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e’ve all heard the expression that every cloud has a silver lining and it certainly can be applied to the lodging industry in many ways. But more specifically, over the last several years, the economic downturn has taken its toll on many of the brands and their respective development engines, effectively clouding any significant growth plans in the U.S. However, the silver lining is that it has forced many of these brands to put an even greater focus on international development as their next avenue of growth.
For example, our annual Franchising issue details the international strategies of two companies specifically, Choice Hotels International and IHG, both of which have significantly ramped up their efforts in Europe and in Mexico, respectively. And there are many more examples of this throughout the industry.
While the brands are determined to increase their pipelines overseas, in my opinion, the most interesting development on the international front took place earlier this year with IHG’s launch of a brand called Hualuxe Hotels & Resorts designed specifically for Chinese travelers. The plan is for the brand to be rooted in China before ultimately branching out to other parts of the world, including the U.S.
No one can say for sure whether or not the brand will be successful, but if I were a betting man I’d say we’re going to see more of this type of product in the near future. For as creative as these brand companies are at finding new “untapped” niches within the U.S., and trust me they are, they may have finally reached the point of oversaturation. There are only so many ways you can divide up consumers.
One thing we know is this is very much a copycat business and creating new brands is deemed essential for these primarily publicly traded behemoths. You have to figure many of these companies are hard at work right now coming up with similar concepts to Hualuxe for markets throughout the globe. While some may take a wait and see approach, it stands to reason that most will effectively go “all in” with their own international flags. Purely from a marketing standpoint, getting a brand front and center in front of international markets is critical as those travelers will be looking for hotels they are familiar with when they come to the U.S.
The challenge for these companies is going to be finding the balance in terms of allocating their resources and figuring how much to put into emerging regions, like China, Brazil and India, versus established markets like the U.S. and Europe, which may be more vulnerable to the global economy but remain their core markets.
The international markets present their share of challenges from working with local governments to finding the right development partners. In addition, one of these days, presumably, financing will loosen up in the U.S. and new build projects will start up again in earnest. However, it’s hard to imagine that these companies will ever be as dependent as they were previously on the growth of their U.S. pipelines and that’s ultimately a good thing.