Hotel brands, like Facebook and Amazon, want deeper relationships with consumers

The CEO panel at IHIF. From left: Deloitte's Andreas Scriven; Wyndham Hotel Group's Geoff Ballotti; IHG's Keith Barr; AccorHotels' Sebastien Bazin; Hilton's Chris Nassetta; and Choice Hotels' Pat Pacious. Photo credit: David Eisen

BERLIN, Germany — Hotel brands, like a best friend, want to interact with customers more than just a few times a year. Turns out, brand CEOs want a relationship with consumers on a basis more akin to Facebook or Amazon, which is to say, with frequency.

The CEOs of some of the most global hotel companies convened at the International Hotel Investment Forum for a spirited discussion on that issue and many more, including... socks.

"Brands are like a group of friends for every occasion that you can always count on," said AccorHotels CEO Sebastien Bazin. 

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But like any friend, in order to continue to be friends, you need to hang out with them, speak to them on a consistent basis, something the hotel industry struggles to do no matter how robust their loyalty programs.

"The problem with our industry is that we see our customers three or four times a year," Bazin continued. "Facebook sees the customer 12 times a day; Amazon four times a week. If we want to grow, we need to interact better."

AccorHotels has launched initiatives to engage customers and non-customers through platforms such as AccorLocal, which opens the group's hotels up, offering a range of services through a dedicated app, as the company looks to integrate its properties back into the communities where they are located, and John Paul, a digital concierge that it acquired almost two years ago.

"It costs us a bundle to acquire a customer, so go beyond the hotel space to try and produce what he or she wants when he's not traveling. Can he pick up a key? Can he get his laundry? It's enlarging the net. I need to be top of mind when it's service related. I'm only trying to multiply that interaction. We already have awareness; if we succeed maybe it will be 20 percent of business, 50 percent of business, but we have to try."

Hilton CEO Chris Nassetta is equally in tune with customer rapport. "Having deeper relationships with the customer is the future. The ultimate path to success is having a real connection. We're trying to do it without losing the focus on the core business," he said. 

"In the old world order, you had an opportunity to engage with the customer, who came to you through all sorts of means. Today, you need to have a different level of engagement pre-book, let alone when they book and you'd better engage with them when they leave over what was right and what was wrong. It's about never forgetting the business we're in—people serving people—but we can use technology to enhance the connection and make it a better experience."

For IHG CEO Keith Barr, partnering with other brands, he said, is a way for the company and its own brands to stay and be a bigger part of guests' lives. He cited three partnerships, in particular: Amazon, Shell Oil and Open Table. "It's about taking the core brand proposition and using technology to have more presence in customers' lives," Barr said.

Still, nothing replaces personal interaction, something Wyndham Hotel Group CEO Geoff Ballotti said. The point was expanded upon by Hilton's Nassetta with regard to whom the guest actually interacts with at a given hotel. It could be either a Hilton-managed hotel, or a franchised hotel, but in Nassetta's estimation, it doesn't matter. "When I get to a property, I don't care if it's our people or a [third-party operator's]; it's one family. The hardest thing I do is build a unified culture, which encompasses our franchise community. We have worked hard to unify everyone with a common set of goals. But if a franchisee fails us, the whole system fails."

Echoing Nassetta, Ballotti said that it should not matter who the operator is, or whether the hotel is managed or franchised. "The brand is only as good as its weakest link. If we're not extending market share we're not doing our job," he said. 

He did admit that a hotel is easier to control when it is company managed, so "there is a need to find great owners." 

The Brand Game

The CEO panel at IHIF represented more than 85 brands, spread across just five companies. Absent from the panel was Marriott, a behemoth with more than 30 brands. Choice Hotels International CEO Pat Pacious took the opportunity to take a playful swipe. "When you end up with 30 brands, you become an OTA," he said. "You have to differentiate."

Choice, which had been quiet on the M&A front prior to Pacious becoming CEO, scaled up in the extended-stay market after its recent acquisition of WoodSpring Suites and the some 240 hotels that came with the brand. "We looked at it and said, 'It's missing a global chain.' We should triple the size of it," Pacious concluded.  

Meanwhile, in the midscale space, Choice "rejuvenated" its Comfort brand, to safeguard its brand equity, as Pacious put it. The midscale space is getting more crowded by the minute. Both Hilton and IHG recently launched new brands in the space, which, according to both CEOs, are growing wildly.

Nassetta cited Hilton's Tru brand, which launched in January 2016, and which has now already done 500 deals. Nassetta said 50 should open this year alone and another 100 next year. While Nassetta complimented all of Hilton's brands, he is convinced that Tru, which became a need as Hilton's Hampton brand graduated to the upper-midscale, even upscale level in ADR, will be the company's biggest future growth vehicle. 

Not to be outdone, IHG launched Avid late last year, and Barr said the company has signed 75 deals. "It's the next Holiday Inn Express for us," he said, adding that it made sense to build out the brand organically as opposed to going out to market and buying one. Meanwhile, IHG is also in the throes of acquiring a luxury brand, Barr said, since building one from scratch is much harder, he added. Once a deal is announced, Barr said the price point will be higher than its current luxury brand, InterContinental.

Wyndham jumped into the acquisition pool of late as well, acquiring AmericInn and La Quinta, two well-known brands in the U.S. With the power of Wyndham now behind them, expect them to multiply. Ballotti announced that the La Quinta brand will be expanded to Spain, but did not give a definitive time frame for that to happen. "We have brands that are transportable to Europe," Ballotti said. Europe was Wyndham's biggest growth market last year, he added.

(At one point, after touching upon La Quinta, Ballotti pulled out pairs of La Quinta-branded socks for all the panelists, imploring moderator Andreas Scriven, head of hospitality and leisure at Deloitte, to change his socks on stage. The entire panel was told ahead of time to wear as colorful socks as they could.)

AccorHotels' Bazin came to the company from private equity, and became CEO in 2013. Back then, according to him, he didn't think too highly of brands. "Years ago, I thought brands couldn't matter less," he said. His tune has since changed. "Now, they have enormous value."

Contracts

Nassetta knocked back the suggestion that, given the speed of change, 25-year management contracts ran the risk of being outmoded and should be replaced with shorter agreements. He offered: "For the best brand companies, we're in a constant state of reinvention. We spend a disproportionate  amount of our time on existing brands and reinventing them. We're all trying to get scale and all that needs investment and we invest in every property—huge amounts of time and effort. We're never a big partner because we don't put capital in, but having a long-term arrangement allows both sides of the equation to align their interests.

"I don't think you're going to want to see a change. The investments won't be made because you start using short-term contracts and that drives short-term mentality. We're not going to do that because we don't want to fail in the long-term."

Looking ahead, Bazin said: "What we missed is that we have been imposing a room on people, with two beds. We stopped this standardization with Jo&Joe, you buy a bed. What I am looking forward to is mobility. Why should you push a customer to a hotel; why can't you bring beds to people's venues as opposed to bringing them to hotels?"