Perspectives

2014 Travel, Hospitality and Leisure Outlook

Interview with Adam Weissenberg

Looking into 2014, the travel, hospitality and leisure (THL) sector outlook remains positive due to improving demand side drivers. While there is potential for renewed growth both domestically and internationally, companies should consider ways to effectively leverage the power of technology to enhance customer experience. Adam Weissenberg, vice chairman and U.S. Travel, Hospitality and Leisure leader, Deloitte LLP, shares his perspective on the THL industry and some thoughts around managing and growing amid the transformative landscape.

What are some of the biggest challenges facing your industry in the coming year?

Travel, hospitality and leisure companies—seeking growth at home and abroad—look to respond to the challenges of an increasingly multi-channel environment, where options are many and customer loyalty is at a premium. As companies grow, managing a talent pool that ensures superior customer engagement and personalized experience remains a key focus area.

  • Attracting and retaining talent: Travel and tourism industry is expected to add more than 70M jobs over the next decade, with two-thirds of those jobs to be created in Asia.1 With this growing global demand and geographic expansion comes the ever-increasing demand for more talent. CEOs will likely be challenged in finding, training, developing, and retaining talent. Given the sophistication of international travelers, successful hospitality employees will need to understand how to cater to customers of different cultures. Training and retention of talent will likely require a significant investment from hospitality companies, but is important to success.
  • Building customer loyalty during the upturn: Hospitality companies should consider building enduring customer loyalty and delivering a differentiated brand experience during this phase of gradual economic recovery. While many companies appreciate the importance of loyalty programs, only a few have managed to derive significant returns, indicating the need to reengineer loyalty programs.
  • Expanding beyond Brazil, Russia, India and China (BRIC): Although disposable income continues to rise in the BRIC countries, growth in these regions is sluggish.2 Hoteliers should consider focusing on under-utilized, “beyond the BRICs” markets such as Burma, Cambodia, and Vietnam, as well as other high-potential countries such as Turkey, United Arab Emirates (UAE), and South Korea, with well developed infrastructure. Still, the BRIC countries continue to provide good growth opportunities for players within various THL sectors, especially China. For example, a number of leading restaurant brands view these markets as key to their future global growth plans.

1 WTTC’s president urges travel and tourism industry, wttc.org.

2 EIU country disposable incomes; Skift Travel IQ, accessed October 23, 2013.

What trends might disrupt “business as usual” in 2014?

While recent health care reform and increased taxes may impact the industry’s profitability in 2014, companies need to be ready as new market opportunities across geographies arise.

  • Health care reform likely to increase companies’ costs: The recent health care reform mandates employers to provide health coverage to their full-time employees who log in more than 30 hours per week. This provision comes into effect in 2014 and may lead to cost increases that travel, hospitality and leisure companies should consider in their plans.
  • Increased taxes may dampen travelers’ plans: In 2013, the UK government increased the Air Passenger Duty (APD) tax to a maximum £188 per person (vs. £92 in 2012) for long-haul premium flying. Similarly, Spain introduced a nearly 19 percent average hike in airport tax. These higher taxes are expected to be passed on to customers, and could ultimately redound negatively to those U.S. airlines that serve those European markets.
  • Potential market opportunities driven by new regulations: Companies should consider planning their market entry strategies as new markets open up, especially in the gaming sector. There are recent developments around legalized gambling in countries such as Japan and Vietnam; when such opportunities materialize, many companies will look to quickly develop the needed infrastructure. In addition, several Asian countries such as Taiwan, Philippines and South Korea are building casino resorts to position themselves as popular gaming destinations (similar to what Macau did in the past decade) to attract tourists.

What are some steps companies can take to foster innovation and/or growth?

Digital innovations and social media play an increasingly important role as hospitality, airline, leisure and other companies look for ways to engage customers and build long-term relationships. Many companies are deploying analytics tools to gain insights about consumer preferences — and deliver a differentiated experience — which could eventually motivate customers to visit frequently, stay longer and spend more.

Sustainability continues to be a key focus area — while airlines are working toward fuel efficiency amid volatile oil prices, many restaurants are focusing on low-calorie and organic food to bolster consumer confidence and reinforce their brand image.

In addition to their core Gen X customers, companies should consider focusing on millennial customers (typically aged 18-34) as they present a significant growth potential. Millennials’ spending will likely only increase as they step into their prime earning and spending years in the next decade. A few hotels are launching new brands while others are revamping their existing facilities with the latest technology features to appeal to young, tech-savvy customers.

These innovation and growth strategies may drive THL companies to realign their legacy structures and processes to the constantly evolving marketplace.

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Adam F. Weissenberg

Adam F. Weissenberg

Global Sector Leader Travel, Hospitality & Leisure

Adam is the global leader of the Travel, Hospitali...More

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Adam F. Weissenberg

Global Sector Leader Travel, Hospitality & Leisure