In 2001 Jim O’Neill, then chief economist at investment bank Goldman Sachs, spotted what everyone else around him seemed to be missing, or ignoring: four giants from outside the accepted sphere of economic power were emerging.
His predictions were bold. Brazil, Russia, India and China, known collectively as BRIC, would, he argued, outstrip the six largest western economies by 2050, permanently changing the balance of global power.
People were sceptical at first. These were countries, they said, with radically different contexts lumped into an acronym with no further purpose than generating media excitement.
Over the years the idea began to gain acceptance, though, and before long some of the biggest international banks and hedge funds were marketing funds under the BRIC banner.
In one five-year period the number of portfolio equity funds flowing into the BRIC group rose by a staggering 12 times. By this stage it had become a central construct for investors and policymakers all over the world.
"The predictions turned conventional Western wisdom on its head," said Gillian Tett in the Financial Times.
A breath of fresh air
Like everywhere else, the hotel industry had a BRIC obsession. On the covers of trade magazines, in conferences and in the sector’s investment decisions, the emerging markets narrative was top of the agenda.
But now, after years of positivity, a new story seems to be taking over. In a recent series for BBC Radio 4, O’Neill, now no longer with Goldman Sachs, travelled to four different countries on the hunt for the next big thing. Perhaps it’s no surprise then, that his latest label is a synonym for freshness: MINT (Mexico, Indonesia, Nigeria and Turkey).
Whether this grouping provides a useful means by which the hotel industry might think about future growth remains to be seen, however. Various areas in Africa and Asia-Pacific that look promising aren’t included, nor do the places that are seem to share anything in common beyond ‘strong’ demographics.
"From our perspective we prefer to look at specific markets," says Geoff Andrew, chief operating officer at WorldHotels. "We don’t have a MINT strategy; what we look at is a set of very specific factors, a combination of sustained economic growth and political structures that are pro-business.
Taken on their own, however, these markets are certainly performing very well. An emerging middle class, and improved economic and political stability in Mexico has created an environment that is extremely conducive to hotel development.
Only last year, Marriott International announced plans to open 20 new hotels across the country with the real estate investment trust, Fibra Hotel.
In Turkey, the hospitality sector remains incredibly robust with 75 hotels and more than 11,000 rooms in the pipeline. Since 2012, the country has seen a lot of political unrest, but not enough to dissuade people from visiting, or partnerships between local Turkish investors and hotel brands from forming.
"Our intention is to continue aggressive growth over the next few years and double the portfolio all over again," said a bullish Patrick Fitzgibbon, senior vice-president for development in Europe and Africa for Hilton, when asked about Turkey last year. The same is true in Nigeria where Marriott, Le Méridien and Accor are just some of the brands leading the way in a country that has now entered the top ten for hotel development. According to pipeline data for 2013, hotel supply grew by over 60% in Lagos in 2013 and 26% in Abuja.
Strong branding in Indonesia has also created a lively hotel market, with revpar up 9.5% by the end of 2013 and a pipeline of 32,000 rooms slated for the next three years. Accor alone has announced plans to open 17 hotels across the country this year – in Bali, Semarang, Jakarta, Surabaya, Makassar, Tangera and Bandung.
End of the rainbow
That these locations are doing well is clearly a positive thing for the hotel industry. But does the hunt for new markets imply the end of the BRIC construct? In his book on emerging markets, Breakout Nations: In Pursuit of the Next Economic Miracles, Ruchir Sharma, an economist at Morgan Stanley, argues that the golden age for these countries is already over.
After the 2008 credit crunch, investment into the BRIC countries slowed down dramatically. Growth in China last year was just 7.8%, which was well below its 10.0% long-term trend.
In India, growth dropped from 10.0% to 5.8% in the same period while in Russia and Brazil things tailed off to around 3.0%.
To understand why the BRIC construct may have lost its power requires looking back a bit further to the 1980s, when China shifted to a centrally planned market economy, India embraced economic liberalism and the ex-Soviet bloc became suddenly integrated into global markets.
These new geographies, third-world and post-socialist, were a central plank of capitalism’s response to the crisis of the 1970s. Within a decade they doubled the global labour market, dramatically altering the balance between workforce and capital and restoring profitability
China became the linchpin of this new, globalised world, absorbing a huge amount of the West’s industrial production and slashing labour costs around the world as it did so. Now, however, it’s at the very centre of a new rupture.
Since 2005, wages have grown fivefold as a result of militant strikes, with profitability hit and FDI slowing for the first time in decades.
It’s possible to interpret the demise of the BRIC construct at least in part as, a response to the twilight of this period. If countries such as China and Indonesia are shifting from low-wage, export-oriented manufacturing economies into higher-wage, service economies, there is a problem for manufacturers. But how much does this problem affect the hotel sector?
Ngai-ling Sum argues in her paper, ‘A Cultural Political Economy of Crisis Recovery’, that "the BRIC story developed a consumption subplot from the mid-2000s" presenting an emerging consumer middle class as the solution to a global slump in demand.
If true, this not only means more outbound travel from BRIC countries, but also that hotel groups that have tended to rely upon business travel can now find opportunities in domestic demand.
While labour inputs may have a large effect on the wider macroeconomy, the dynamics are different for the hotel industry. The latest BRIC forecasts suggest that, even with slower growth rates, these markets are far from finished. Between 2009 and 2015, all four countries will have experienced annual industry growth of at least 5%.
Above revpar
"Growth in the BRICs continues to outshine expectations," said Aaron Glick, vice-president of global brand management at Starwood Hotels, earlier this year, "and we continue to see strong revpar index across all four markets."
In no country is this more evident than China, which, according to a report by Deloitte, will exceed the US in terms of industry growth by 2019. "China is still dominating the headlines," said Simon Press, senior director of World Travel Market, recently. "Its economic success continues to be reflected in the level of interest from the global travel industry."
Brazil has been less predicable than China over the years, but with two major global sporting events, it is also experiencing positives. Branded hotels are becoming more and more common – IHG recently signed five different deals in time for the 2016 Olympic Games.
"Brazil has taken a big step forward," says WorldHotels’Andrew, "and there’s optimism thatit can sustain that forward momentum after the major events. It’s been on the up for a while and will continue in that direction for some time."
While the BRICs continue to display clear signs of health, the MINT nations’ successes for the hotel industry to date should not obscure the problems these countries face at a, macroeconomic level. Projected population growth may be impressive, but good demographics won’t lead to development when serious exogenous factors are at stake.
Turkey, for example is currently going through an extremely serious political and economic crisis. The economy is flatlining, interest rates are high and the currency is tumbling after large flows of so-called "hot money" began receding.
Even more problematic is Nigeria, a nation currently experiencing an increasingly serious civil war involving Islamic militants in the north, and a long-standing, brutal struggle with piracy in the Niger Delta.
We are left with a paradox. On the macroeconomic level things look bad. As spaces of accumulation, the MINT economies are facing problems which the snappy acronym, for all its marketing potential, is unlikely to be able to fix. Looking more narrowly at the hotel industry, at the data and investor sentiment, however, reveals some grounds for a lot more positivity.
If anything, MINT seems overly restrictive. What about Malaysia, Japan and Vietnam, or countries in West or sub-Saharan Africa? In the end, MINT exists because it forms a word with which people are familiar. The hotel sector, always growing and forever seeking out new grounds, will be looking far beyond it.
