New Entrants, Blessing or Blight….

New entrants keep markets fresh – but they cause problems for incumbents.

Restaurants, bars, hotels, you name it:

• Bars, restaurants:

o    Peach Tracker shows total sales > LfL by c3%. That’s the impact of new capacity

o    Some will be new entrants & others will be incumbents bulking up

o    But the latter can lead to cannibalisation (RTN)

o    Incumbents can become lazy, entitled. New entrants are relevant, nimble

• Hotels:

o    London hotel market ‘added 18k budget rooms between London Olympics & now’

o    Rates & occupancy there said to be under pressure, not likely to abate

Lemmings & rabbits, restaurants & hotels, overproduction is often the issue:

• There’s rarely a shortage of grass but there are often too many rabbits
• Leisure is an enticing field as operators know it is a premium-to-GDP-growth market
• But that’s not a secret, oversupply can be a problem
• There is no braking mechanism, there is a crashing mechanism

So what to do?

• Prisoners’ dilemma, tragedy of the commons etc.
• What’s good at the micro level may upset the macro
• Operators do communicate, but they rarely back down. You open 3k rooms, we’ll open 4k.
• And we know how that ends – for the incumbents at least

Conclusion:

• This is a 200-word piece; you could write 200,000 but consider the winners & likely losers
• New entrants such as Franco Manca, EasyHotel are worth a look
• Losers may (or already do) include RTN, WTB etc.