The “wave of retirements” coming now and “which will go on for decades of the healthiest and wealthiest generations ever” is set to drive international leisure travel, IHG Hotel Resorts global CEO Elie Maalouf told delegates at the IHIF EMEA in Berlin today.
In a session entitled Leadership Insights: Crafting Tomorrow’s Success, moderated by Barclays head of leisure research Vicki Stern, Maalouf stressed his belief that travel is a dynamic industry, so the strategy for hotel operators cannot be static.
“There have been changes in consumer behaviour but they haven’t been sudden. One of the most important trends that doesn’t get talked about, which is very prevalent in the US, Europe and China, is that we have a wave of retirements coming which will go on for decades of the healthiest and wealthiest generations ever. Now they want to do the things they want to do and travel is always one, two or three,” he said.
As a result, he believes there will be a persistently higher level of leisure travel and he maintained that business travel had stabilised because virtual had proven not to be as good.“Business travel was back last year,” he said. “Then there’s the blended travel, that’s here to stay, perhaps a little bit less than pre-pandemic, a little more hybrid.”
IHG has over 6,300 hotels in 100 countries but Maalouf said that there was still huge scope for growth, as the company adds to its brand portfolio, opens in new countries, and adopts new technologies, as he cited InterContinental with 100 new sites under development worldwide and Holiday Inn with 1,200 hotels but 20% plus in development.
“Age isn‘t the whole story, we’re still a young brand,” he said. “We’re looking at taking developing markets to their full potential. We were one of the first brands in the Middle East, China and Hong Kong, and South East Asia. We were early in all these markets but even established markets like Japan and Germany, with low brand penetration, offer a lot of potential to grow.”
Maalouf was keen to stress that success needed to be shared and said that the business was mindful that a key focus needed to be on owner returns, even though interest rates are easing.“Ownership costs are up, we recognise that and making sure owners are getting returns is key. In addition, we’re focused on a clear articulation of our excess capital returns strategy, so we’ll see buybacks on a more regular basis,” he added.
Maalouf also remained confident about hospitality as a strong asset class because of the operational performance achieved post-pandemic. Pointing to other sectors which have more structural issues, like offices and retail, he noted that hospitality was performing very well and with investors typically looking to allocate 10% of their total holdings to real estate, whereas hotels used to be last, now they are very interested in going into a performing asset class, he said.
Looking to the emerging growth markets of China and India, Maalouf insisted that he remained confident in the dynamics of the Chinese market, despite its more volatile economy.
“We’ve been in China 50 years and we have confidence that whatever the macro situation, it tends to have higher highs and lower lows,” he said. “It is a vast economy, and some sectors are under stress such as residential and banking, but by contrast electric vehicles and AI are doing very well. Travel and hospitality is doing pretty well.
“Two vectors define the opportunity – the middle class is expected to grow by 200 million even without population growth in the next ten years. They will start travelling. And the penetration of hotel rooms per capita is one seventh of the US. That penetration will continue to close.”
While Maalouf would not be drawn on any specific targets for acquisition, he said that the travel industry is remains a very unconsolidated sector compared with many other sectors.“There have been some combinations, where companies have good platforms, or look at the cost of technology and feel a merger would be better,” he said. “We have acquired a number of companies, we look at what we feel is complementary, but this industry is organic too, it tends to grow much more organically.”