will continue to strengthen and enjoy growth at historical levels.

At the same time that these markets experience growth in both variety of product and the inbound traveler, a new economic market will be created which will in turn create new travelers. Nowhere is this more evident than in China where the recent growth of both the inbound market to mainland China and the demand for outbound travel has been equally as strong. According to statistics, a total of 28.5m tourists will fly out of China this year, a figure that is expected to rise further following the Chinese government's decision to increase to 90 the number of worldwide destinations granted approved status. By 2007, China is expected to replace the US as the world's biggest outbound tourist market.

With new markets opening and the unlimited potential abounding, the challenge on the hotel industry and most importantly the luxury boutique sector, is to keep pace with the bourgeoning opportunities offered. If even a great portion of the statistical information comes to fruition, the hotel industry will need to adapt and change many of the current strategies in order to remain successful.

The World Tourism Organization's Tourism 2020 Vision forecasts that international arrivals are expected to reach over 1.56 billion by the year 2020. Of these worldwide arrivals in 2020, 1.2 billion will be intraregional and 0.4 billion will be long-haul travelers. The total tourist arrivals by region shows that by 2020 the top three receiving regions will be Europe (717 million tourists), East Asia and the Pacific (397 million) and the Americas (282 million), followed by Africa, the Middle East and South Asia.

East Asia and the Pacific, South Asia, the Middle East and Africa are forecasted to record growth at rates of over 5 percent per year, compared to the world average of 4.1 per cent. The more mature regions like Europe and The Americas are anticipated to show lower than average growth rates. Europe will maintain the highest share of world arrivals, although there will be a decline from 60 per cent in 1995 to 46 per cent in 2020.

Although the order of the ranking has been fairly constant over the past decade, not all destinations have grown at the same pace. The two Asian destinations, China and Hong Kong (China), will clearly outperform the other destinations, each growing at a pace of close to 9 per cent a year between 1995 and 2004. Among the more mature tourism destinations, Spain is showing the most consistent performance with an average growth rate of almost 5 per cent a year. In the same period, France and Italy grew on average by 2.5 and 2.0 per cent a year respectively. American destinations recorded the lowest growth rates; 0.6 per cent a year for the USA and 0.2 per cent for Mexico.

It is evident that we all have a great deal of work ahead of us. There will be new customs to learn and cultures to explore. For those in the luxury boutique sector such as Small Luxury Hotels of the World, the strategy will be to find the right properties in these destinations that will support the consumer demand both inbound and outbound while maintaining the consistency and levels of service that will also continue to expand with the ever changing world traveler. I am not sure if Thomas Cook understood the impact he would have back in 1841, but the boundaries appear to be endless.

Ed started his career with Servico, Inc as Director of Sales for several franchised Hilton properties. After a move to New York he became Director of Sales for The Royalton. Ed also served in regional positions with Pegasus Solutions. He has headed up the sales efforts for Summit Hotels, Sterling Hotels, Golden Tulip Worldwide and Rosewood Hotels. Ed has served as Regional Director, UK for TravelCLICK and VP of Sales for hubX, recently purchased by Pegasus. Ed currently is VP, Marketing, The Americas for Small Luxury Hotels of the World. Mr. Donaldson can be contacted at 212-953-2064 or ed.donaldson@slh.com Extended Bio...

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