CEO panel looks at consolidation, optimism and finding the right guests

(Marriott Marquis)

NEW YORK—Day two of the NYU International Hospitality Industry Investment Conference was host to a second round of talks from top hospitality CEOs, and it didn't take long for the discussion to turn to online travel agencies. When asked if operators should be concerned about the level of technology OTAs invest in to put themselves in front of consumers, and if hotels have cause for worry as OTA market share grows, Hyatt Hotels Corp.'s president and CEO Mark Hoplamazian cautioned operators not to generalize about guests.

"If you reverse the perspective, what do OTAs look at relative to branded competition? When you look at customer type, a small minority are people I consider to be the customer we would have a chance to develop a long-term relationship with," Hoplamazian said, before explaining that there are large swaths of travelers who hold no loyalty to any brands. "The [OTA] delivery mechanism for that category of customer is pretty efficient, and that's a customer base I'll never go after."

Instead, Hoplamazian said hotels should be focused on the customers that can be swayed, particularly through long-term, meaningful relationships. Particularly, engaging with guests in other ways beyond price is becoming more important. "That's a battleground, but it's a smaller percent so generalizing is not helpful," he said.

It's difficult to talk about OTAs without bringing up consolidation, considering that Expedia and own nearly every other OTA on the planet. But consolidation also continues to take place throughout the brands as well, with Marriott International poised to grow from 750,000 rooms to 1.1 million rooms after its acquisition of Starwood Hotels & Resorts Worldwide. Beyond the fact that one hotel company is about to command roughly 30 brands, these large-scale mergers are creating other operational concerns even at the leadership level—where there was once an industry in need of leaders there are now leaders in need of companies.

"The elephant in the room is the idea of leadership," said Bill J. Ferguson, chairman and CEO of Ferguson Partners. "Boards are very supportive of CEOs, but how do you effectuate change? If you are an activist or investor, you push the needle."

Sharing Service

Christophe Alaux, CEO, North America, Central America and the Caribbean for AccorHotels, said that the French company misses having a luxury portfolio, something it realized when looking at the size of the home-sharing market kick-started by the growth of Airbnb and its ilk and culminating in its purchase of Onefinestay.

"It's not just a matching platform for people looking for a lower price," Alaux said. "They want services. We don't want to become commoditized. Whatever industry we are in, we want to provide services, in that way there is nothing to compare between us and Airbnb."

And on the subject of service, the panel also discussed the changing face of loyalty programs, and Starwood Preferred Guest in particular. Simon Turner, president, global development, Starwood Hotels & Resorts Worldwide, described SPG as "cult-like" in many ways, and said the program achieved that distinction by serving travelers based on their current trip.

"[Each] traveler has a different trip persona in different instances," Turner said. "When we come to a conference we are a different traveler than when we go on vacation with our kids. We at SPG drilled down into that idea to understand that guest as best we can."

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Big Buys

Turner also insisted that Marriott's leadership understands the place of SPG in the industry, and isn't going to mess with the formula. Turner wasn't the only person on the panel in the midst of an acquisition, though the details of the Marriott/Starwood deal are clearer than the more sudden acquisition of Carlson at the hands of Chinese conglomerate HNA. Speaking on the deal, Javier Rosenberg, COO and EVP managed hotels, Americas for Carlson, said he expects a deluge of both organic and inorganic growth in Carlson, on top of gaining a window into the traditionally stoic Chinese market.

"It's about economies of scale. Global travelers are changing," Rosenberg said. "In general, scale has a huge ability to penetrate the market, to deliver values from brands to owners."

On the first day of the NYU conference, the CEO panel boasted optimism about the future of the industry, while a later discussion between owners was fraught with much less confidence. Turner attributed these sentiments to the fact that the CEOs had a global outlook, whereas the owners were fixated just on the U.S., which has a major presidential election around the corner.

"Globally, it's a balanced picture," Hoplamazian said. "Predictability and understanding how things might evolve from a political or regulatory perspective creates uncertainty, and competition doesn't go well when there is uncertainty."

Alaux said this is the benefit of having a global mindset because it can help balance the negativity one market might be feeling. More significantly, Ferguson said there is a "wall of worry" that has besieged hospitality since the crash of 2008.

"We have seen clients with one foot on the brake and the other on the accelerator," Ferguson said.