My mother is my market research inspiration. Being responsible for all the needs for us at home, my mother set a good example to when to provide food, love, and care to us. She knows what each one of us likes to eat for lunch and based on that, lunch is prepared and the same applies to breakfast and dinner. Chicken would always make us happy but not tomatoes. The same basics apply to market study, an hotelier should know what hotel to build to make his pockets bigger and bring in more customers.
General market surveys are the first milestone in the market study procedure. The survey covers macro level information such as population, airport traffic, Gross Domestic Product (GDP), and country legislation structure. A good understanding of those factors would give the hotelier a good insight of the economic trends and potential niche markets within the studied market. Before October 2008, many developers have been looking into emerging markets where they can achieve maximum profits but faced with major challenges. Many risks are associated with venturing in an unknown environment. Many of these emerging markets have some or no regulations, corruption, unqualified labor, and no technical means to establish big developments. The World Bank Geo Map offers a very easy way to navigate through the country macroeconomic profiles and assist in market surveys.
Knowing the market economic growth drivers and how it can accept yet another hotel would open the road to the next step; specific market surveys. Covering competition, hotel supply and demand gives the hotelier an insight on the micro aspects of the market. Competition should be looked at from a developer and a property stand point. a breakdown of the hotel developers in the market along with their properties allows for analyzing what companies control what hotel segments, how long brands have been penetrating the market, what strategic developments agreements have been formulated with international hotel companies, and where is the niche market. All these factors would play in formulating an initial feasibility study that must include market Average Room Rates (ARR), Average Occupancy Rates (AOC), Revenue Per Available Rooms (RevPAR). Moreover, knowing your markets and where to plant your hotel gives an insight on your opportunity cost. Knowing the best available options would give the hotelier the option to choose the best investments available and reduce his opportunity cost.
Each hotel development company should have the macro and micro hotel market studies in hand as a database to save time preparing for the financial studies when needed. All information would work to make better decisions on area programs, hotel characteristics, and site selection. A good example for our article is the Iraqi market. Many hotel development companies have announced hotel projects all over Iraq including the Kurdistan Region which is supposed to be the safest region but these developments never took off. Iraq has a great potential but it lacks all kinds of services which makes it risky. Six years after the liberation of Iraq, the country is starting to stabilize and work is ongoing day and night to improve infrastructure. Developers who want to start projects there have to outsource contractors, designers, consultants, and skilled labor which drive logistics and costs sky high. All those factors drove their projects to death.
Iraq is just an example of the targeted markets Kuwaiti and GCC developers have been looking into, other markets such as Syria, Libya, Morocco, and Algeria were listed also. Realizing the market’s risks and needs prevent such loses. Hope local developers announcing projects in emerging markets would do their homework to prevent them from going out of business especially in the current tough times.