Hotel owners demanded greater productivity and efficiency of the brands at the International Hotel Investment Forum in Berlin.
The global operators remained committed to expanding their brand portfolios, while maintaining that their interests remained very much aligned with that of the owners.
Anders Nissen, CEO, Pandox, said: “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 organisation better. It becomes like a sport, a game – how can I use my team better than a competitor? Our growth is about controlling productivity.
“If you have a lease then you have the same incentives, because it’s turnover based, if you have a franchise it’s about revenue, if you have an operator and you have to tell him what to do every day, you don’t have a partner.
“We work with 20 different brands. All hotels have a business plan, if it’s leased or owner operators it’s the same, it’s maximising 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.”
Making the case that there was true alignment between the owners and the brands, Chris Nassetta, president & CEO, Hilton, said: “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 have better alignment. Having short term agreements creates a mis-alignment of interest.
“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.”
Speaking for the owners, Cody Bradshaw, managing director, head of European hotels, Starwood Capital Group, said: “It’s rare that you find a scenario where you don’t think a brand can deliver extra revenue, it’s about the fee structures. The last 20 or 30 years the brands have owned no real estate and the only way to is through increasing fees, often new fees.
“We’re all students in this game and we’re constantly learning and part of out job is to facilitate the learning of best practice. There is a spectrum of asset management – on the one hand operator monitoring and the other real in-the-trenches operations. Asset management is like peeling back an onion. You can go back a few layers and think you’re gone quite deep or you can go even further back.”
Sébastien Bazin, chairman & CEO, AccorHotels, responded: “The owner wants a big brother to help him in the downside. Four years ago when I was here I thought that brands could matter less, but I was wrong.
“Brands are like a group of friends, for every occasion you can count on them for a different purpose and that’s what clients want. It’s a short cut in a very crowded world. OTAs will tell you that the conversion factor is twice for branded over non-brands. Whether you have too many brands does not matter – make sure you differentiate the promise between the brands. Even if the brand is very small it doesn’t matter – social media can make them known.”
Bazin’s comments came shortly after the sale of a 55% stake in AccorInvest to investors led by a group of sovereign wealth funds. John Ozinga, CEO, AccorInvest, told delegates that it was “an interesting time” for the organisation.
He added: “We are very happy, we are very focused on Europe and it’s important to have a good contract which states how you are going to work it, you have to be partners, you can’t just have one who dictate 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 deal was not expected to be the only one of the year, with NH Hotel Group likely to be sold before 2018 was out. Raul Gonzalez, CEO, Barcelo Group, which proposed a merger of the two companies last year, said: “We believe it is important to consolidate the market and we want to be one of the consolidators. We are very kind people, we don’t want to buy, we want to do a merger, but the other company don’t think what we think.
“We think it makes a lot of sense for both parties – we think it can be a good platform, for trading now and deals in the future. We can try to do the same with a medium-sized company, not as big as NH. The market is too fragmented, not efficient enough and if we want to be global worldwide players we need to grow.”
HA Perspective [by Katherine Doggrell]: The clash between the owners and the brands has been an ongoing one throughout the 21 years of IHIF, with many evolutions, tossing in mutual animosity towards the OTAs for a bit of spice.
But with leases now back in favour in Europe, alignment is once again the name of the game and everyone without the scale of Marriott International is looking to bolt on more brands (we hear IHG is picking up Belmond alongside its 51% stake in Regent) and/or starting to look more favourably towards leases, particularly in priority markets. As we report elsewhere in this issue, the relaunch of Radisson Hotel Group sees a volte face from the former Rezidor, leaping back into leases.
As we edge towards 100 brands spread across the big four, there is no sign that creation of new flags is going to stop any time soon. With brands becoming ever-more niche, it is likely that the Hiltons and Marriott, the old standards, are likely to find themselves under pressure. Tom Magnuson, CEO, Magnuson Hotels, said that there would be a place for these brands “but it’s going to be very different. It will not be the kind of top-down environment that started in the 1950s. It’s going to get a lot more fragmented”.
As ever at these events, eyes were on AccorHotels for a taste of what hotels may look like in the future. As a hint, Bazin said: “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?” For all arriving those late to the conference because airline capacity has been unable to keep up with hand-luggage-only pricing, many look forward to IHIF coming to them next year.