> John Bell Re-Elected IH&RA President in 2005 John Bell Re-Elected IH&RA President in 2005 Congratulations to IH&RA President John Bell, re-elected to the helm of IH&RA in the year 2005! Read here the transcript of John's speech at the IH&RA Congress in Istanbul where he discussed his vision of the industry and the future of IH&RA. Address By IH&RA President John Bell At the Opening of IH&RA's 41th Annual Congress, 19 November Last year Minister Muncu did us the honor of coming to Cairo and personally extending his government’s invitation to the IH&RA to come to Turkey for their 2004 Congress. Personally, I have taken him at his word, and have spent the last week discovering the extraordinary beauty, culture and history of Istanbul, a city that spans three civilizations, covering more than two milleniums at this nexus of europe and asia, and know that I will be back, hopefully many more times. Over the last 4 months our hard working staff under the talented leadership of Alain-Philippe Feutre have done a phenominal job of stitching together a conference program that addresses most of the issues that are driving our business world today. The program boasts a wide range of industry leaders and I urge you to make sure to attend these sessions and take full advantage of the wealth of experience and knowledge they contain. 10 years ago the IH&RA undertook, under the leadership of professor Mike Olsen, a visioning exercise through which to project the future shape and direction of the hospitality industry. They determined that there were 5 major forces driving change. They were: - New technology - Capacity control - Availability of capital - New management skills - Safety and security There can surely be no doubt that their conclusions were prophetic, perhaps much more so than any of us would have liked. Earlier this year the international society of hospitality consultants published their own list of issues and challenges affecting the hospitality industry. It is not surprising that several of them mirror exactly our original 5 forces, while others are obvious derivatives of one or another of them, they are: - Distribution managment - Worldwide terrorism and personal safety - Availibility of capital - Managemnt change - Global uncertainty - Service deficiencies - Financial viability - New business realities - Airlift in the 21st century (the subject of our keynote speech by Stelios Haji-ioannou) - Building occupancy (this year’s congress theme) To these I would add one more: - The exiciting potential of new markets The common denominator amongest all these industry issues is that although much of their impact may well be local, they are all global in nature. The WTTC has long trumpeted travel & tourism as being the world’s biggest and fastest growing industry. More relevantly perhaps, it is the most international of all industries, and certainly the most dynamic in nature, constantly having to adapt to the changing external circumstances that shape both its product development and marketability. Our congress last year took place against the traumas of what some people then termed the perfect storm, caused by a combinsation of: - The bursting of the economic bubble in early 2001 - The terrorism attrocities that took place in new york and washington on september 11 2001 - The retributive november war in afganistan - Escalating terrorism activity around the world - The war in iraq in 2003 - The sars and bird flu pandemics A year later despite the continuation of many of these problems, it is heartening to witness the measurable bounce in travel throughout much of the world. It is a reality that travel, both domestic and international, has become a right which few people are prepared to be denied, they may adjust their focus, but most expect to travel, often several times a year. This may involve staying closer to home, or selecting destinations that are perceived to be relatively safe, but they will travel. The bad news is that we would all be naive to believe that global terrorism, even if the nominal leadership of Al Qaida is eventually captured, will go away. It has proved to be too successful in focusing attention on a cause, and too potent an adrenalin rush for those publicity seeking extremists who thrive on notoriety. We are therefore obliged to adjust our strategic thinking to deal with a future punctuated by uncertainty, with all its attendant negative impact on economic stability and the consequent fears of international travellers for their personal safety. The good news is that while our European and North American source markets are continuing to fulfill their travel addictions, new markets are flowering in south and east asia, where the indian and chinese economies are already generating significant numbers of outbound travellers with the huge potential of many more to come. As a very potent example, the world tourism organization estimates that by the year 2020 outbound travel from china will generate 100 million tourists. Our challenge will be to facilitate this growth, and assist our member chains and associations to take full advantiage of it. It is therefore no accident that IH&RA’s 2005 Congress will take place in Beijing and, I trust, our 2006 congress will be in New Delhi. Air travel With the revolution begun by Southwest Airlines and Jet Blue in the United States, and Ryan Air and EasyJet in Europe. The comfortable role of the traditonal scheduled carriers has been seriusly impacted, and low cost fares have changed the nature of consumer travel, probably forever. Air travel is, however, the foundation on which international tourism rests, and it behoves all of us to monitor closely the changing dynamics between these two competitive elements of the industry and their charter partners. Financial viability With falling occupancies the international hotel industry was obliged to postpone much of its planned capital expenditure, and even some of its regular maintenance, with the inevitable result that much of the industry is now showing its age, and rundown hotels are having a very hard time in building back their rates, causing friction between owners and their brands as the chains demand improvements that their owners cannot afford. Service With escalating budget constraints, the industry was obliged to cut payroll, sometimes drastically. Training programs were cancelled, or seriously curtailed, and service delivery reduced. Inevitably staff morale fell off and service standards corresponingly deteriorated. In the light of an apparent market lift the industry will now be obliged to refocus attention on service delivery as a matter of utmost priority. Capital While capital financing continues to be readily available, it exists within a very competitive environment, calling for the delivery of creative and innovative incentives, and a significant reduction of bureaucratic red tape, with which to facilitate it. With the current low interest rates, debt financing is now, of course, relatively inexpensive, but over the longer term hotels will need to find ways to stabilize in a higher interest rate environment. Safety Inevitably the issue of personal safety for the traveling public will continue to be top of the mind in decision making. Our industry will be obliged to take great care in providing an environment that not only is safe, but is seen to be so. In the current litigious environment, supported by increasingly powerful consumer protective legislation, we can expect tour operators to make ever more stringent demands on the hospitality industry before committing to include hotels in their brochures, since they will be on the front line of consumer litigation. A sobering example of these concerns is the prospect of a multi-million dollar law suit that is being levied by an israeli law firm against the taba hilton in egypt following the recent bombing there, that took more than 30 lives. Health issues will also play a more important role in travel decisions, with sars and avian flu central in everyone’s mind, more crucially, however, the whole issue of hiv / aids cannot be ignored by an industry that seeks to present itself to the world as a good corporate citizen. New business realities Our perfect storm has changed the business landscape in a number of obvious ways, but together with numerous technological developments, it has spawned a numer of interesting derivatives. Economic uncertainties have resulted in shorter booking cycles, making accurate forecasting a real crap shoot, and the maximization of revpar even more difficult than before. New business arrangements have tended to reduce corporate travel, thus eroding a once lucrative market segment. This, allied to a new aggressive wave of consumerism, fed by internet shopping, has resulted in lower average rates, only partly compensated for by reduced distribution commissions. Added to this is the growing competition for land based tourism in many parts of the world from the cruise ship phenomenon. You can only applaud a cruise industry that has frequently managed to get its ships built with subsidies from foreign governments, sails under flags of convenience, equips and provisions their ships free of duty and taxes, staffs their ships from the cheapest non-unionized labour pools to be found anywhere in the world, and then plays one port of call off against the next for the cheapest docking facilities. By contrast the hotel industry is a sitting duck for every new tax and restrictive regulation coming down the pike. The IH&RA Challenge Against this changing background the IH&RA is challenged to protect the hotel & restaurant industry by keeping its membership fully informed of every new development, and continuing to work with the international agencies to guard against the promulgation of costly and inappropriate regulatory reform, that will further damage the industry’s viability. In a shrinking world it is inevitable that such international organizations as the United Nations, the World Trade Organization, the World Tourism Organization, the International Labour Organization, the International Standards Organization and WIPO, are liabable to focus ever more closely on travel & tourism as the world’s biggest and fastest growing industry. Unfortunately their decisons do not remain where they are made, in Geneva, New York or Madrid, and instead filter down in the form of costly national legislation passed by their member states. The monitoring of their deliberations and advocacy on behalf of this industry is the core strategic purpose of IH&RA. Just as the international government agencies are destined to play an increasingly invasive role in travel & tourism industry affairs, there will be an overriding need for a potent industry response at an international level. There are those that may, in the past, have questioned the relevance of a global approach to industry affairs, but I would suggest to you that there is an expanding roster of issues such as: - International terrorist activity - Health pandemics - New and rapidly changing technologies - Exiciting new market opportunities - A rapidly changing global economy Our business decisions will therefore demand more cross border strategic thinking, rather than less, and the importance of organizations such as the IH&RA and WTTC is bound to have significantly increased relevance in the future. As the world shrinks, and business imperatives take on a wider perspective, driven by the emergence of such regional trading blocks as: - The european union, - The asean group of countries - And the soon to be Free Trade Assocation of the Americas (FTAA) , that will link NAFTA and the countries of South and Central America The role of international trade associations such as IH&RA is bound to increase. It is, however, of critical importance for the hospitality industry to recognise that such organizations as IH&RA cannot fulfill their obvious mandate without broad based industry support through which to obtain appropriate funding. Advocacy, backed by relevant research analysis, inevitably costs money, as of-course, do the adminstration and communication programs that are essential to any membership based organization. IH&RA is operating today on a wing and a prayer. That cannot go on for much longer, if iIH&RA indeed has a genuine purpose then it will require the wholehearted support of all our industry partners. This means reaching back out through our national assocation and chains to the individual hotels and restaurants and their suppliers that are the grass roots of this industry, and who all stand to gain so much by the success of IH&RA's activities. In this we will need your full support, not just passive approval. Thank you for your attention. Copyright 2003 International Hotel & Restaurant Association. All rights reserved. International Hotel & Restaurant Association 51 rue Jean Jacques Rousseau 75001 Paris France Tel: 33 (0) 1 44 88 92 20 Fax: 33 (0) 1 44 88 92 30 www.ih-ra.com