Global
LeisurePerspectives
Leisure industry trends from around the globe: 2023

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

1

Global Leisure Perspectives

Contents

01

02

03

04

Driving
customerloyalty

The impactof ESG

How technology
is revolutionisingleisureMergers andacquisition
opportunities

Click on the topics© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

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Global Leisure Perspectives

It was the first sector to go into lockdown, and thelast to come out of it. Yet people stopped going out
to eat, to be entertained or to travel even before
government-mandated lockdowns came into effect.
Overnight, businesses were left with surplus stock,no income, and little or no financial support.
Need bred innovation — and a sector was reborn,
albeit in a different guise. I’d go as far as to say that
we probably saw five years’ worth of innovation injust a few months.

Will Hawkley
Global Head of Leisure and Hospitality,
KPMG

Foreword
Global Leisure Perspectives is back.
Our last edition, in 2019, was all about technologyenabled improvements to the customer journey andexperience, and the upshot of Brexit. Who would
have thought, one year later, that we’d be plunged
into the COVID-19 pandemic, which would disrupt
the global leisure industry perhaps more acutely
than any other sector.
This edition of Global Leisure Perspectives is allabout the industry getting back on its feet, redefining
its priorities and addressing big issues, like ESG anddecarbonisation.
Resilience tested
What strikes me most about the leisure industry is
its resilience in the face of disruption created by the
pandemic.

Quick Response (QR) codes, for instance, saved theday. They allowed contactless ordering right acrossthe food industry, from the biggest operators to thesmallest. Today, they are used to drive cost efficiency
in outlets facing inflationary pressures.
As mentioned in our 2021 'Food for thought' report,
confronted with the closure of its outlets, Pizza
Pilgrims developed “Pizza in the Post” — a kit withall the ingredients to make your own pizza at home.
A cheeky marketing strategy to rate customers’
home-cooked efforts on Instagram engaged awider audience. Pretty soon, the business wasselling 20,000 pizzas in the post every week during
lockdown. This new direct-to-consumer strand to its
business model continues post COVID-19, because
why stop doing something that works?
But there were commercial casualties. And job
losses. People left the industry because there was
no work. But they found new employment in othersectors, like healthcare, delivery or food retail, where
they enjoyed what might be considered betterworking hours, while avoiding split shifts and latenights.
As normality started to return, the aviation sector,
which had not anticipated a rapid recovery indemand for travel, found itself with insufficient
staff. Shortages led to huge queues at airports
and disruption to flight schedules. Restaurants,
meanwhile, started to close earlier or shut theirdoors on certain days of the week to keep costs© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

down and to give staff a better work-life balance. The
knock-on consequences for profitability, hindered thesector from driving economic growth.

• New concepts, like competitive socializing —darts or ping pong nights, activity centers, escaperooms, etc., — are growing at pace.

Yet customers’ pent-up demand to get out andabout and shake off the cabin fever brought on by
lockdown, was good news for the leisure sector.
Even though times are still tough — the economic
downturn, food inflation and energy prices have seen
to that — people now want to eat out, see family
and friends and socialize. So, leisure businesses
are doing well. Hotel room rates are increasing, andoccupancy is up. Whitbread, for instance, posted
results in April 2023, which exceed pre-COVID-19
levels and Hilton Worldwide Holdings Inc. posted
greater revenue per available room compared tothe same period before the start of the coronavirus
outbreak. Global tourism is recovering. Americans
are travelling again. China is reopening.

And consumers are making up for what they missed.
Vacations, for many, are no longer considereddiscretionary spend. They are crucial. Increasingly,
experiences come ahead of products, like a new TVor a car, on wish lists. Though people might go awayfor 10 days rather than two weeks or stay in a threestar hotel instead of a four-star, they now regard
travel as a privilege. They value freedom and contact
with other human beings.

A changing world
As the world gets back to living, things are changing
in the industry. Innovation and reinvention are
reframing the sector:• Pay is increasing and working hours are becoming
more flexible to attract and retain staff and enablea better work-life balance. Campaigns, suchas Hospitality Rising in the UK, are helping totransform the image of the hospitality sector, andattract new talent, while shining a light on good
employers.
• Better use of outdoor space, including rooftops,
allows people to sit outside all year round andenjoy a meal in the fresh air with reduced risk of
COVID-19 contagion.
• Brands are following their work-from-homecustomers out of city centers and into thesuburbs. Instead of nipping to the pub in the citywith colleagues after work, people go out locallytoo. Empty retail units on high streets are being
turned into new leisure venues, supporting local
economies.

Among them are middle-income families in China
and India, who want to travel the world. And
businesspeople who take family away with them tocombine work with leisure downtime. And holiday
makers who extend their vacation to work while
they’re away. Hotels are becoming accustomed to
the “bleisure” traveler, and learning to anticipate
and accommodate their alternating work and leisureneeds.
Competition is intense. The pandemic forciblychanged people’s values. What went before
COVID-19 is quite distinct to what came after.
What comes next, across all segments of theleisure industry, must be greater personalization,
driven by data-analysis of behavior, to deliver agreat experience, differentiate offerings and capture
customer loyalty. And, as explored throughout thisedition of Global Leisure Perspectives, ESG shouldtake center stage. Decarbonization strategies andcommitments to net-zero should be incorporated
into everything the industry does as it endeavors
to reduce its carbon footprint and contribute to acleaner and greener world and a better society forall.

3

Global Leisure Perspectives

Driving customer
loyalty01. Customer value = price +experience + purpose
02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom

Driving
customer loyalty

03. Beyond B&B: New trends for
hospitality in India

In customers’ eyes, value isn’t just about price andexperience, but purpose. Innovation, incentivization andpersonalization, rooted in a data-led understanding ofwhat makes customers tick, can inspire loyalty.

How technology isrevolutionizing leisure© 2023 KPMG
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KPMG International Limited, a private English company limited by guarantee. All rights reserved.

04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG

Mergers and acquisitions
opportunities

4

Global Leisure Perspectives

Customer value = price + experience +purposeWhen it comes to value, values matter, says Stephen
Harwood, Customer Experience Manager at KPMG in
the UK.
You would expect, in the current cost-of-living crisis,
to see a decline in customers’ discretionary spend on
leisure activity. But these are extraordinary times. Afterthe pandemic lockdowns, customers are keen to get out
and about and make up for lost time. And that is helping
to offset some belt-tightening measures.
So, what will define and differentiate a successful leisurebusiness? According to our KPMG Customer Experience
Excellence study1 (CEE), value can drive future success.
But the customer’s perception of value is not just about
the price and the experience anymore. It’s also about the“purpose”.
Does your purpose match your customer’s?
An essential part of the value equation is how well theorganization’s purpose resonates with the customer. Overtime, we have seen integrity — the level of trust in an
organization — become more prominent in determining
customer loyalty and their likelihood to recommend.
And with integrity comes purpose: namely what theorganization stands for, over and above making profits forshareholders.
In fact, our research identifies that customer experience
excellence is rooted in organizational purpose. We’reseeing customer sentiment switch from “buying from” to1.

“buying into” brands. Take Everyman Cinemas, who rank
16th in our UK Customer Experience Excellence report
2022. It has transitioned from a large multiplex cinema
format to more intimate local venues, with enhanced
comfort, food and drink. Everyman provides a lifestyle
experience, which customers rate and buy into.
Increasingly, customers buy into the ethos of the brand,
as well as the social, environmental and ethical pledges
it makes. Leisure businesses that deliver on thesemeasures can stand out.
But it’s not quite as simple as that. Customers’
assessments of the purpose of a business, and its social,environmental and ethical stance, should be balanced
against the price they are willing to pay. In our study,nearly half of customers say they are willing to pay more
for goods and services that reflect their personal values.
Just 15 percent say they are not.
Customer experience excellence is rooted inorganizational purpose. We’re seeing customer
sentiment switch from “buying from” to “buying
into” brands.

Purpose is an essential part of Integrity.
It has become more important as aconsequence of heightened consumer
concerns over the environmental andsocietal actions of companies.

Driving customer
loyalty01. Customer value = price +experience + purpose
02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom
03. Beyond B&B: New trends for
hospitality in India
04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

The KPMG Customer Experience Excellence study (CEE) annually defines those organisations
leading the way in terms of delivering great customer experiences, not just in leisure, but acrossall sectors. The study, incorporating over 300 brands, enables KPMG to gather, analyse and sharelearning and latest trends.
© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

5

Global Leisure Perspectives

What makes Hilton a top performer?
Hilton Hotels and Resorts is the best performing hotel
group in our CEE study of 300 brands. It ranks animpressive 13th in our 2023 study, up 30 places on2022.
Hospitality is all about “people serving people”.
Hilton ensures that its purpose, set 120 years ago by
founder Conrad Hilton, and the values that underpin it,
permeate every aspect of the guest experience. So,
in common with other top performing companies, theemployee is at the center of the Hilton approach. The
group encourages team members to use their initiative
to make every guest feel welcome in the best way theycan. Training focuses on soft skills, to turn a nice stayinto a great, memorable experience for the customer.
Hilton’s brand and proposition are built on listening towhat customers want. And that includes environmental
and social initiatives too. So, when the Hilton London
Metropole underwent a large-scale refurbishment,
it took the time to listen to guests’ needs. They said
they wanted to see more evidence of sustainability,
so the hotel partnered with sustainable suppliers. Its
new uniform supplier, for instance, uses only British
sustainably sourced materials and recycled plastic
bottles, while a menu is created around locally sourced
ingredients.
More broadly, Hilton believes it is important to assess
its environmental and social impact across its entire
ecosystem. It tracks the environmental performance ofevery single Hilton hotel — including their energy andwater consumption and waste generation — using its© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

LightStay technology platform. It calculates reductions
in carbon emissions and even generates customized
estimates of the environmental impact of corporate
customers’ events.
As well as sustainability, Hilton runs several social
initiatives. Hotels proactively help team members tonavigate the cost-of-living crisis, with free meals, pay
rises and discount schemes. Great Place to Work, theglobal authority on workplace culture, ranks Hilton as
the top hospitality company in the UK. It also places as
the top hospitality company in the Best Workplaces for
Women in the UK.
This link between value and values is increasingly
important to customers. Providing a great leisureindustry experience, while demonstrating that you carefor your people and the environment, resonates withcustomers. It means that your purpose fits with their
purpose and, when it comes to value, these values
matter.

Hilton Hotels’ 30 place improvementin our index is a powerful exampleof how purpose fueled, valuesdriven experiences drive commercial
success. Drawing on a purpose set
some 120 years ago by its founder,
Conrad Hilton, it continues to ensurethat purpose, and the values that
underpin it, permeate every aspect of
the guest experience.

Driving customer
loyalty01. Customer value = price +experience + purpose
02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom
03. Beyond B&B: New trends for
hospitality in India
04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

6

Global Leisure Perspectives

Luxury industry prepares for new
Chinese consumer in post-pandemic
travel boom
After three years in relative isolation, China has reopened its borders. A massive shift in the global
luxury market is taking place as Chinese consumers
resume leisure travel. To attract shoppers on
holiday, the industry must prepare for new types ofconsumers, explains Anson Bailey, Head of Consumer& Retail, ASPAC, KPMG China.
Their bags are packed; their travel documentation has
been renewed; their visas are ready. Now that COVID-19
pandemic restrictions have been lifted, Chinese leisuretravelers are taking to the skies once again. But where
and how they travel, and what they might buy while
they are overseas, hinges on a complex new set of
motivations.
KPMG’s latest study, Luxury Redefined: Building trustwith Chinese consumers through authenticity andintegrity, offers insight into consumer behaviors, as well
as challenges and opportunities for retail businesses.
The survey, across 2,653 consumers in cities in
the Chinese Mainland and Hong Kong (SAR), is
supplemented by interviews with executives from theluxury industry. It clusters respondents into seven distinct
types. Data suggests that these consumers move fromcluster to cluster as their experience with the luxury
market evolves, due, in part, to socioeconomic factors
like increased disposable income. The analysis drills
down into the characteristics of each consumer type,their propensity to travel and their purpose for travel anddestination, as illustrated in figure 1.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

Driving customer
loyalty01. Customer value = price +experience + purpose
02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom
03. Beyond B&B: New trends for
hospitality in India
04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

7

Global Leisure Perspectives

Figure 1

Consumer type

Willing or highly willingto travel post COVID-19

Characteristics
Aged 40 or above
Influenced by family, peers and sales representatives
Do not spend much time researching products•

Luxury newcomers

•
•
•

•
•
•

Heavily represented among consumers aged 25-34
Newly acquired purchasing power
Make purchases that reflect their social status•

81%

Statusreflectors••

Heavily represented among consumers aged 18-24
Heavy reliance on information from social media andinfluencers
Spend time at social events, parties and virtualenvironments•

69%

Value high quality
Relatively higher knowledge of luxury brands
Make purchases to demonstrate their uniqueness•Community approval
seekers•••

Luxuryconnoisseurs••“New luxury”
pioneers

78%

77%

•

Preferred
destinations

Driving customer
loyalty

To experience culture, relax
and retreat.

International:• Sydney, Seoul
Domestic:• Hainan, Hong Kong•

To experience culture, relax andretreat. To visit family and friends, orto go on honeymoon

International:• Milan, New York
Domestic:• Hong Kong

02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom•

To experience art, culture andhistory

International:• Tokyo, Singapore, London
Domestic:• Hong Kong, Macau

03. Beyond B&B: New trends for
hospitality in India••

Relaxation, retreat and adventure

Shopping

International:• Tokyo, Singapore, London
Domestic:• Hong Kong, Macau

Favor artisanal, high quality and high-priced goods
More open to brands that promote new ideas, advanced
designs/concepts, and contribute to society
Care more about environmental impact and social
responsibility

•

•
•
•

Strong emotional connection to Chinese culture
Prefer purchasing Chinese brands
Relatively young with most aged 18-34

•

61%

•

Relatively hesitant to travel post
COVID-19; prefer domestic
destinations

International:• Milan, Paris
Domestic:• Hainan, Chengdu

•
•
•
•

Most aged 25-44
Spend a large percentage of their income on luxury goods
Focus on resale value and limited-edition items
Likely to attend art or fashion shows to obtain information
about the luxury market

•

68%

•

Shopping

International:• Milan, New York
Domestic:• Hainan, Chengdu•

Cultural resonators

Luxuryinvestors•

68%

Main purpose
for travel

International:• Milan, New York
Domestic:• Hong Kong, Macau

01. Customer value = price +experience + purpose

04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

Source: KPMG China, Luxury redefined: Building trust with Chinese consumers through authenticity and integrity, 2023.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

8

Global Leisure Perspectives

Adapting to new consumer behaviors
Purchasing behaviors across these consumer types arereshaping the way in which the leisure industry must
respond. Notable trends are emerging.
The rise of the individual in purchasing decisions
The escalation in e-commerce platforms, including
leisure travel sites, has shifted decision-making powerfrom the Chinese family unit to the individual. Leisureindustry retailers must understand the “me” rather than“we” consumer mindset and become better at customer
segmentation to target and service this growing sense of
self.
For luxury retail and hospitality brands, there is also
scope to explore customization services with customers
who want tailor-made products and services thatshowcase their uniqueness and personality.

consider sustainability when making travel decisions andplans. In response, retailers must communicate more
effectively their environmental, social and governance(ESG) story to consumers, not only in their core branding
and marketing, but also on digital and offline channels andother consumer platforms.
Boost to luxury shopping revenues expected as travel
resumes
The pandemic has had a lasting impact on Chinese
consumers’ shopping behaviors. For the past three years,
they have grown accustomed to shopping domestically.
Though outbound Chinese travel is picking up, it is too
early to tell how much incremental growth brands willachieve.

Demand for sustainable travel coincides with growing
social awareness
Higher levels of environmental and social awarenessare prompting some Chinese consumers to reconsider
how their purchasing decisions impact the world aroundthem. Young people, most notably, are adopting anenvironmentally friendly lifestyle. They shop, for instance,for vintage clothes and eco-friendly products. This isbacked by the rise of a second-hand market in China, withspending exceeding 1 trillion Renminbi (RMB) in 2020.

Nonetheless, short-haul travel to Hong Kong (SAR)
returned in the first quarter of 2023; long-haul travel is
expected to surge in the second half of 2023. Someadjustment to the proportion of domestic versus
international spending on luxury items is anticipated.
For brands, the challenge is to ensure that any shortfalls
in domestic revenues are recaptured overseas. To do this,retailers must better understand the spending patterns of
new types of Chinese consumers and make adjustments
to their operating models.

Leisure industry retailers must understand the“me” rather than “we” consumer mindset andbecome better at customer segmentation totarget and service this growing sense of self.

Driving customer
loyalty01. Customer value = price +experience + purpose
02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom
03. Beyond B&B: New trends for
hospitality in India
04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

This trend is similarly reflected in growing demand forsustainable travel. Our Luxury Redefined survey reveals
that 90 percent of Chinese mainland respondents© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

9

Global Leisure Perspectives

Beyond B&B: New trends for hospitality
in India
The hospitality industry in India is undergoingsignificant transformation as it caters for customers
with more sophisticated demands and expectations.
Chintan Patel, Partner, Deal Advisory at KPMG in
India, reports on the changing dynamic.
India has innovative possibilities for every type oftravelers, whether the ultimate digital hotel experience;a hybrid work-and-leisure stay; a resort that combines
luxury with sustainability or just a wallet-friendly option.
Innovation reinvents hospitality in India
An enhanced digital experience
Digital services are replacing customer-facing
delivery in some hotels. It means minimal
contact between guests and staff. Instead,technology-assisted solutions, like contactless check-in
and check-out, QR-code supported ordering and selfservice kiosks do the customer service. Mobile apps,
digital tablet menus, voice control and biometrics makeit happen. Though an enhanced digital experience is one
way for hotel groups to meet customer needs and securecompetitive advantage, it is likely to come at significant
cost.
Bleisure combines business with leisure
Bleisure defines a new type of travel:neither fully business nor fully leisure, but a
combination of the two. A traveler might, forinstance, tag a few days’ sightseeing onto a business trip,
and perhaps bring along family or friends. A holidaymakermight need to fit in work time around downtime on thebeach. Bleisure, pitched at a better work-life balance, isgaining popularity post-pandemic.
In response, hotels are providing business-friendly
services, such as high-speed internet, workstations andconference rooms for bleisure travelers. Some evenprovide "workcation" packages. There are hotels, forinstance, providing a dedicated plug-and-play office areathat can be combined with add-ons, such as food andbeverage options, with discounts for overnight stays.
Health and wellness
Since the COVID-19 pandemic, health andwellness has become a bigger priority for thehospitality industry. Several hotels in India now
provide fitness facilities for guests, along with yoga andmeditation sessions, and nutritious food and wellness
therapies, like traditional Indian Ayurveda remedies.

The Shangri-La in Bangalore, for instance, mitigates its
impact on climate change by deploying a renewablesolar power plant that provides 90 percent of the hotel's
electricity. Meanwhile, the Shangri-La Academy provides
training to staff in energy and cost-cutting, as well as
waste management.2
Immersive virtual reality
A rise in online gatherings has prompted
several hotels in India to offer hybrid event
services. They blend the face-to-faceand virtual experience, using advanced audio-visualtechnologies and live streaming to connect remote
guests with in-person participants.

With the help of big data, customer profiling andpredictive analytics, hospitality providers are
informed by their customers' past browsing orpurchasing habits. They use these insights to refine
their offer and provide hyper-personalized tailoredservices and immersive guest experiences.

Globally, health and wellness is a thriving trillion-dollar
market. Hospitality venues, especially those with existing
facilities and bespoke treatments, are well positioned tocapture a significant share.
A more sustainable experience

Driving customer
loyalty01. Customer value = price +experience + purpose
02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom
03. Beyond B&B: New trends for
hospitality in India
04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG
How technology isrevolutionizing leisure

Sustainability is a big customer concern.
Hotels in India are increasingly cognizantof the need to improve sustainability byeliminating single-use plastics, adopting energy-efficient
appliances and lighting, and promoting local and organic
produce.

Mergers and acquisitions
opportunities

Eco-friendly resorts are becoming popular in India. They
combine luxury with eco-friendly practices, like using
renewable energy, rainwater harvesting and green
roofing.

2.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

Hotelier India article, Hospitality goes green, https://www.hotelierindia.com/operations/hospitalitygoes-green, accessed on 22 February 2023.

10

Global Leisure Perspectives

Hyper-personalization at your service
Increasingly, guests seek personalized
experiences. Hotels in India are responding
with customized menus, in-room amenities
and tailored experiences like city tours and culturalactivities. However, hyper-personalisation goes muchfurther.
King's Mansion in Goa, for instance, offers a wellness
consultancy. Guests submit a saliva sample prior to theirstay, which is analyzed at a local genetics laboratory, andused to tailor a wellness programme.
An authentic experience
Many travelers seek authentic local
experiences. These types of tourists tend
to be less interested in extravagant showsof wealth. They spend carefully and meaningfully, withconsideration for their impact on the world.
Hotels respond with activities and excursions that reflect
the local culture and heritage. They take guests on foodtours and offer art classes and visits to local markets andhistoric sites. Distinctive experiences, which give backto local communities, as well as specialist properties,
adventure holidays and relaxation retreats, are also indemand.
Some hotels curate unique experiences for their guests.
Raffles in Udaipur, for instance, provides a full moon
cruise, guided farm visits and lessons in coffee making
and tea brewing.

3.

Deal seekers
Rising inflation is impacting consumer
and business purchasing power. Reduced
disposable income is depressing demand for
hospitality and for meeting, incentives, conference andexhibition services.
Price-sensitive customers may be open to timely deals.
Hospitality players can respond with personalized
offerings that reflect customers’ prior buying patterns anddesign innovative packages to improve hotel occupancy
and sustain existing average-room-rate levels.

Transformation opportunity
If the hospitality industry in India seizes upon innovation,
it can revolutionize the way in which it operates andextend its appeal to a wider consumer audience. To
do that, players must continue to be flexible, invest
in technology and create unique and personalized
experiences that meet and exceed customer
expectations. Hoteliers that adapt to changing consumer
appetites will be better placed to stay ahead of the curvein what could become an increasingly crowded market.

Driving customer
loyalty01. Customer value = price +experience + purpose
02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom

The rise of the franchise model
Most hotels in India operate on management
and ownership contracts. Franchising has
grown in popularity in recent years, but
mostly for lower-ranked hotels. Now, as the Indian hotelbusiness evolves, brands' attitudes to franchising are
shifting. Large global and Indian-origin hotel brands areinvestigating franchising options. Increased availabilityof data, insightful analytics, astute owners, and qualified
third-party operators are the primary drivers of thistransition.
Branded residences
Residences linked to exclusive hotels, areslowly gaining traction in India’s luxury
property market. Branded residences blend
hotel-style elegance, aesthetics, exclusivity, services andamenities with home ownership. Most developments are
dual-branded or mixed-use. Residences are located close
to hotels to benefit from the synergies and efficiencies ofshared resources.3

03. Beyond B&B: New trends for
hospitality in India
04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

Hotelivate report, 2022 Indian Hospitality – Trends and Opportunities, https://hotelivate.com/wpcontent/uploads/2022/09/TO-2022.pdf, accessed on 22 Feb 2023.
© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

11

Global Leisure Perspectives

Driving customer
loyalty01. Customer value = price +experience + purpose

Why airlines are masters of loyalty
The airline sector does loyalty programmes exceptionallywell. Their schemes offer points that can be earned andburned quite easily and conveniently. But there is alsosocial currency to be gained from being a member ofan exclusive “club”. Few people can claim “platinum
frequent flyer” status, but many will aspire to it. And so,
the dynamics of high demand and limited supply makesuccess difficult to replicate in other leisure industries.
Airlines, quite simply, have a product that naturally lends
itself to customer demand for priority status.

Why your loyalty programme isn’tdelivering commercial value…
and what to do about it
The airline sector is the ultimate master of the loyalty
platform. Others in the leisure industry struggle toemulate its success. Lisa Bora and Naren Sanghrajka
at KPMG Australia, ask what makes a loyalty
programme work and deliver value.
Loyalty schemes deliver positive value when incremental
revenue, generated from increased customer retention
and changes in behavior, offset the costs of developing
and maintaining the programme itself.

The terms customer loyalty and loyalty
programme are often conflated. A loyalty
programme alone is not enough:Customer loyalty is an emotional relationshipbetween you and your customer. Loyalty
manifests itself in your customers willingness toengage with and repeatedly purchase from you,rather than your competitor.

In return for mastering the integration of loyalty
programmes across their organizations, airline businesses
have a rich seam of data. Using sophisticated data
analytics, they can drill down into their ecosystems andmonetize loyalty insights. And these insights, and theaccess they give to members, become a new form of
currency. It is no surprise that the loyalty division is fast
becoming the most profitable component in an airline
business’s balance sheet.

02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom
03. Beyond B&B: New trends for
hospitality in India
04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

Loyalty programmes are a structured means
to reward existing customers for their loyalty,
using incentives.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

12

Global Leisure Perspectives

What the leisure industry must do better
Loyalty programmes in the leisure industry are growing
at pace, with forecast growth of 9.2 percent from 2023
through to 2032. Though growth is significant, schemes
are less sophisticated than those in the airline sector.
Some lack the basic “earn-and-burn” construct; others
struggle to extrapolate data for insights, which could beploughed back into the business.
Though programmes are designed to drive repeatpurchases, many, according to eight-year analysis by
KPMG, do not optimize the true economic benefits.
We find that 88 percent of organizations run
earn-and-burn loyalty programmes, but:

40%
12%
6%
Just

To evolve their loyalty programmes, hotel, tourism
and leisure operators should get better at leveraging
their extensive data pools to deliver more varied andpersonalized benefits to members. They should beaccompanied by more attractive incentives andexperiences that reward participation.
Ultimately, a well-engineered programme can deliver
better commercial returns through lower wastage andhigher engagement, with operational efficiencies and datatransparency central to success.

collect data but do not perform regularanalysis

integrate results from loyalty
programmes into their marketing
channels and go-to-market strategies.

Only

actively leverage loyalty programmes
to drive their sales objectives

Why most point-based loyalty schemes fail torealize full value for retailers and shoppers
All customers are treated the same, with thesame offers driven by the same triggers
Low active participation
Margins eroded by rewarding shoppers forbehavior that would have occurred anyway
Points deemed too hard to earn and/or spend

Lack of detailed and robust customer data to
support personalization and execution
High program churnHigh operating costs to set up and maintaina commercially beneficial loyalty program
Low incentive to increase spend

Driving customer
loyalty01. Customer value = price +experience + purpose
02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom
03. Beyond B&B: New trends for
hospitality in India
04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

13

Global Leisure Perspectives

How to overcome friction points to fulfil value
Getting genuine commercial returns from loyalty
programmes hinges on resolving three barriers:
Driving customer
loyalty
The disconnect between loyalty
programme measures and companywide commercial metrics. Where
these measures are closely connected,
loyalty programmes can deliver on
primary organizational metrics, such as
revenue growth.
Difficulty in measuring incremental
returns. Though often the mainstated goal of loyalty programmes,
incremental returns are, typically,
difficult to prove empirically.
Lack of transparency andunderstanding of true programmecosts. Reporting on end-to-end costs,
such as technology, partnerships,
operations and customer rebates,
will help to inform trade-off decisions
around investment in specific loyalty
programme initiatives vs broader sales
and marketing tactics.

01. Customer value = price +experience + purpose
02. Luxury industry prepares for
new Chinese consumer in postpandemic travel boom
03. Beyond B&B: New trends for
hospitality in India

In the pursuit of greater commercial value, rememberthat the terms customer loyalty and loyalty
programme are often conflated. A loyalty programmealone is not enough.
Customer loyalty is an emotional relationshipbetween you and your customer. Loyalty manifests
itself in your customers’ willingness to engage withand repeatedly purchase from you, rather than fromyour competitor. Loyalty programmes, on the other
hand, are a structured means to reward existingcustomers for their loyalty by way of incentives.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

04. Why your loyalty programme
isn’t delivering commercial value… and what to do about it

The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

14

Global Leisure Perspectives

Driving customer
loyalty
The impact of ESG
05. How global tourism is putting
ESG on the map
06. Hong Kong (SAR), China
reopens to visitors: What’s instore for the hotel sector?

The impactof ESG07. Decarbonizing leisure flights
with sustainable aviation fuels

How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

From the aircraft that fly to and from destinations; to thehotels, restaurants and must-see sights that attract millions
of tourists every year, every action has environmental, socialand governance (ESG) consequences. Leisure providers areengaging with ESG and working out how they can lessen
their impact and make a positive difference.

© 2023 KPMG
Copyright
LLP,owneda UK limited
by oneliability
or morepartnershipof the KPMG
and Internationala member firm
entities.
of the KPMG
KPMGglobal
Internationalorganisation
entitiesof independent
provide no services
member toclients.
firms
affiliatedAll rights
withreserved.
KPMG International Limited, a private English company limited by guarantee. All rights reserved.

15

Global Leisure Perspectives

How global tourism is putting ESG
on the map

What’s driving change?

Tourism has a massive impact on global carbondioxide emissions. James Chilton at KPMG in Ireland,
explores what the industry can do to help combat
climate change and preserve bio-diversity, while
continuing to operate competitively.
Tourism has experienced phenomenal growth in thepast twenty years. It is a pervasive industry, linked
to almost every aspect of the international economy.
Positives of tourism include support for heritage andculture, and socio-economic benefits for communities
and destinations. But there are negatives too: tourism
has an adverse impact on the natural environment andbiodiversity.
Globally, tourism accounts for around eight percent ofcarbon-dioxide (CO2) emissions, half of which are causedby transport. The World Tourism Organisation predicts
that transport-related CO2 emissions from tourism
will increase by 25 percent between 2016 and 2030,
accounting for more than five percent of all man-madeemissions. During the same period, international anddomestic passengers are expected to increase from 20
billion to 37 billion,4 illustrating the size of the problem theworld faces.
Of course, tourism can help to make places better for
those who live there and those who visit, but it is notenough. Tourism must take responsibility for biodiversity
and climate action too. Key stakeholders — national
and local government, transport, leisure and hospitality
providers, and tourists — must contribute to a wholeindustry response that works.

01 Risk

02

From a macro perspective, risk includes thenegative impact on a destination due to climatechange and biodiversity loss, as well as, froma compliance perspective, risk to the ongoing
viability of tourism businesses. The impact of
COVID-19, for instance, demonstrated the needfor more resilient and vibrant destinations, and forindustries to work together and in harmony withlocal communities.

Visitors want more sustainable travel options.
A survey by Expedia Group among 11,000
consumers in 11 markets, found 90 percent seek
sustainable options when travelling.** However,70 percent admit to feeling overwhelmed by theprocess of becoming a more sustainable traveler.
In response, companies like Booking.com and
TripAdvisor are helping customers to accessinformation more easily to reduce the negative
impacts of their trips and boost the positives.

03

Investor demand
and reporting

Increasingly, investors demand that the businesses inwhich they invest operate ethically and responsibly.
For companies in the EU, there is an obligation tocomply with the Corporate Sustainability Reporting
Directive too.

04

ConsumerdemandCompetitive
advantage

According to Booking.com, 83 percent of global
travelers think sustainable travel is vital, with
61 percent saying the pandemic has madethem want to travel more sustainably in the
future.* Businesses that do not engage in ESG
risk becoming outliers. And they could lose
increasingly environmentally conscious travelers.

Driving customer
loyalty
The impact of ESG
05. How global tourism is putting
ESG on the map
06. Hong Kong (SAR), China
reopens to visitors: What’s instore for the hotel sector?
07. Decarbonizing leisure flights
with sustainable aviation fuels

How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities* https://www.unwto.org/news/tourisms-carbon-emissions-measured-in-landmark-report-launched-at-cop25** https://advertising.expedia.com/about/press-releases/sustainable-travel-study/

However, climate action should also take place within thecontext of securing continued economic revenue for theindustry overall, in order that it can deliver, in turn, thosewider regional benefits.
4.

https://www.unwto.org/news/tourisms-carbon-emissions-measured-in-landmark-report-launched-at-cop25© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

16

Global Leisure Perspectives

How tourism bodies are responding
According to Booking.com, 83 percent of
global travelers think sustainable travel isvital, with 61 percent saying the pandemic has
made them want to travel more sustainably
in the future. Businesses that do not engage
in ESG risk becoming outliers. And they could
lose increasingly environmentally conscious
travelers.

Increasingly, tourism strategies for national and regional
destinations are becoming climate-action focused.
In Ireland, the National Tourism Development Authority,
Fáilte Ireland, is embedding a more sustainable approach
into its regional tourism strategies. KPMG is supporting
Fáilte Ireland with a decarbonization project for the cruise
boat-hire sector, introducing lessons learned from otherdestinations, and assessing opportunities to green andrenew the fleet.
Slovenia is seeking competitive advantage with its
Green Scheme. It certifies destinations, attractions andbusinesses, including hotels and restaurants, that engage
in sustainable tourism.

Driving customer
loyalty
The impact of ESG
05. How global tourism is putting
ESG on the map
06. Hong Kong (SAR), China
reopens to visitors: What’s instore for the hotel sector?

The Singapore Tourism Board and the Association ofConvention and Exhibition Organisers and Suppliers areworking on an ESG framework, together with a data
and analytics pilot, to collect, quantify and report carbon
emissions from events. The goal is to generate actionableinsights to enable net zero by 2050.

07. Decarbonizing leisure flights
with sustainable aviation fuels

If you’re not yet on board with ESG, get on board

Mergers and acquisitions
opportunities

Initiatives by tourism operators are helping to put ESG
on the global map and encourage sustainable behaviors.
While these umbrella organizations are taking the leadat a local, regional and national level, it is down to theparticipants themselves — in hospitality, leisure, travel
and connected industries — to deliver on the ground.

How technology isrevolutionizing leisure

A whole-industry response can help, in turn, to stemsome of tourism’s catastrophic impacts on climatechange and biodiversity, while enabling 37 billion
travelers, anticipated by 2030, to visit destinations
sustainably and responsibly. For the tourism industry
itself, acting now on ESG is, in effect, preserving its rightto operate and compete in the future.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

17

Global Leisure Perspectives

Hong Kong (SAR), China reopens tovisitors: What’s in store for the hotel
sector?

and investment sectors. A strong rebound in trade fairs,
exhibitions and conferences, helped by popular events
like the Hong Kong Rugby Sevens and Art Basel Hong
Kong, is expected in 2023.

Post-pandemic, Hong Kong (SAR) is expecting
a resurgence in visitors. Among them areenvironmentally conscious millennials and Gen Z,
steering hospitality towards greater ESG compliance.
KPMG China's Alan Yau, Head of Real Estate, Hong
Kong, and Heidi Chan, Head of Hospitality, Hong
Kong, discuss what’s going on in the hotel sector in
Hong Kong.

Reasons to be optimistic

After almost three years of travel restrictions to containthe COVID-19 pandemic, Hong Kong (SAR) is open tointernational visitors. In January 2023, visitor numbers
jumped 70-fold, compared with January 2022, to nearly
500,000 arrivals.

As visitors return to Hong Kong, things should be looking
up for the hotel industry too. The sector is taking its
readings from Europe and the US, where hotel businessis back to around 80 to 90 percent of pre-pandemic
levels. Elsewhere in China, Macau (SAR) — which is open
again to inbound travelers and has renewed operators’
gaming licences — anticipates a big bounce-back intourists and gaming revenues this year.
In 2022, Hong Kong had close to 90,000 keys, likely togrow to around 92,000 by 2026, and more than 11,000
guesthouse rooms. Some new hotels opened during
the lockdown period, while owners and operators tooktime to improve or create value from existing assets.
Investors targeted 3-star and 4-star hotels for valueadd opportunities or conversion into residential rentals.

The Hong Kong Tourism Board intends to capitalize on
momentum. It has launched a massive campaign topromote Hong Kong globally, and drive its tourism, retailAnd so, despite significant pandemic disruption to thehospitality sector in Hong Kong, the market saw nosignificant distressed assets.
But there are challenges ahead for operating profits.
Labor shortages will incur additional hiring andtraining costs. Inflation continues and interest rates,
though expected to grow modestly, could impact thecapitalization rate. Even so, favorable trends indicate thatthe hotel industry has turned the corner. Hotel operatorsand investors expect a more positive outlook, with a
gradual influx of Chinese Mainland and international
tourists into Hong Kong.

Driving customer
loyalty
The impact of ESG
05. How global tourism is putting
ESG on the map
06. Hong Kong (SAR), China
reopens to visitors: What’s instore for the hotel sector?
07. Decarbonizing leisure flights
with sustainable aviation fuels

How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

8000000

Visitors to Hong Kong (SAR), China, per month, 2019 to 2023

6000000

4000000

2000000

2019

2020

2021

2022

2023

Sources: Tradingeconomics.com, Census and Statistics Department, Hong Kong
© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

18

Global Leisure Perspectives

Hotel owners and operators are looking to technology
to speed up efficiency, improve the guest experienceand ease demand on people resources. They are using
analytics to mine their vast pools of data for customer
insights, which will, in turn, increase guest satisfaction,
improve revenue and drive profitability.

92,634

92,18092,01091,39490,07589,74386,70084,08981,46578,93574,868

Hotel supply 2016-2026

Enhanced ESG practices can, in turn, create
environments that meet guests’ needs and create newinvestment opportunities.
The new cohort of hotel guests – millennials andgeneration Z – are calling loudest for industry
action on ESG. More vocal and environmentallyconscious than their predecessors, they value
sustainability and local destinations, andwill seek out hotels that conform with theirprinciples. To stay relevant, and give theseyoung travelers what they want, hotels must
realign their offerings.

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Source: Hong Kong Tourism Board

The influence of millennials and Gen Z on ESG
ESG is making a big impact in the hotel sector in Hong
Kong – and will reshape how they operate. Listed
and multi-national hotel groups are required to set
out their pathways to net-zero. ESG and performancetracking are demanded increasingly by hotel investors,
operators and travelers. Waste and energy management,
decarbonization, reduction in single-use plastics andsustainable sourcing all demand attention, with strategy
driven from the board-level down.

Driving customer
loyalty
The impact of ESG
05. How global tourism is putting
ESG on the map
06. Hong Kong (SAR), China
reopens to visitors: What’s instore for the hotel sector?
07. Decarbonizing leisure flights
with sustainable aviation fuels

How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

However, it is the new cohort of hotel guests —millennials and generation Z — who are calling
loudest for industry action on ESG. More vocal andenvironmentally conscious than their predecessors, theyvalue sustainability and local destinations, and seek out
hotels that conform with their principles. To stay relevant,and give these young travelers what they want, hotels
must realign their offerings.
© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

19

Global Leisure Perspectives

Decarbonising leisure flights withsustainable aviation fuels
Human-caused climate change is responsible forweather and climate extremes in every region in
the world. Sustainable aviation fuels hold the key
to travelers leisure flights, says Rachel Solomon
Williams, associate director of Energy and Mobility
Strategy at KPMG in the UK.
When the United Nation’s Intergovernmental Panel on
Climate Change published its Sixth Assessment Report inMarch 2023, it found that human-caused climate change
impacts weather and climate extremes globally. However,mitigation is possible, to some extent, with deep, rapid
and sustained global greenhouse gas (GHG) emissions
reduction.
Aviation is a big contributor. The industry has committed
to net-zero by 2050, but it will face challenges in reducing
its emissions. For long-haul journeys, especially, it
will likely depend heavily on liquid hydrocarbon fuels.

But the solution that may best address the need toreduce emissions, while enabling flight to continue, issustainable aviation fuel (SAF).
SAF’s greener promise
SAF is available commercially today, unlike battery orhydrogen solutions for aircraft. And it does not require
the redesign of aircraft or engines. It reduces the lifetime
GHG emissions associated with fuel consumption
by acting as a drop-in fuel that can be blended, inincreasingly high proportions, with conventional
kerosene-based Jet A-1 fuel.
The aviation industry recognizes the potential of SAF. In
recent years, it has worked closely with governments,
fuel producers and suppliers to increase SAF supply
globally. Grants and funding for innovative technologies;
tax incentives (mainly in the US) and proposed supply
mandates (in Europe and the UK) are designed to drive
supply and demand in parallel. Airports are starting to playa role too, incentivizing SAF-fueled flights with reduced
landing charges.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

Currently, however, SAF is both scarce and expensive:• Scarcity is due to SAF’s reliance on biogenic
feedstocks, which are also in high demand for road andmarine fuel applications. In the long term, fuels madefrom renewable electricity and captured carbon-dioxide
are likely to be more prevalent but are not yet available
at scale.
• Cost is driven by the high price of inputs andprocesses. This will continue until carbon pricing
begins to impact significantly on the price of fossil-jet
fuel. For now, there are limited options to reduce theabsolute cost of SAF. And that raises big questions
about economic support.

Driving customer
loyalty
The impact of ESG
05. How global tourism is putting
ESG on the map
06. Hong Kong (SAR), China
reopens to visitors: What’s instore for the hotel sector?
07. Decarbonizing leisure flights
with sustainable aviation fuels

Passengers are most likely to pick up the additional
cost of SAF in their airfares. Analysis by the UK
Government suggests that a 10 percent SAF-blend
could increase the cost of a medium-haul return
ticket by between £4 and £14 in 2030. Clearly, as
higher SAF-blend levels are mandated, there will
be a greater impact on ticket pricing.

How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

20

Global Leisure Perspectives

Who pays?

True green, not greenwashed

National SAF mandates are coming into effect. In Europe,
regulators demand that fuel supplied to EU airports are twopercent SAF by 2025; in the UK, it is 10 percent by 2030. The
cost of compliance through supply will likely have to be borne
elsewhere in the system because, post pandemic, airlines
simply cannot absorb higher costs.

In implementing these changes, airlines must be mindfulof the need to drive genuine environmental benefit andavoid any implication of “greenwashing”. They must
be able to demonstrate that passenger payments go
towards either a genuine supply of SAF or investment in
SAF production.

Driving customer
loyalty

Passengers are most likely to pick up the additional cost of SAF
in their airfares. Analysis by the UK Government suggests that a
10-percent SAF-blend could increase the cost of a medium-haul
return ticket by between £4 and £14, (two to seven percent) in
2030.5 Clearly, as higher SAF-blend levels are mandated, there
will be a greater impact on ticket pricing.

Sustainability and supply chain management are, KPMG
believes, vital in maintaining the environmental integrity
and reputation of new fuel types like SAF.9

05. How global tourism is putting
ESG on the map

Right now, we are at an exciting crossroads in the use of
SAF in leisure flights. Airlines and passengers agree thatthey want to encourage its use. But, while the market
is in its infancy, finding the right approach for different
participants, which apportions costs equitably, remains achallenge.

But are passengers willing to pay? According to the latest UK
Department for Transport Technology Tracker, 68 percent ofpassengers say they are prepared to pay an extra £5. This falls
to 62 percent for an extra £10 and to 58 percent for an extra£20.6 It seems, among UK passengers at least, that there ismajority support for some degree of SAF-related surcharge on
ticket prices.

The impact of ESG

06. Hong Kong (SAR), China
reopens to visitors: What’s instore for the hotel sector?
07. Decarbonizing leisure flights
with sustainable aviation fuels

How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

Airlines will need to bring customers with them on theirjourney to sustainability and be transparent in their pricing andcommunications. Airlines are already engaging with passengers
on cost and benefits, even though SAF usage is still optional:• A European Airline applies a €1-8 SAF surcharge per personfor economy tickets.7• Some airlines offer an opt-in SAF purchase, either during or
after online ticket booking.
• British Airways gives customers the option to pay for carbon
removals and SAF combined. Choosing a 10-percent SAFblend for a London-New York return flight, costs around £45.8

5.
6.
7.
8.
9.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/
file/1005382/sustainable-aviation-fuels-mandate-consultation-on-reducing-the-greenhouse-gasemissions-of-aviation-fuels-in-the-uk.pdf
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/
file/1139418/transport-and-transport-technology-public-attitudes-tracker-wave-9-report.pdf
https://www.businesstraveller.com/business-travel/2023/01/16/air-france-increases-ticket-prices-topay-for-sustainable-aviation-fuel/https://ba.chooose.today/#scrollTo=e57vdllxwg2ddsea2oxqgx
https://kpmg.com/uk/en/home/insights/2022/11/sustainable-aviation-fuel.html

21

Global Leisure Perspectives

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure

How technology
is revolutionizing
leisure08. Serving the digital guest: therise of XR and the metaverse in
hospitality
09. How virtual reality is shaping
the future of tourism andheritage
10. The role of tech in tacklinglabor shortages in theleisure market
11. What happens when the worldsof gambling, sports and media
converge?

Mergers and acquisitions
opportunities

Technology is reinventing leisure.
Virtual reality, extended reality andthe metaverse are feeding customer
appetite for more innovative andengaging leisure experiences.

© 2023 KPMG
Copyright
LLP,owneda UK limited
by oneliability
or morepartnershipof the KPMG
and Internationala member firm
entities.
of the KPMG
KPMGglobal
Internationalorganisation
entitiesof independent
provide no services
member toclients.
firms
affiliatedAll rights
withreserved.
KPMG International Limited, a private English company limited by guarantee. All rights reserved.

22

Global Leisure Perspectives

Recent research reveals that:

More than one-third of U.S.
travelers are keen to embark
on a multi-day virtual-reality
or augmented-reality travel
experience.10

Around half of Gen Z andmillennials in the US have used
at least one metaverse platformin the recent months.11

Serving the digital guest: the rise of XR
and the metaverse in hospitality
Today’s hospitality customers want exciting,innovative, and engaging experiences, which
emerging technologies can enable. KPMG innovation
leaders explore how to differentiate your immersive
offerings for digital guests.
The hospitality industry is all about delighting thecustomer. Delivering remarkable experiences andcustomized offerings that align with guests’ preferences
are impactful ways to distinguish your business fromother providers. So, whether a customer is walking into a
hotel lobby, a concert venue, or a sports arena, hospitality
brands must take great care to deliver memorable
moments.
However, the industry is at an inflection point. Customers
still enjoy traditional experiences at hotels, casinos,
theme parks, restaurants, and the like. But emerging
technologies are feeding their appetites for more novel,
interactive experiences.
Next-level technologies, like Extended Reality (XR)
and the Metaverse, are helping brands differentiatethemselves and deliver the experiences consumers seek.

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure08. Serving the digital guest: therise of XR and the metaverse in
hospitality
09. How virtual reality is shaping
the future of tourism andheritage
10. The role of tech in tacklinglabor shortages in theleisure market
11. What happens when the worldsof gambling, sports and media
converge?

Mergers and acquisitions
opportunities

Hospitality brands should
pay particular attention to
Gen Z, which is estimatedto wield as much as US$143
billion in spending power.12

10.
11.
12.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

Skift and Oracle Hospitality, “Hospitality in 2025: Automated, Intelligent…and more Personal,” 2023.
KPMG survey of 10,000 US-based individuals ages 13+, March 2023.
Barkley, Inc. and Millennialmarketing.com, “The Power of Gen Z Influence, How the Pivotal
Generation is Affecting Market Spend,” 2018.

23

Global Leisure Perspectives

According to the KPMG 2022 CEO Outlook survey,13close to 75 percent of CEO respondents believe theyneed to quickly shift investments into digital opportunities
and divest offerings that face digital obsolescence.
Meanwhile, our Metaverse Investor Perspectives survey
reveals that investors see benefit in early metaverse
investments.14 More than one-third fear they may havealready missed windfall opportunities, while threequarters say they plan to increase or maintain their
metaverse investments over the next five years.14

Immersive technologies explained
Consumers access immersive experiences via theirmobile phones, tablets, VR headsets, or yet-to-beinvented devices.
• Extended Reality (XR) encompasses both virtualand augmented reality.
• The Metaverse, which is considered an
application of XR, comprises immersive, 3D,
and virtual worlds, as well as avatars and digitalassets.

Consider the spectrum of immersive-technology
applications
Experimentation is essential for building understanding
and capabilities to enable immersive experiences. There
are plenty of options to explore:• The Metaverse allows brands to elevate customer
experiences with storytelling platforms and interactive
environments.
• Extended reality enhances live entertainment andleisure experiences and brings together communities
of like-minded fans or tourists.
• Web3 can be the basis of new loyalty rewards, suchas digital collectables (including non-fungible tokens)and preferential access to in-demand amenities, using
token gating.
Future metaverse experiences are unlikely to replacein-person experiences. But they may dramatically extend
and deepen brand relationships and loyalty. Virtual worlds
create opportunities for dynamic customer interactions,as well as new data streams that can inform efforts
around customer acquisition, loyalty, and retention.

• Web3 is an emerging blockchain-based
infrastructure for the Internet, which enables
decentralized digital ownership.

The art of the possible
Imagine a tennis enthusiast attains the highest
loyalty tier at a hotel chain. Before an upcoming
professional tennis tournament, the customer
receives an invitation to an exclusive party inthe hotel brand’s metaverse VIP lounge. The
memorable XR experiences include:
Participating in exclusive metaverse events,
including interacting with the world’s top players,
who mingle with guests and give out digital
autographs.
Networking with fans worldwide while watching
matches in real-time.
Virtually visiting one of the hotel’s lavish properties
to purchase exclusive digital collectables assouvenirs, leading to a planned future stay at thephysical property.
Throughout customer journeys such as this, XR
experiences can create deep immersion in events,
while allowing the hotel brand to create high-value
touchpoints leading to real revenue.

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure08. Serving the digital guest: therise of XR and the metaverse in
hospitality
09. How virtual reality is shaping
the future of tourism andheritage
10. The role of tech in tacklinglabor shortages in theleisure market
11. What happens when the worldsof gambling, sports and media
converge?

Mergers and acquisitions
opportunities

13. KPMG 2022 CEO Outlook.
14. KPMG Metaverse Investor Perspectives Survey.
© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

24

Global Leisure Perspectives

Are you ready for the metaverse?

Prepare for tomorrow’s tomorrow

Uncertainty around headwinds may give brand leaderssome pause about investing now.

The following three sets of questions can help you
evaluate your readiness to embrace emerging XR andmetaverse solutions and prepare for a distinctly different
future:Before you push ahead, examine where the Metaverse
fits into your company strategy and growth goals andhow those goals can be accelerated by emerging
technology solutions. Determine whether you are more
focused on increasing customer acquisition through newchannels or more internally focused on efficiency andproductivity gains. Rather than implementing technology
for technology’s sake, refine your objectives before
choosing technology solutions that can bring them to life.
Consider the risks as well as the opportunities aroundinvesting in immersive technologies. For example,
can your cybersecurity and privacy policies support
digitalization of your offerings? Despite overall optimism,a recent InnoLead report, sponsored by KPMG,
concluded that security, regulatory, and complianceissues rank near the top of the list of challenges thatorganizations expect to face when building or deploying
Web3 technologies.15
Leisure companies that get a strategic head start into theMetaverse, XR, and other immersive technologies could
realize a financial advantage. Staying one step ahead of
hospitality consumers’ needs and preferences can go along way toward solidifying those customer relationships.

Now is the time for hospitality companies to begin
thinking about their Metaverse strategies and roadmaps.
Generative AI-based technologies are poised to further
enhance immersive experiences, signaling that we arejust at the beginning of a long-tailed — and exhilarating —period of disruption.

Driving customer
loyalty
The impact of ESG

Envision opportunities for your brand/organization• Given brand perceptions and customer
expectations, how will you experiment with XR and
the Metaverse?
• How do your physical presence and products/
services drive customers to your immersive
environments and vice versa?
Evaluate your readiness to experiment with andpilot XR and metaverse initiatives• What metrics will you use to measure success?

How technology isrevolutionizing leisure08. Serving the digital guest: therise of XR and the metaverse in
hospitality
09. How virtual reality is shaping
the future of tourism andheritage
10. The role of tech in tacklinglabor shortages in theleisure market• What governance and risk controls are in place toprotect consumers and your brand integrity?

11. What happens when the worldsof gambling, sports and media
converge?

Establish your vision and align resources

Mergers and acquisitions
opportunities• What strategic commitments has your organization
made that could be accelerated — or deprioritized— by XR or metaverse solutions?
• To what degree have you assessed your internaltalent needs and identified business partners with
relevant capabilities?

15. InnoLead, “Shaping your strategy for Web3 and the metaverse,” sponsored by KPMG, https://www.
kpmg.us/growth-strategy/shaping-strategy-web3-metaverse.html© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

25

Global Leisure Perspectives

How virtual reality is shaping the futureof tourism and heritage
Immersive technologies can create competitive
advantage for tourist providers and augment thevisitor experience. Cailean Keaveney at KPMG in
Ireland, discovers how virtual reality is helping the
tourism industry shift from tradition to innovation.
The global virtual reality (VR) technology market is valued
at around US$12 billion and is expected to grow to morethan US$22 billion by 2025.16 Unsurprisingly, a broad
range of industries are embracing its transformational
promise. Among them is the tourism industry.
Studies highlight the potential for virtual reality in tourism.
It’s said to increase and retain visitor attention, enhance
the immersive quality of the experience and provide
a platform for better marketing. But what can it reallyachieve? Around the world, several tourism businesses
are already mixing real-life and virtual experiences.
Virtual reality in tourism is said to increase andretain visitor attention, enhance the immersive
quality of the experience and provide a platform
for better marketing.

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure08. Serving the digital guest: therise of XR and the metaverse in
hospitality
09. How virtual reality is shaping
the future of tourism andheritage
10. The role of tech in tacklinglabor shortages in theleisure market
11. What happens when the worldsof gambling, sports and media
converge?

Mergers and acquisitions
opportunities

16. https://www.statista.com/
topics/2532/virtual-reality-vr/© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

26

Global Leisure Perspectives

The reality of virtual reality
National tourism strategy
Explore some of Egypt’s most diverse protected areas. A
VR tourism campaign takes visitors on a virtual journey of
discovery across the White Desert, through the Sannur
Cave and onto Taba. Developed in response to a decline
in tourism, attributed to the pandemic, the VR experiencehas earned praise for its contribution to the revival of the
tourism industry in Egypt.
ECO Egypt is a nationwide VR tourism campaign. It is led
by Egypt’s Ministry of Environment, funded by the Global
Environment Facility and implemented by the United
Nations Development Programme, with the National
Bank of Egypt as a strategic partner.17

The creators mimic real-life galleries with audio
descriptions of each painting. Users can make notes or
sketches that can be seen by other visitors and get closer
to the art in the VR setting than would be possible in
the real world. The gallery includes Caravaggio’s Nativity
with St. Francis and St. Lawrence and Cézanne's View of
Auvers-sur-Oise, which was stolen from the Ashmolean
Museum in Oxford in the UK on New Year's Day in
1999.20The Irish VR experience
Tourism is one of Ireland’s most important economic
sectors and biggest employers. VR is being used to bringthe island’s historic importance, heritage and cultural
diversity to the virtual visitor.

Cultural heritage sites

The Legends of Kildare

Take a journey through the archaeological ruins of theancient city of Pompeii without setting foot in it. VR isbringing the heritage site to users: a sustainable tourism
experience without the environmental impact of travel.

The Legends of Kildare is a an immersive 3D-experiencethat takes visitors back in time to discover the history andmythology of Kildare. It was funded with investment fromthe national tourist authority, Fáilte Ireland, and Kildare
County Council.21 It is part of a wider national tourism
strategy that leverages Ireland’s rich history and heritage,embracing VR as an innovative technology solution.

In fact, the experience allows users to experience the
Italian UNESCO World Heritage Site from the Grand
Palais in Paris, France. Three people can explore the ruins
simultaneously, and visit a fully reconstructed room, in
its pre-volcano-eruption state, and access historical andscientific information.18
Art exhibitions
Set your eyes on five unseen works of art via asmartphone app and a VR headset. A new virtual reality
exhibition, “The Stolen Art Gallery”, displays masterpieces
that have either been stolen or are missing.19

The Gates of Hell, Wicklow Gaol
The Gates of Hell visitor experience at Wicklow Historic
Gaol, received significant investment from Fáilte Ireland23
as part of a €2.3 million Storytelling Interpretation Grants
Scheme.
The gaol, known as Ireland’s most haunted building,uses a VR experience to transport users back in time tointeract and learn about the rebellion of 1798, the famine
era and the War of Independence from the perspective of
the inmates.
Successful initiatives like these reveal the potential of VR
in improving visitor experiences, promoting destinations
and attractions, enhancing accessibility and lessening
the climate impact. We believe collaboration between
public and private stakeholders, and the wider tourism
community, can elevate VR as a mainstream andtransformative technology for the sector.

The impact of ESG
How technology isrevolutionizing leisure08. Serving the digital guest: therise of XR and the metaverse in
hospitality
09. How virtual reality is shaping
the future of tourism andheritage
10. The role of tech in tacklinglabor shortages in theleisure market
11. What happens when the worldsof gambling, sports and media
converge?

Mergers and acquisitions
opportunities

The attraction is expected to draw an additional 30,000
visitors to Kildare Town Heritage Centre between 2019and 2024 and is forecast to generate €1.3 million inrevenue for the local area.22 The experience appeals
to a diverse audience of tourists and is available in four
languages.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

Driving customer
loyalty17.

https://www.undp.org/egypt/stories/pioneering-virtual-reality-tourism-egypt%E2%80%99sprotected-areas
18. https://www.gedeonmediagroup.com/en/production/pompeii-the-vr-experience/
19. https://www.smithsonianmag.com/smart-news/virtual-reality-stolen-artwork-180980389/
20. https://www.prnewswire.com/news-releases/the-stolen-art-gallery-opens-its-doors-in-themetaverse-301583463.htmlprnewswire.com
21. https://www.hospitalityireland.com/general-industry/new-vr-experience-unveiled-81054?preview=1
22. https://www.hospitalityireland.com/general-industry/new-vr-experience-unveiled-81054?preview=1
23. https://wicklownews.net/2019/07/gates-of-hell-virtual-reality-experience-launches-at-wicklowhistoric-gaol/

27

Global Leisure Perspectives

The role of tech in tackling labor
shortages in the leisure market
Travel numbers are predicted to go up. Everyone
wants to get out and about now that pandemic
restrictions are mostly lifted. But the labor dynamic
needs to be fixed to enable business growth and an
improved customer experience.
The travel, leisure and hospitality industries aretransforming on the back of resurgent demand.
Consumer, business and hybrid “bleisure” travel are
picking up. Accelerated technology adoption, remoteand hybrid working models and new user expectations
complete the post-pandemic picture. It’s all looking goodapart from the scarcity of labor to service demand.
Right now, strong headwinds remain on the labor
front and employee shortages aren’t going away. The
pandemic exacerbated existing trends in the labormarket. The ageing population has weighed on labor-force
participation since the early 2000s; the rise of longCOVID and early retirements, prompted by the pandemic,
have further eroded supply. And even with increases
in unemployment during a recession, which can create
more demand for jobs, it is likely that labor shortages,
especially in leisure and hospitality, will likely define thenext decade.
All change at the workface
For leisure industry employers, the changing industry
landscape, and rising employee expectations, bring newchallenges. In response, they should be innovative indetermining how and where work gets done, along with
who makes up the workforce.

There are ways to tackle these challenges andimprove margins:

Treat employees as customersof the organization
In the hospitality sector, employee experience is emerging
as a corporate function. Listen to your employees andunderstand their changing aspirations. And respond in atimely way to remain competitive in the market. If you don’t,
you employees will move elsewhere.

Leverage technology to tackle labor
shortages and reduce staff turnover
Although the hospitality industry is a people business,
technology can replace manual tasks and enable a better
employee and client experience.

Raise a new generation of travel andhospitality workers with a passion forserving others

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure08. Serving the digital guest: therise of XR and the metaverse in
hospitality
09. How virtual reality is shaping
the future of tourism andheritage
10. The role of tech in tacklinglabor shortages in theleisure market
11. What happens when the worldsof gambling, sports and media
converge?

Mergers and acquisitions
opportunities

The modern workforce is diverse. Reimagine your talentstrategies and build a culture that resonates with thepersonal beliefs of your people, to strengthen and elevateyour brand among employees.

© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

28

Global Leisure Perspectives

Let technology take the strain

The irreplaceable human touch

Increasingly, in the travel and hospitality industry,companies adopt technology-based solutions to attract
and retain talent, improve efficiency and enhancecustomer service. They deploy:

Although digitalization can reduce workloads and improvecustomer experiences, the human touch can never befully replaced. Nor should it be.

Labor-management technologies:• Sophisticated forecasting algorithms predict demand
and automate time management, staffing andscheduling to maintain operational efficiency.
• Streamlined human resources and operations remove
barriers between talent sourcing, onboarding,scheduling and training to improve employee
satisfaction.
AI to turn data signals into value:• Artificial intelligence-powered software can accurately
analyze and deliver on predictions and businessoutcomes.
Automation:• Robotics with artificial intelligence, such as chatbots,
can reduce the need for manual labor and elevate thecustomer experience.
• The use of hiring apps is booming. They ease theprocess for storing applicant information, onboarding
and training employees, and allow collaboration on job
postings. They improve the overall experience for theworkforce.

Technologies alone cannot organize trips, connect withvisitors or earn customer brand loyalty. Industry leaders
must build a new generation of travel, leisure andhospitality workers. And for that, a balance should be
struck between technological advances and the humanconnection.
Businesses can turn the current disruption in the labormarket into an opportunity. Though there are several ways
to go about this, they can:• Reimagine the value proposition: The new generationof talent expects a purpose-driven culture that has
a positive impact on society, the environment andoverall employee well-being. Around 76 percent of job
seekers consider workforce diversity when evaluating
job offers.24 Employers must act with both agility andempathy when reframing their value proposition.
• Focus on the non-traditional workforce: Given the tightlabor market, companies must find creative ways toexpand the workforce by hiring cross-industry talent—perhaps from retail or healthcare — and focus ontransferable skills. Some organizations are initiating
special training programmes to integrate under-served
groups into the workforce and will help them develop
their skills.

• Adopt an inclusive recruitment strategy: To combat arising preference for location-agnostic jobs, capitalize
on geographic agility and flexible working hours
that combine leisure travel with work. Long-term
partnerships with other businesses in the sector cansupport the identification of qualified talent and build
talent pipelines.

Although digitalization can reduce workloads andimprove customer experiences, the human touch
can never be fully replaced. Nor should it be.

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure08. Serving the digital guest: therise of XR and the metaverse in
hospitality
09. How virtual reality is shaping
the future of tourism andheritage
10. The role of tech in tacklinglabor shortages in theleisure market
11. What happens when the worldsof gambling, sports and media
converge?

Mergers and acquisitions
opportunities

24. https://www.glassdoor.com/employers/blog/diversity-inclusion-workplace-survey/
Some or all of the services described herein may not be permissible for KPMG audit clients and theiraffiliates or related entities.
© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

29

Global Leisure Perspectives

What happens when the worlds ofgambling, sports and media converge?
A US$135 billion ecosystem is emerging from theconvergence of gambling, sports and media. But
players must move quickly and purposefully tocapitalize on the opportunity, says Rick Arpin at
KPMG in the US.
Sports betting in the US spiraled out of a perfect storm.
First the Supreme Court overturned the Professional andAmateur Sports Protection Act in 2018; then, COVID-19
lockdowns in 2020 and 2021, created an environmentthat lent itself perfectly to watching sport at home andbetting on outcomes. Today, betting is a key driver forincreased fan engagement, growth in media viewing
figures and improved valuations across sport and media
entities.
Synergies happen when players interconnect
Synergies and flywheel effects are at play when the
sports, media and gambling industries interconnect. Eachsector within this ecosystem benefits from increased
activity in another.

This convergence has the potential to create a US$250
billion ecosystem across advertising, media rights andgambling.25 To to help fully realize these potential benefits,
and create a well-executed sports-betting environment,
players should move quickly and strategically.

Betting is a key driver for increased fan
engagement, growth in media viewing figures
and improved valuations across sport and media
entities.

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure

How sports betting links the gambling, media and sports industries

08. Serving the digital guest: therise of XR and the metaverse in
hospitality

More legalized
sports betting

Sponsorship andother advertisingwith teams andother leagues

Gamingcompanies
acquire newcustomers

Increased fan
engagementwith sports

Increased media
rights fees

09. How virtual reality is shaping
the future of tourism andheritage
10. The role of tech in tacklinglabor shortages in theleisure market
11. What happens when the worldsof gambling, sports and media
converge?

Mergers and acquisitions
opportunities

Increasedviewership ofbroadcast sports
events25. Our KPMG report “Capitalizing on the convergence of sports, media and gaming,” issued in August
2021, has been updated to include our estimates for 2022, based on trends in sports betting andsports franchise revenue, and includes digital advertising.
© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

30

Global Leisure Perspectives

Deal volumes increase
The need for speed is evidenced by increased deal
activity as parties in one sector seek to “play” in another.
We tracked 105 convergence deals (mergers, large equity
investments and joint ventures) in the US between 2019and 2022, with deal participants seeking to expand theirmarket geographically, add products to their portfolios
and enhance brand value.26 They include:• Casino operator and entertainment company Penn
Entertainment, which purchased a 36 percent stakein media brand Barstool Sports in 2020. It sought toleverage Barstool’s differentiated customer base andbuild a content-based brand within the sports betting
space. It completed a full acquisition of Barstool in
February 2023. Penn also bought The Score, a leading
digital media and sports betting and technology
company, in 2021.
• PointsBet, the Australian sports betting company,
which struck a deal with US media and entertainment
conglomerate NBC Universal in 2020 to become its
sports betting provider. In return, NBC received an
initial 5 percent stake in PointsBet.
• Gaming company Bally’s Corporation and media
broadcaster Sinclair announced a deal in 2021 in which
Sinclair invested in Bally’s while re-branding its own
regional sports network as Bally’s Sports.
Elsewhere, intense activity is underway to seal marketing
partnerships and build sports betting platforms within
media companies. However, the pathway to success canbe difficult or cost prohibitive. For example, TV streaming
platform FuboTV started and subsequently shut down
its online sports betting division. Meanwhile, Fanatics
Betting & Gaming launched its first retail Sportsbook
in Maryland in January 2023 and intends to launch andoperate its Sportsbook and iGaming platform in additional
U.S. states in 2023 where permitted by relevant
legislation and upon the receipt of required license.

restrictions on sports sponsorships, including the removalof betting firms’ logos from football shirts.27

With change comes risk

Start by defining your “why”. Develop a strategy tosupport you decision to play in another sector and to fulfil
your objectives for convergence. Tactical steps might
include hiring leaders with experience in adjacent sectors
to build expertise and know-how across the ecosystem.

Convergence brings risks to every party involved in the
new ecosystem. Companies are moving into non-corebusiness activities, which come with an entirely new setof customers, products, employees and systems. And
that is a recipe for new risk. They include the increased
risks of cyber-attacks, data theft, hacking and money
laundering. These risks must be actively managed.
There is potential risk to the relationship between thecompany and its customers, which should be built on
trust. And so, transaction processing mechanisms must
be as robust in the betting industry as they are in othersectors, and customer funds must be managed properly
and transparently.
It is critical too that companies maintain gaming integrity
and comply with relevant data-privacy regulation.
Regulatory compliance in this industry is complex andwill require input from connected parties. Convergencemeans that sports and media companies are “guilty by
association” if things go wrong on the customer side.
Moreover, regulators and the public will expect
companies — whether they operate in the core gaming
sector or have entered via the media or sports industries— to demonstrate a strong commitment to responsible
gaming. They must strike a balance between selfpromotion and education about responsible gaming
behaviors.
For certain, US companies will be keen to avoid
the backlash that their counterparts faced with thelegalization of sports betting in Europe. A huge uptick in
betting advertisements angered the public, leading to© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

Playbook for successful convergence

Consider the broader customer base. Companies withineach sector should fully understand their own customers
and how their preferences might be leveraged acrossthe wider ecosystem. Identify gaps in offerings to both
existing customers and new customer segments, which
can be addressed by convergence.
Ensure systems and processes are robust and thatpeople can ensure compliance and security for thecustomer and for the operator. The convergence ofsystems can be tricky, especially in M&A where partnerorganizations might have superior technology.
This is a nascent segment, and so the focus should
be on innovation. Product development and productofferings will go through rapid iterations and must be wellconnected to other parts of the organization, such as themarketing, data and analytics and compliance functions.

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure08. Serving the digital guest: therise of XR and the metaverse in
hospitality
09. How virtual reality is shaping
the future of tourism andheritage
10. The role of tech in tacklinglabor shortages in theleisure market
11. What happens when the worldsof gambling, sports and media
converge?

Mergers and acquisitions
opportunitiesThose that take an informed approach to convergencebut move quickly and purposefully to capitalize on theopportunities that exist in this potential US$135 billion
ecosystem, will likely have the strongest start.

26. KPMG research.
27. Source: The Guardian, “UK betting faces bigger threats than losing its sport shirts,” February 1, 2021,
and House of Lords, Select Committee on the Social and Economic Impact of the Gambling Industry,“Gambling Harm - Time for Action, Report of Session 2019-21,” July 2, 2020.

31

Global Leisure Perspectives

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities

Mergers andacquisitions

12. A snapshot of M&A activity inthe global hotel market

The pandemic hit hard, but a resilient industry
has emerged. Though investors are encouraged by
performance, deal appetite is not yet back to where
it used to be. Alternative assets and new customer
values are shaping investment decisions.

© 2023 KPMG
Copyright
LLP,owneda UK limited
by oneliability
or morepartnershipof the KPMG
and Internationala member firm
entities.
of the KPMG
KPMGglobal
Internationalorganisation
entitiesof independent
provide no services
member toclients.
firms
affiliatedAll rights
withreserved.
KPMG International Limited, a private English company limited by guarantee. All rights reserved.

32

Global Leisure Perspectives

Post COVID-19, investors are taking positive readings
from better-than-expected performance recovery
across the global travel, leisure and hospitality sector.
KPMG partners in Germany, the UK, the US andJapan firms look at the sector through an M&A lens.
In 2022, across Europe, room rates were up 18.5
percent on 2019 levels, though occupancy was down
10.5 percent.28 In the UK, hotel trading performance
surpassed 2019 benchmarks, with demand coming fromboth the business and leisure segments, staycations andinternational travel. A post-pandemic rebound in travel,leisure and hospitality in the US got an extra boost fromrobust consumer spending. Meanwhile, Japanese room
rates rose, and the luxury segment fared well as travel
restrictions eased. The industry, it seemed, had turned acorner.
However, new headwinds could blow recovery off
course. Rising energy costs, interest-rate hikes, inflation,
wage demands, staff shortages and the cost-of-living
crisis all feed into a challenging economic environment.
And that translates into a switch in consumer behaviors,
reduced discretionary spend, continued pressure on theindustry and unsettled investors.
So, as post-COVID-19 recovery butts up against these
new economic headwinds, how are investors responding
to deal-making?

The German market

Figure 2

Germany reports a persistent gap between buyer andseller price expectations, which is limiting the numberof deals transacted. In fact, in 2022, the German hotel
investment market reached an historic minimum, withvolumes 45 percent below the 10-year average (seefigure 3). However, an increase in capitalization rates (upto 50 basepoints throughout 2022, with further increases
in the first quarter of 2023) returned an average 5 percent
gross yield for hotel real estate.
Figure 3: Hotel real estate investment in Germany

6,000
5,000
Hotel Investments

M&A deal activity in the global travel,leisure and hospitality sector

4,000
3,000

2,131

1,083

1,781

821

1,393

2,000

672

1,000 2,604

3,050

3,104

3,201

3,622

2016

2017

2018

2019

0
2015

Single assets

300
231

1,506 2,213

1,666

2020

2022

2021

Deal

Buyer

Year

No. of Hotels

MichelHotelsAchat Hotels

2023

13

Bierwirth& Kluth

Borealis2022

12

AmediaHotelsHR Group

2022

23

Success
HotelsHR Group

2022

22

ViennaHouse

HR Group

2021/2240

Odyssey
HotelsActivum SG

2021

12

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities
12. A snapshot of M&A activity inthe global hotel market

Portfolio deals

Source: BNP Paribas Real Estate Hotel-Investmentmarkt Deutschland Q4 2022

Operator consolidation has accelerated in the past two
years (see figure 2). In Germany, Austria and Switzerland(DACH region), portfolios of hotels, anything from fewer
than 10 to more than 100, are on the market or underdiscussion. Meanwhile, strategic alliances are being
formed. Lindner Hotels AG and Hyatt Hotels Corporation,for instance, are jointly seeking to extend their market
presence across Europe.

28. https://www.hospitalitynet.org/news/4116110.html© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

33

Global Leisure Perspectives

Institutional investors widened their nets to take in B- andC-class cities, as well as resort hotels. They are attracted
by new concepts and the ongoing professionalization of
the operator landscape. Union Investment, for instance,
entered the leisure segment in October 2022, with its
first acquisition of a resort hotel, close to the Bavarianalps, under the Marriott brand.
The long-stay serviced-apartment segment, which
demonstrated resilience during the pandemic, is gaining
investors’ attention too. Often highly digitalized, whichtranslates into greater efficiencies in the operating
business, while overcoming challenges presented by staff
shortages, serviced apartments also attract comparatively
high rents.
Smaller deals in unbranded hotels are gaining popularity.
Brand and chain penetration is still low in most European
markets — more than 80 percent of hotels and 50
percent of rooms are unbranded in Germany — whichindicates the scale of the acquisition opportunity. Amongthe interested investors is a newly established €500
million asset management fund, which targets vacantpossessions with potential to reposition assets.
However, as they switch into alternative hospitality
products, investors find themselves in a dynamic market
environment with a different set of investment risks. They
need a profound understanding of the operating concept
as the guarantor for secure rent payments. They shouldbe equipped to make judgement on the professionalism
and credit standing of operators as tenants, particularly
in a lease-dominated market like Germany. These risks
should be assessed in the context of potential future
market downturns.

The UK market
In the UK, there is no shortage of capital available
for investment in the hotel sector and real estate in
2023. For investors, hotels can be an effective hedge
against inflation as, in theory, operators can adjust
their prices quickly in response to short-term rises. But
new and existing investors, though attracted by strong
fundamentals, are waiting for an opportune time to
deploy capital.
Notable deals in 2022 include Tristan Capital Partners’
acquisition of Point A Hotels from Raag Hotels forapproximately £420 million.29 Fortress Investment Groupacquired PREM Group and KSL Capital Partners acquired
The Pig Hotels Group from Home Grown Hotels, both for
undisclosed sums. These platforms offer significant scopefor expansion and sit in the highest performing and mostresilient segments of the UK hotel industry.

Some hotel groups are looking to expand their UK
presence. They include B&B Hotel, which has plans toopen 100 hotels in the UK by 2030, meanwhile, Virgin
Hotels recently opened its first European properties in
Edinburgh and Glasgow.
Management contracts remain the preferred operating
model in the UK (outside of limited-service hotels),
but some operators are interested in leases to support
expansion.

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities
12. A snapshot of M&A activity inthe global hotel market

However, the second half of 2022 saw transaction activity
slow, a consequence of the UK’s mini budget and therising costs of debt and inflation. More stress could beon its way over the next 12 to 18 months, especially forcompanies needing to refinance. Increasingly, equity
investors are offering credit solutions to fill gaps left byhigh street banks, but these arrangements are generally
more expensive than what the trade is used to.
So far this year, most transactions have been for single
assets. The Israeli-based Fattal Group, the owner of
Leonardo Hotels UK and Ireland, acquired the Grand
Hotel in Brighton and, at the end of 2022, The Dilly in
London. Dalata Hotel Group, meanwhile, bought a new
192-bedroom hotel in Finsbury Park, London.

29. https://www.tristancap.com/news-and-media/press-releases/tristan-fund-partners-queenswayacquire-point-hotels-business-%C2%A3420m© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

34

Global Leisure Perspectives

The US market
Acquisitions were popular in the first half of 2022 in the
US. Hoteliers tapped into relatively cheap financing to buy
properties ahead of a summer surge in room and service
demand. Extended stay and alternative accommodation
proved popular with travelers and constitute a growing
market.
However, in response to rising inflation, the US
Federal Open Markets Committee raised interest rates
aggressively. Companies were forced to reconsider
deal making as they adjusted to a new normal of higher
capital costs. They assessed how inflation and potentiallabor stress in the sector would impact consumer
satisfaction. And though buyers made acquisitions toimprove operations and park cash in anticipation of achallenging first half to 2023, few were willing to pursue
megadeals. Others simply avoided deal-making in the
sector altogether.
Companies were forced to reconsider deal making
as they adjusted to a new normal of higher capitalcosts. They assessed how inflation and potentiallabor stress in the sector would impact consumer
satisfaction. As a result, the total value of deals in
the travel, leisure and hospitality sector sank in
2022.

As a result, the total value of deals in the travel, leisureand hospitality sector sank 72 percent in 2022 to
US$62.5 billion. This was from a banner 2021, when
US$224.8 billion worth of deals got done.

Diversification is evident among buyers who remained
active in 2022 in the US. Responding to consumer
appetite for high-quality travel and lodging, companies
like Choice Hotels, which purchased Radisson Hotels
America for US$675 million, moved into upscale
properties to better serve customers and capture
higher-margin revenue. Others, such as Dave & Buster’sEntertainment, which bought Main Event Entertainmentfor US$835 million, expanded geographically to build
scale and accelerate growth.
The Japanese market
Investment focus switched to resorts and luxury hotels,
rather than developments in big Japanese cities. This
policy became evident during the pandemic. A return ofwealthy travelers, after prolonged COVID-19 lockdowns,
is expected to see increased demand for natural andwellness experiences within the resort and luxury
hotel segments. Among some investors, there is an
expectation that the target-customer profile will change
and that hotel facilities will need to be modified toaccommodate their demands.

Investors, meanwhile, are conscious that thesustainability of their investments is tied to compliancewith ESG regulations. Wary that assets could become
stranded, they increasingly demand ESG due diligence
before signing off on investments.
The hotel industry’s commitment to ESG is set toaccelerate in line with government initiatives and shifting
consumer attitudes. Expect investors to eye up hotel
properties that offer opportunities for future proofing andenhanced sustainability, and which will appeal to next
generation ESG-conscious guests.

Driving customer
loyalty
The impact of ESG
How technology isrevolutionizing leisure
Mergers and acquisitions
opportunities
12. A snapshot of M&A activity inthe global hotel market

ESG exerts influence on investment decisions
Increasingly, investors must factor environmental, socialand governance priorities into their investment agendas.
Consumers purchase more thoughtfully and sustainably
than ever before, which impacts their accommodation
choices. Operating 24/7, hotels are the most energyintensive assets in the property sector, so hotel operatorswith an ESG focus can expect to be rewarded.

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35

Global Leisure Perspectives

What comesnext and how
to survive it
The leisure industry has been through a challenging time during andpost pandemic. There are several strategies that businesses can deploy
to ensure that their values reflect what their customers are looking foras the world moves on.

Align to your customers'
valuesPrioritize ESG to thrive inthe evolving industry

Adapt and transform youroperational strategies

The pandemic forced people to takea breather from hectic urban life.
Now, they are ready to travel andhave a renewed sense of purpose
and adventure. But they are morediscerning about how they travel andwhat they want from the experience.
The industry must develop more
personalized responses that
accommodate customers’ values.

Hotels and travel companies, aswell as restaurants and venues,
must consider their impact on theenvironment, how they achieve theircarbon targets and comply with
ESG regulation. Within that, theymust also address access to labor,
ways to increase diversity and theircontribution to the society in which
they sit.

Businesses must evolve their target
operating models, keep control ofcosts and extract maximum value
from investments if they are tocontinue to compete in the newenvironment.

Cut through the complexity to turn fresh
consumer insights into opportunities

A once in a generation chance toaccelerate change and make things right.
Are you with us?

Utilize technology anddata to enhance customer
experience

Take a proactive approachto M&A – it can transformthe leisure landscapeTechnology enables innovation
around customer experience. Loyalty
programmes, properly executed,
deliver incremental value fromincreased customer retention. Hotel,
tourism and leisure operators mustget better at leveraging data pools todeliver more varied and personalized
benefits to customers, while keeping
data secure.

Leisure businesses must consider
their growth strategies — bothglobal and local — and ensure thatgovernance and risk processes arerobust enough to withstand any
future upheaval.

Deliver value through digital transformation
and acquisition.

Create a bold strategy and navigate thecomplexities of deals© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

Reshape your costs to find growth36

Global Leisure Perspectives

Talk to our experts
If you would like to discuss any aspect of this paper, please don’t hesitate to contact us:
For leisure and hospitality
industry expertise, contact:

For guidance on customer
experience and loyalty:

For guidance on ESG,
contact:

For guidance on Metaverse, AI,
VR and technology, contact:

Will Hawkley

Stephen Harwood

James Chilton

Stephanie Kim

Global Head of Leisure andHospitality

Customer Experience Manager

Associate Director at
KPMG Future Analytics

Senior Director, EnterpriseInnovation

KPMG in Ireland

KPMG LLP

E: james.chilton@kpmg.ie

E: jiseonkim@kpmg.com

Rachel Solomon Williams

David Pessah

Associate Director of Energy andMobility Strategy

Gemma GardnerDiscovery Leader, KPMG Ignition

Director, Real Estate, M&A

KPMG LLPKPMG in the UK

E: dpessah@kpmg.com

E:Gemma.Gardner@KPMG.co.uk

KPMG
E: will.hawkley@kpmg.co.uk

KPMG in the UK
E: stephen.harwood@kpmg.co.uk

Anson Bailey
Head of Consumer & Retail, ASPAC
KPMG China
E: anson.bailey@kpmg.com

Heidi Chan
Head of Hospitality
KPMG China
E: heidi.chan@kpmg.com

Lisa Bora

KPMG in the UK
E: Rachel.SolomonWilliams@kpmg.co.uk

Giorgio Parolini
Energy & Mobility Strategy
KPMG in the UK
E: giorgio.parolini@kpmg.co.uk

Partner in Charge, Retail & Leisure
KPMG Australia
E: lbora@kpmg.com.au

For guidance on gambling,
sports and media, contact:

Naren Sanghrajka

Rick Arpin

Director, Management Consulting

National Gaming Leader, Office
Managing Partner

KPMG Australia
E: nsanghrajka@kpmg.com.au

KPMG in the US
E: rarpin@KPMG.com

Zak Williams
Director, KPMG Ignition
Market Leader
KPMG LLP
E: zjwilliams@kpmg.com

For guidance on M&A,
contact:

Fabrice Adler
Manager, Deal Advisory, Real
Estate & Hospitality
KPMG in Germany
E:fabriceadler@kpmg.com

John Taylor
UK Head of Hotels
KPMG in the UK
E:John.Taylor@KPMG.co.uk

Chris Brodkey

Chintan Patel

Senior Associate, KPMG Ignition

Partner Deal Advisory

KPMG LLPKPMG India

E: cbrodkey@kpmg.com

E:chintanpatel@kpmg.com

Cailean Keaveney
Consultant - KPMG Future Analytics
KPMG Ireland
E:cailean.keaveney@kpmg.ie

Alan Yau
Head of Real Estate
KPMG in Hong Kong (SAR)
E:alan.yau@kpmg.com

Braden Mark
Deal Advisory Partner
KPMG in the US
E:bmark@kpmg.com© 2023 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services toclients. All rights reserved.

37

Global Leisure Perspectives

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CREATE | CRT148545A | May 2023
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Global Leisure Perspectives