13 Nov 2018
New Food, Health and Hotel Needs Transform Asia's Hospitality Sector
While the growth in Asia's hospitality sector is still continuing to outpace the global average by a considerable margin, there are a number of obstacles that need to be overcome if its momentum is to be sustained over the long-term.
Last year was a great one for the hospitality sector in Asia, with consumer demand still outstripping increased supply. In other parts of the world – notably the Middle East – the picture wasn't quite so rosy.
Taking to the podium at the recent Food & Hotel Asia – one of the region's largest events for the hospitality and food / drinks industries – Jesper Palmqvist, Asia-Pacific Director of STR, a US market data tracking company, set out to provide a snapshot of the current health of the sector. Armed with the latest data from his own company, he said: "Revenue per available room [RevPAR] is up everywhere by between 3% and 5%, except in the Middle East where it is down 5.6%. It's partly a supply-and-demand issue, with supply outstripped by demand everywhere except the Middle East. In Asia, supply has increased by 3.3%, while demand has grown 6.2%.
"At the same time, throughout Asia RevPAR was up 3.5%, with all parts of the region enjoying similar growth. For 2018, we are expecting this to change. When the final figures are in, we are predicting that the overall Asian RevPAR will be 5.3%. In India, however, RevPAR will be 2.3%, while the strongest growth will come from Northeast Asia [5.5%] and Southeast Asia [6.2%].
"As we look across Asia, three markets stand out. Compared to a year ago, these markets have massively increased their number of rooms – Australia by 47%, Japan by 62% and Vietnam by 40%. Within the ASEAN bloc, Indonesia is the largest market with 300,000 rooms at present and plans in place to grow this by a further 19%. This massive market, though, is largely driven by domestic tourism."
Turning her attention to a considerably larger market and one that is increasingly outward-looking, Shirley Lu, Research Manager for Euromonitor, the London-headquartered market-research company, said: "In 2017, there were 1.3 billion outbound tourist departures from mainland China. This represented a total global spend of US$1.3 trillion – an average of $1,012 per person. Significantly, 48% of travel sales in China are made online. Of these, 60% are made via mobile, a far higher percentage than in other Asia Pacific markets. This is largely down to the enormous success of the country's online travel agencies, with Ctrip being the most notable example.
"Another online service that offers real opportunities for travel brands is WeChat, with the Shenzhen-headquartered messaging service now having more than one billion users, as well as ambitious expansion plans for both North America and Europe. It's also worth bearing in mind that the typical Chinese traveller is also starting to prioritise authentic experiences over shopping, a development that opens up a number of new opportunities."
Despite the overall level of optimism, not every delegate was confident that Asia could continue to meet the challenges of its expanding tourism sector. Sounding a cautionary note, Gert Noordzy, Managing Director of Northside Consulting, a Macau-based specialist consultancy with a focus on the opening of new hospitality sites, said: "Worldwide, there are 11,130 hospitality-related projects under way, comprising 1.9 million rooms. That's the highest level ever recorded. China, with 2,448 projects and 549,222 rooms, is the second-largest pipeline after the US, a position set to be reversed by 2025. Unfortunately, about 70% of all Asia-located projects will end up being delayed.
"In order to open new hotels on a large scale effectively, the industry needs to significantly upgrade its understanding of project management, methodology and techniques."
One aspect of the Asian hospitality sector that is already in mid-upgrade is the provision of food and beverages, with rising incomes and improved nutritional awareness seeing visitors both to and from the continent now having higher expectations of the cuisine on offer. Maintaining that the demand for 'nutraceuticals' – nutritious and healthy food and supplements – is now on the rise, Shikhar Aggarwal, a Director of Frost & Sullivan, a Californian research company, said: "In 2017, the global market for such items was valued at $175 billion and it's projected to reach $220 billion by 2020, representing a compounded annual growth of 6.5%. In 2017, Asia Pacific became the single-largest market, accounting for some 37% of overall global demand.
"There's also a growing demand for active nutrition – nutrition as a lifestyle choice and as a way to drive activity. Under this particular heading there are pregnancy-appropriate foods as well as specialist diets for the elderly, children and athletes.
"Also on the horizon is growing demand for so-called 'freedom foods' – items that are ethical, healthy, safe and green, including grass-fed, fair trade, halal and kosher products. Consumers, in general, are willing to pay a 10-15% premium for such foods."
Turning his attention to the Asian market in particular, Aggarwal highlighted a number of issues unique to the region, saying: "Across Asia, consumers, by and large, tend to be emotional shoppers, buying concepts rather than products. Then there's the continuing rise in the level of disposable income. At present, Asia has a one billion – and growing – middle class, while 61% of the world's millionaires are now domiciled there.
"As well as these opportunities, there's also some real challenges. About 42% of the fruits and vegetables produced in the region are currently being wasted, yet food security remains a huge issue, with 66% [or 522 million] of the world's poorest people to be found in Asia. At the same time, health costs are also rising, with most Asian countries already spending more than 5% of their GDP on funding their domestic medical resources.
"This will only get worse as the over-65 demographic continues to grow across Asia. In the ASEAN bloc, for instance, 30% of all citizens will be 65 or over by 2020. We can see how this has already affected Japan, where, from a food perspective, we have seen the rise in demand for flavours particularly appreciated by the elderly and the emergence of specialist nursing-home foods and supplements."
Singling out three particular areas of opportunity for food manufacturers overall, as identified by a recent research paper produced by his own company – Smart Innovations Transforming the Food and Hospitality Landscape by 2020 – Ivan Uzunov, Euromonitor's Asia-Pacific Research Manager said: "The first is the demand by consumers for transparency and simplicity. As consumers become more health- conscious and ethically-engaged, they are demanding sustainably-sourced food as well as ethical and transparent management of the production facilities they visit.
"Secondly, consumers are more digitally-engaged than before, with digital now a critical element of brand engagement, decision-making, ordering and payment. Thirdly, the preference for home-delivery will soon outpace any growth in all other forms of customer delivery."
Food & Hotel Asia (FHA) 2018 took place from 24-27 April at Singapore Expo and Suntec Singapore. The event featured 3,466 exhibitors and attracted 81,896 visitors from 120 countries and regions.
Ronald Hee, Special Correspondent, Singapore