Hoteliers examine industry's future at AHC

Photo credit: Questex Media

Close to 1,000 owners, operators, investors, developers and consultants gathered at the Hilton Manchester Deansgate last month for the 15th Annual Hotel Conference.

With a conference theme of “Innovate to Elevate,” the event had 66 speakers, including Leo Johnson—a broadcaster, author and partner at PwC—who delivered the keynote address on the big ideas and innovations re-shaping business and society. For hotels to thrive, he said, they should be rooted in place, amplify local assets and generate long-term income from them.

Questex Hospitality, the parent company of Hotel Management magazine, commissioned UK research company BVA BDRC to examine what consumers are looking for regarding current hotel offerings. One takeaway the study found was while brands used to play a significant role in consumer choices, people now look to other consumers to advise on buying decisions.

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Speakers Speak Out

The program content touched a wide range of topics to help delegates respond to the challenges of hotel design, development, operation, funding, branding, distribution and benchmarking, among many other topics. Generating revenues from non-rooms sources received particular focus as attendees examined food and beverage and how to innovate in lobby design to generate more revenue from this space.

Discussing market specifics, Joe Stather of CBRE Hotels predicted a stable landscape with flat property yields and low profit growth.
 
In a panel focusing on the latest trends in asset management, Christian Youens, principal and VP at Cedar Capital Partners/HAMA [Hospitality Asset Managers Association] shared some notable statistics on the UK’s hospitality sector: The country’s minimum wage has increased, hotel supply is growing in a “considerable” number of markets, business rates are going “through the ceiling” and F&B costs are becoming prohibitive. On the flip side, he added, domestic demand has been strong, and the weak pound has given a boost to both occupancy and rates for those markets that receive a lot of foreign visitors. 

Brands and Strategies

New options in operating structures have changed the relationships among owners, operators and brands, Youens said. Elias Hayek, head of global hospitality and leisure at Squire Patton Boggs, agreed the traditional franchise model is evolving into an opportunity for intermediaries to take a much more significant role in relationships between hotel owners and the brand.

“We have intermediary, third-party, white-label operators coming in and various permutations to the relationship that allow a third-party manager to provide the services that were traditionally provided by the brand,” he said. “The traditional model doesn’t afford the owner too much involvement in the day-to-day affairs of the hotel. It delegates a lot of that responsibility to the brand and as a result, it moves the owner to a passive participant in the relationship. The drive now is to have models that allow greater say for the owner or an agent of the owner in the day-to-day affairs in the P&L.” 

One benefit franchise agreements offer the owner is the so-called “billboard effect” that drives branded listings to the top of OTA pages. “That’s certainly has a benefit for the owner,” said Robin Leahy, development manager at London + Regional.

In terms of negatives, Leahy saw a degree of what he called “unalignment” between the brand and the owner in their overall goals. “Brands are driven by proliferating new brands,” he said. “They don’t sunset old brands that are failing.” As such, an existing brand may see its strength diluted through oversaturation, and franchise agreements could prevent a hotel from adapting to rapid changes. “It’s a strong model against the [hotel management agreement] because the HMA gives the owner less control over costs,” Leahy said. “If you are an owner who wants to get your hands on the costs and really be able to control the bottom line, the franchise model does give you an opportunity to dive into those costs.” Entrepreneurial hoteliers may find these kinds of agreements to be a double-edge sword, he added, because the pricing strategy might actually hamper rather than allow opportunistic pricing strategies. “On the whole, at the lower end of the scale, where you are very focused on costs, the franchise model certainly works," he said. 

The Future of Leadership

During a one-on-one session on the importance of leadership in hospitality, Julie Fawcett, CEO of Qbic Hotels, said leaders are “beholden” to have a view about what the future is going to look like. “We’re here to build something for the future,” she said, and noted because her company, as an owner-operator, handles the brand, the operating model and the real estate, she has both agility and responsibility in realizing that view. 

Fawcett noted Qbic is one of the first hotels to receive B Corporation certification. This private certification is issued to for-profit companies by B Lab, a global, non-profit organization with offices in the United States, Europe, Canada, Australia, New Zealand and a partnership in Latin America with Sistema B. The certification means a business’ articles include strong CSR objectives, she explained. “What it means is that we have a clear relationship that’s [driven] into the culture of the business between how we take care of all of our stakeholders—staff, supply chain, community—but most dominantly, our sustainability ethos,” she said. 

CSR is poised to become increasingly important for hotels in the coming years, she added. “We’ve only got to look at climate change reports in the news to see how profound the issue is becoming,” she said, noting the rising cost of energy will affect hotels’ P&Ls. “And it’s only going to get worse,” she warned, calculating if the planet is home to 1 billion more people in the next 10 years, it will need 50 percent more energy and 40 percent more food and water to support people. “It will come home to roost on us as hoteliers in terms of our P&L lines,” she said. “Even if you don’t care about your corporate social responsibility for reasons of economy, you need to start to care. Also, it will be critical to provide a solution that’s relevant to consumers. Add those two together, it’s a no-brainer.”