Special Report:
EP International Forum
"Up, up and away?"

Proudly sponsored by

The word globalisation has been a focal point of business discussion for many years now, particularly with the emergence of the China and India as key players in the world economy. This has led many hospitality operators to explore international opportunities, particularly into emerging markets such as Dubai.

A survey conducted by HSBC last year showed that 80% of companies already trading internationally believed that they needed to do more to survive the recession, whilst 40% of companies not currently trading internationally believed that they needed to do so in order to survive the recession.

But what is the viability of such an endeavour?

The aim of this inaugural international forum was to raise the level of discussion on key issues which impact international development, including;

Which markets are attractive for international growth?
What is the best business model – corporate owned, franchise or joint venture?
What are the opportunities within the international hospitality market?

In an interesting debate, it became evident that the experience of operators in the international market varied dependant upon business type; that international travel patterns were shifting and that selected emerging markets have the potential to succeed.

The guest speakers...

Guest speaker Martin Francis, Senior Manager, Global and Corporate Franchising briefed the group on the HSBC's experience of the international marketplace, highlights included:

There is an old Chinese curse "May you live in interesting times" – but is this really a curse?

In Brazil more than 30 million consumers have entered the market and many want to own their own businesses.
In Poland unemployment has halved over recent years.
In China confidence is growing, foreign companies have entered the market via joint ventures – now resulting in WOFEs: wholly owned foreign enterprises.
It is essential to have the right partner in China – some provinces have c. 100 million people.
In the developed world innovation is vital.
Eating out trends in France are evolving; the market is open to tapas, Asian food etc, whilst food habits are changing; meal times are shortening, lunch is eaten more ‘on the run’ and businesses like Subway are entering the market.
Vietnam is open to new offers and brands.
It is not all about expansion into the Middle East; companies like Jumeirah are exporting their Noodle House concept to other parts of the world.

Guest speaker Peter Backman, Managing Director, Horizons briefed the group on trends and contextual issues within the eating out market highlights included:

The eating out market is worth £1.4 trillion worldwide
The US and Europe are roughly the same size at current exchange rates, but this is distorted by the strong Euro. The US is one-third of the worldwide market by volume.
Europeans spend on average £378 pp per annum, eating out of the home – this amount is higher in developed economies as countries like the Ukraine and Moldova have low average spend..
12,500 meals are sold per second, equating to 40 billion per year.
There are 2,160,000 eating out establishments, so it is a large and complex market.
Markets have been operating on a very open basis in recent years - will this change?
The top five countries in Europe: (Germany, France, Italy, Spain and the UK) – equate to 77% of the market.
No company has more than 3.5% of the market and this company is McDonalds.

The current market

Consumers are not spending unless they have to
There is a drive for lower costs throughout the sector, and it is looking for value along the chain, from operators to distributors
A lot of Menu Engineering is taking place, resulting in reduced portion sizes in some instances to support price reductions.

The forum's discussion...

The following points provide a selection of comments from the forum, click on the link at the bottom of the page for the full report:

Dubai and the rest of the Middle East

The optimistic view

"Our operations are performing well; I think that there is a lot of press hype. Dubai is too far developed now for it not to be successful. We believe the market could take another four sites."

The pessimistic view

"We opened our third site in January and believe that the market has changed radically. Dubai's hotel sector has suffered, mostly due the business travel decline."

The changing travel market

The group heard about the experience of one operator in the international travel market, who pointed out the following significant changes:

First tier airports have lots of operators, but spend is declining.
Second tier airports are in double digit decline.
Third Tier airports are losing money and will not survive.
From an F&B perspective, some noticeable trends are that people are people are bringing their own food and experiments with the high end eating establishments are noticeably not working.
People are eating more quickly, as queues are longer. At one airport security checks involve patting each traveller down individually and F&B sales are down 30%.
Booking patterns are changing: they are happening later and people are looking for a deal.

International Expansion opportunities – the markets

"Brazil is growing its mid-market restaurant provision; the key is to find great partners. Hubs need to operate independently and locally."

"In Europe there are different labour costs, different employment patterns, but the EBITDA is similar – so you get there differently but with the same end result. Our top two markets are France and Spain."

"Time versus reward is really important. When is the right time and place for your brand? India is very exciting but need to look at red tape, litigious nature and corruption, so is it worth it?"

"Ultimately the more we expand internationally and go through new borders, the more local and cultural issues become apparent."

Click here for the full report: