IHIF 2020 Speaker Interview: Olivier Harnisch, Head of Hospitality, Public Investment Fund

Olivier Harnisch

1. What regions or markets will offer the best investment opportunities in 2020?         

Many of the emerging tourism markets are attractive from an investment perspective. In these countries, one will often find an interesting combination of limited supply, strong demand growth, coupled with low construction costs and high operating margins. Given the low yields currently available on real estate in mature markets, and the fact that many of these economies seem to be coming to the end of a cycle, I see a growing interest in these destinations. Saudi Arabia in such an example. The recent opening of the Kingdom for leisure tourism is placing it on the world map as a new destination. With its incredible resources and its historic heritage, the country is poised to see the number of tourists increase exponentially in the coming decades. The opportunities for investors are enormous.

  1. What are your observations on the types of owners currently investing in hotels? Where are they originating from? What objectives do they have? 

We have seen a major diversification in ownership over the past two decades and our sector has benefitted a lot from that. Whilst the hospitality industry was seen as a somewhat exotic asset class in the past, today it is an integral part of a well diversified real estate portfolio. We have also observed an increased savviness from ownership which has changed the dynamics between asset owners and operators. Owners today either themselves or through professional asset managers go into more depth when analyzing the performance of their properties. They negotiate more balanced management agreements, ask tougher questions in performance reviews and are more careful when approving budgets.

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  1. What do you think will be the biggest challenge for the hospitality industry in 2020?

As we are improving our ability to collect and use guest data, one of our most important challenges will be to translate this wealth of information into meaningful and individualised guest experiences. Every stage of the guest journey can be positively changed through an intelligent combination of guest data management, technology and human service. A typical guest journey can be broken down into a number of transactions and services. Whilst transactions are usually performed more efficiently by technology, humans provide a far better experience when it comes to services. As an industry, we have largely lost our edge when it comes to innovation. This was not always the case. Today’s technologies such as internet of things, voice, near field communication, etc … provide amazing opportunities to make the guest journey more seamless. Harnessing these technologies will change the way we design hotels and train our teams. Roles will be enriched as humans take care of the relational, empathetic part of the guest journey and create unique experiences.

  1. If you could change one thing about the hospitality industry, what would it be?

I have spent the last three years in the Middle East, and one thing I have observed is the challenges we have in the region in building hotels which are not only beautiful but also efficient. These attributes are not mutually exclusive, they are fundamental for the success of a property. An inefficiently built hotel will generate a lower ROI through higher construction costs and higher operating expenses. One tragedy of hotel development is that value engineering usually sets in very late in the process, when most of the investment has already been committed. By that time, the potentials for savings are limited and mostly in the front of the house. The decisions which are then made often harm the revenue generating capability of the hotel. Efficiency thinking has to be built-in from the beginning and applied to space planning in the back of the house and to commercial areas which generally yield a low ROI.

  1. Why is it important for the industry to gather, face to face, at events like IHIF?

Events such as IHIF are extremely important. A face to face interaction is still much more meaningful than an email, a phone call or even a video call. Conferences are a great way to meet many partners within a short period of time. There are many international and regional events taking place, hence I find it important to select the ones which are the most relevant, such as IHIF. 

 

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Olivier will participate in “Investor Panel: Playing the Long Game” on the opening day of IHIF 2020, Monday 2 March. In this session, investors anticipate future market trends and evaluate new risks to plan their longer-term strategies? The investor panel will look at the biggest trends affecting the business of hotel investment, including sustainable investment, sustainable operations, the risks of climate change, geopolitical disruption, regulatory changes and industry disruption.

For further information on this session and IHIF and Adjacent Spaces, please visit www.ihif.com and https://ihif.com/adjacent-spaces.

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