Minor Hotels International has acquired a 10% stake in Global Hotel Alliance, taking a place on the group’s board.
The GHA said that it would use the money invested to strengthen its platform, taking on the brands and OTAs for a less expensive, more collaborative take on distribution.
Pan Pacific Hotels Group also invested, joining founding joint venture partners Omni Hotels and Resorts, Kempinski Hotels and Oracle Corporation. GHA brings together 33 brands with over 550 hotels in 77 countries.
Chris Hartley, GHA’s CEO, said: “We are making substantial investments in CRM and shared technology to build on the success of the Discovery loyalty programme. The 13 million Discovery members will produce USD1.7bn in room revenues in 2018, of which around USD125m is from customers moving between our member brands. We plan to double those numbers in the next few years, as independent brands look to collaborate with each other to share the common challenge of competing with the ever-consolidating major brands and third-party distribution providers.”
Hartley told Hotel Analyst that the deal had come about when founder members Kempinski and Omni invited others to join earlier this year, after some of the brands in the group, such as Minor, had grown to the extent that it was felt they should have more involvement at governance level, as well as having a chance to show their commitment to the alliance.
The CEO said: “We’re dying to compete with the megabrands, we’ve waited to invest in more technology and strengthening our loyalty platform. We’re not an OTA or public company with funds to invest, our revenue comes from our loyalty programme. We’re very good at helping our members reduce distribution costs, our daily purpose is not to make money for ourselves.
“We market to a shared loyalty base and the effect is that we reduce the cost of booking by up to three quarters compared to a OTA. We’re trying to level the playing field by driving all bookings through direct channels, trying to create a spirit of cross-brand alliance. We want our customers to understand that brands are collaborating.”
The GHA launched on a fee basis but now, Hartley said: “The world is thinking ‘I want to pay for what I get’ and now, with the loyalty programme being as powerful as it is, we charge a variable fee, plus a fee depending on the type of customer we bring in – we want to drive repeat customers. Across-brand revenue will be a higher variable fee than a customer from within the brand.”
Looking ahead, Hartley said: “There’s going to remain in our fragmented industry a place for independents. For every megabrand there is a high net worth individual who wants to own a hotel business. We have more assets in the alliance than the global brands. We have bought together owners who want to manage their assets themselves. That works up to a point, but managing a brand is a complex and expensive business. What we’re trying to say is that you can work with the alliance and chase the challenge. You share your customer base and benefit from others’ customer bases.”
Hartley said that he did not know whether NH Hotels Group, now owned by Minor, would join the GHA.
In June last year Dillip Rajakarier, CEO, Minor Hotels, told Hotel Analyst: “We are the largest group in the GHA and they have 10 million members. Minor has two million and NH eight million, so this is something we will look at. Under the GHA programme there are many brands so you have the advantage of having many brands for guests to move between. At the end of the day we would love to have our loyalty programme, but as NH has one we can piggyback on that.”
GHA followed the news of the investment with the appointment of Andrew Boshoff as CFO. Boshoff was a co-founder of Otus Corporate Finance, the hospitality-focused corporate advisory firm based in London, and he has advised the shareholders and board of GHA on strategic issues and transactions for several years.
HA Perspective [by Katherine Doggrell]: It’s true to say that we’re all looking for cheaper distribution these days, even those of use for whom it would just mean a cut in train fares, but surely the brands are offering much the same with their soft brands? For Hartley, not so much.
He said: “It’s a potential threat, but we’re dealing with brands, not individual hotels. It would be contradictory for them to join another brand, I’m not aware of any of our brands who have talked to the megabrands. They’re simply too expensive – it’s a similar price to a hard brand to join a soft band. We don’t have the distribution they do, but we’re infinitely cheaper and the big brands tend to exaggerate the difference that they make with a luxury or upscale asset – it’s likely to be only a few points in occupancy. As you get to the very, very high end of the market there’s not even that.
“I also think there’s a change in consumer thinking about brands. People are much more interested in small brands or independents.” As for the OTAs? “The OTAs are in a race to the bottom. They can’t increase commission any more and hotels are getting better at building a relationship with the consumer.”