Analyzing Resort Destination Star Rated Hotel Distribution

Analyzing Resort Destination Star Rated Hotel Distribution

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All Resort Destination Star Rated Hotel Distribution

Destination Hotel Star Rating Distribution

 

In conventional hotel market studies you focus on supply and demand of hotel rooms, hotel performance, average-length-of-stay, seasonality and source markets. From here you can determine hotel market opportunities and hopefully fill the gap with a successful hotel product.

Here we look at hotel market analysis from a different angle. And specifically, the resort destination hotel market in Asia.

Rather than the conventional approach we look at hotel distribution across the star rated spectrum and compare the hotel distribution of mature destinations with that of emerging destinations. Are there clues that point to which segment of the hotel market will benefit from further growth or which will lag as a destination matures over time?

And how do we define resort hotel market maturity? Loosely, destinations that have been around for more than 3 decades, an international visitor base that forms a substantial portion of total arrivals and have the highest visitor arrivals amongst peers. I would believe Hawaii, Bali and Phuket falls within this definition.

Look at the chart above. Together with the island of Oahu in Hawaii, its a combination of both emerging and mature destinations in the Asia region. Note one pattern. Across all these different destinations the percentage of 5-star hotels are always less than 10% – regardless whether mature or emerging. Click the chart to enlarge for details. One exception not shown here is the Maldives. Due to geographical peculiarity has 30% of its hotels in the 5-star category.

Now, what if we extract the mature destinations out from the tangled mess above.

 

Mature Destination Star Rated Hotel Distribution Profile

Mature Destination Hotel Star Rating Distribution

 

 

What’s uncanny for these mature destinations? Look at the hotel distribution profile for Bali (blue) and Phuket (red). They are almost perfectly correlated! Another mature destination Oahu (dark green) is fairly close except for a bump in the 3-star category. Click the chart to enlarge.

We have also included emerging destinations Krabi (orange) and Koh Samui (pale green) to show that these two emerging destinations also follows this profile.

 

Take-aways

So what can we gather from the two charts above?

  • Emerging destinations have more than 50% 1-2 star rated hotels.
  • Large mature destinations have less than 50% of 1-2 star rated hotels.
  • While both emerging and mature destinations are range bound in the percentage of 5-star hotels, mature destinations, in absolute terms, have greater number of 5-star hotels.
  • Bali and Phuket are highly correlated across of the entire hotel spectrum.

 

As a general rule of thumb we can say that large mature destinations have the following star rated hotel distribution profile:

  • 5-star – 5% to 10%
  • 4-star – approximately 20%
  • 3-star – 30% to 35%
  • 1/2-star – 40% to 45%

 

Obviously this is not a hard approach to analyzing hotel markets but one that can help frame a hotel market better. For the hotel developer this does not mitigate the need for a conventional approach but rather complements it. Using this to complement a conventional hotel market study is somewhat akin to fundamental vs technical analysis in the financial markets. Just as in technical analysis we can associate a hotel distribution analysis with probabilities rather than absolutes.

Question is, will this be a useful tool for predicting the expected number of, say, new 5-star hotels as a destination matures?

The next section attempts to answer this question for new hotel development possibilities in emerging resort destinations based on the analysis here. Where are the destinations affording the most upside for development and which the least?

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Note:

Hotel data extracted from Tripadvisor during November 2013. Excludes other accommodation types.

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