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Executive Forum:The Global Hospitality Industry and the Evolution of Global Hospitality Education

Sponsored by The School of Hotel and Tourism Management at The Chinese University of Hong Kong

by

Michael D. JohnsonDean and E. M. Statler ProfessorCornell UniversitySchool of Hotel AdministrationMay 2, 2008

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Agenda

US Hospitality Industry Outlook Global Hospitality Industry Outlook Focus ChinaThe Evolution of Hospitality Education:

Meek’s PathThe Evolution of Hospitality LeadershipImplications for Global Hospitality EducationEnvisioning a Global Hospitality Leadership Network

Summary and Conclusions

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US Hospitality Industry Outlook

The US hospitality industry is a mature albeit healthy industry. A slowing economy will slow demand growth, more so for leisure sectors than business sectors. The American hospitality consumer has become very price conscious.

According to Ypartnership LLC, the number of consumers using the internet to find information is stabilizing (64%), while thenumber using the internet to find a lower prices and make on-line reservations continues to increase (56%).

As of February 2008, 198,244 hotel rooms were in construction and 648,882 were in the active pipeline (Smith Travel Research).

The largest growth is in mid-level properties without F&B.

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US Hospitality Industry Outlook

Some weakening in the market is expected (Source: PKF Hospitality Research):

Declines in real personal income and total employment will result in the demand for new rooms to slightly lag supply. High cost of building and more conservative lending practices will limit the number of projects that make it to construction stage. US hotels will enjoy increases in both revenues and profits, but at a more modest pace than in the past. “Forecasts of economic recovery, plus a slowdown in the pace of new supply, will lead to increasing occupancy levels beyond 2009.” Mark Woodworth, PKF (quoted in Hotel New Resource, March 3rd, 2008).

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US Hospitality Industry Outlook

The weak US dollar continues to support demand in destination locations including New York, Miami, and Las Vegas:

The US is a bargain!Example: Average daily rates (ADR) in New York increased 10.6% in 2007, yet the net change in Euros was only 1.4% (Smith Travel Research).

Key question: Will there be demand revenue discipline?How will operators respond to the predicted downswing in demand?Our faculty’s research shows that, during downturns in demand (e.g., post 9/11), operators are better off holding the line on ADR rather than chasing higher occupancies with lower rates. Smith Travel Research predicts a -0.8% decrease in occupancy, but a 4.7 percent increase in ADR (vs. a 3.5% 20-year average).

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Global Hospitality Industry Outlook

In multiple regions of the world, hospitality is a growth market!

E.g., Dubai, China and Macau, India, Mexico, Brazil, South Africa

In other regions there is both economic and political cause for concern.

E.g., Parts of the Middle East and Africa.

Overall, global hospitality companies see China as a significant part of their growth. These companies single biggest need is for human resources at all levels.

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Focus China

Factors fueling China’s hospitality growth include (Source: Horwath HTL Asia Pacific):

2008 Beijing Olympics2010 Shanghai World ExpoDramatic increase in both domestically generated demand and leisure marketsNew focus on secondary and tertiary cities, with renewed tourism and industrial developmentA high-growth economy with substantial direct foreign investment

The key question: How should we collaborate to prepare individuals and companies to compete in the global service economy? Specifically, how do we train future global hospitality executives?To gain insight, let’s study the evolution of hospitality education at Cornell.

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An early class in Hotel Management at Cornell

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Today’s Hospitality Leadership Education at Cornell

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The Evolution of Hospitality Education

Professor Howard Bagnall Meek served as founding Dean of the SHA from 1922 to 1961.

“Prof” Meek challenged the prevailing view, as expressed by Ellsworth Statler, that the only way to learn the business was by working in the business.

He died in 1969 having served the School and the hospitality industry for over 50 years.

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Meek’s Path

Meek’s philosophy and pedagogy:Connect theory to practice!A specialized curriculum that centers on:

Experiential learning (i.e., learning by doing)Extra-curricular programsA program for industry research

He emphasized relationships and social networking, especially among students.

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A Pioneer in Global Research and Education

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Meek’s Philosophy and Pedagogy

A global focus“You have to have balance” to prepare yourself for a leadership position. The importance of understanding owner/equity issues:

Meek is quoted as saying: “Who owns this hotel anyhow?”The Cornell Quarterly (1961)

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The Evolution of Hospitality Leadership

Back in 1922 the hospitality industry was comprised of a highly fragmented set of individual businesses. Over time, segments of the industry have become more and more concentrated, resulting in the need for hospitality business leaders. Hospitality executives today include the deal makers who run the world’s largest companies and the entrepreneurs who reinvent the industry.

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Implications for Global Hospitality Education

Like all markets, the market for hospitality education segments itself over time. Three basic segments:

Hospitality Leadership ProgramsBusiness programs with a hospitality focus that prepare students for hospitality leadership positions.

Hospitality Management ProgramsHospitality programs with a growing business focus that prepare people for hospitality management positions.

Training ProgramsPrograms that prepare individuals to have successful careers as excellent service providers.

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Implications for Global Hospitality Education

Given the growth of hospitality globally, there is a huge need for programs at all levels. In an age where success requires global cooperation, no small set of schools or alliances will fill the needs of the industry in any given hospitality education segment. In the Hospitality Leadership segment, one can envision a global network of schools that will train tomorrow’s hospitality business leaders.

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Envisioning a Global Hospitality Leadership Network

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Summary and ConclusionsThe global hospitality industry includes a variety of market conditions, including:

A mature but healthy US market Growth markets in China, Macau and elsewhere Markets where economic and political instability are a cause forconcern

As the global industry has grown and evolved, there is a need for hospitality education at multiple levels:

LeadershipManagementFront-line service

At its core, hospitality leadership education continues to follow “Meek’s Path.”Going forward, Cornell is poised to help lead a network of global educational institutions to train tomorrow’s hospitality industry leaders.