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Will new markets replace the absent US tourists?

22 May 2008

Economic uncertainty, a falling dollar and the forthcoming presidential election are all conspiring to keep Americans at home, so should UK hoteliers be looking elsewhere for foreign customers? Gemma Sharkey investigates

Attracting North American tourists has always been a key part of any UK hotelier's marketing plans. Not surprising, as the average US tourist spends about $1,000 (£513) a day, according to estimates, and some hoteliers target 90% of their foreign clients from the USA.

But the latest figures from the Office for National Statistics (ONS) will have given hoteliers pause for thought. In the 12 months to March there was a 6% decline in the number of US tourists coming to the UK, with the economic slowdown, the decrease in value of the dollar, and the fact that it is election year in the USA all combining to dent the figures.

Impact on revenues

Marvin Rust, hospitality managing partner at Deloitte, said its own figures backed up the trend. "While visitor numbers increased marginally in the first quarter of this year, we have seen a continuation of the decline in US visitors, who traditionally spend well on hotel rooms," he said. "For the first time since 2003 we witnessed a decline in revenue."

Tim Helliwell, head of hotels at Barclays Commercial bank, said hoteliers need to expand their customer base by targeting the BRIC (Brazil, Russia, India, China) markets. Long-haul arrivals in the UK from these markets increased by 7% last year, the ONS figures show.

"Within 10 years there will be 100 million emerging middle class in China, all of whom will have the propensity to travel, and Russian wealth is already clear to see," Helliwell said. "Smart businesses are marketing to these groups to compensate for the decline in North American tourists.

"In London, particularly, premium hotels need to develop a broader geographical customer base to achieve growth."

So what can hoteliers do to attract customers from these emerging markets? Rob Baldry, director of Seabrook Marketing, said the new markets must all be targeted in different ways.

"China, for example, has quite a formal travel trade, and there is also the question of language barriers. You need to work with representatives in the local market to find out how to reach and influence customers," he said. "What is influential in one market is not in another. It's a matter of trialling and testing."

Knowledge of national customs in order not to unwittingly make a faux pas could also make a crucial difference, Helliwell added. "Hoteliers need to be aware of the culture and norms of the emerging markets," he said. "For example, you wouldn't put a Chinese guest in a room with a number four on the door. The question is, then, how do you manage the database to not give a number four to a Chinese client?"

But, according to some experts, much of the industry has learnt from previous downturns in the market and already diversified its business.

Hotel analyst Melvin Gold said the issue was "self-solving" in that the emerging markets will naturally succeed the USA. "With the gaining strength of the euro, hotels are now cheaper for European customers, so the upmarket operators have managed to gain European clientele to fill the gaps," he said.

Trade fairs

Gold said many businesses will have gone to European trade fairs and travel agents instead of US ones. Those brands that already have a presence in developing markets, such as InterContinental Hotels Group in China, will have an advantage due to recognition, he added.

Of course, the downturn does not mean the industry is ignoring US tourists. VisitBritain is letting Americans buy discount cards in dollars so they can see the sights for less. It is also offering Oyster cards and Great British Heritage cards online in dollars to cut out fluctuating exchange rates.

On the operator side, the One Aldwych hotel in London and Red Carnation Hotels are both offering a fixed dollar rate of 1.8 to the pound as well as all-inclusive packages. Jonathan Raggett, managing director of Red Carnation, said: "Our initiatives provide a comfort factor for people booking in three to six months' time."

Raggett added that the group was using the downturn as an opportunity. "It has always been a difficult market, with peaks and troughs," he said. "We have a sales team in the US, and we will stay out there no matter how bad things get. We want to keep them as friends, and next year they will be back again."

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