BERLIN, Germany — As costs increase and the price of assets rise, brands must work with owners to increase efficiency and productivity. And while hotel owners remained committed to the global flags, they are still insisting on more transparency and greater on the contribution of F&B and non-rooms revenue.
“It’s rare that you find a scenario where you don’t think a brand can deliver extra revenue," Cody Bradshaw, managing director, head of European hotels at Starwood Capital Group, said at the first day of the International Hotel Investment Conference, here at the InterContinental Berlin. "It’s about the fee structures. For the last 20 or 30 years, the brands owned no real estate and the only way for them to drive EBITDA was through increasing fees, often new fees.
“Where it becomes more of a question is where brands are in danger of compressing the value. With the brands, you really need to drill down into the cost-per-bookings—the loyalty program, for example. We’re all students in this game and we’re constantly learning, and part of our job is to facilitate the learning of best practice.
“There is a spectrum of asset management—it is a case of the operators monitoring the asset and there are the real in-the-trenches operations. Asset management is like peeling back an onion: You can go back a few layers and think you’ve gone quite deep, or you can go even further back. You have to have your hands on it, but do it in a collaborate way.”
Last year, Starwood Capital invested in Yotel, kick-starting the brand’s growth. “If we can take a building and add 40 percent to 50 percent more keys—as we have in Glasgow with Yotel—that, combined with operator efficiencies such as no check-in, that flows into the bottom line," Bradshaw said. "The return on cost was 40 percent more than the other brand we looked at.
“We have to look at the inefficiencies in the physical product. The new brands look to address those.”
Collaboration
The importance of taking a more collaborative approach between owners and the brands was underlined by Anders Nissen, CEO, Pandox, who noted that his company works with 20 different brands. “All hotels have a business plan. If it’s leased or owner-operator it’s the same—it’s maximizing cash out of the building. Many people find us demanding, but we want to invest together, more rooms in every building, upgrading the restaurant. We are fighting for market share every day.
“This is an everyday business. You have to fight for business every day, not like banking or insurance. And you have to love it.”
The issue of rising costs drove the debate to the issue of the online travel agencies. “Now, we have hundreds of distribution channels and just a few are held by brands," Nissen said. "To get value, you need to understand the OTAs and your own brand and the competitor set and your local management—and you need to work with all of that.
“We have a positive view of OTAs. They cost too much, but they create a lot of demand and they have introduced technology which we, as an industry, have not done ourselves. There may be so many more channels that the commission may come down. To call the OTAs the enemy is not right. They can deliver a revenue premium, but you have to work with channel managers, which is an expertise that the sector does not have.
“It’s good for an owner like Pandox because we are not so reliant on a brand anymore.”
May You Live in Interesting Times
At AccorHotels, the conference was preceded by the news of the sale of a stake in AccorInvest to a group of investors, with the group retaining a 45-percent share. “It’s an interesting time," John Ozinga, CEO, AccorInvest, said. "You have to be partners, you can’t just have one who dictates the way it goes. It will be a real market-driven relationship. We have to be able to challenge the operator and get the balance right to drive the extra euro. The more EBITDA you get through the business, the more profits you get in the long run.
“It’s the ancillary business where we have been driving a lot. F&B is one area where you can drive revenues and change brand experience. The rest of the business [is] about what you do with the space we don’t use, maybe converting meeting space into apartments. We’re looking at those things on the top line.”
The last word went, as is often the case at IHIF, to Nissen. “We are from Scandinavia and we are about productivity. With costs you cut something. You close a restaurant, you take away one person at reception. Productivity is about using your organization better. It becomes like a sport, a game. How can I use my team better than a competitor? Our growth is about controlling productivity.”
Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.