Big hotel brands were reacting to changing consumer demands, to shifting operational needs and to the challenge of social marketing. Delegates at the Hotel Alternatives Event heard how groups including Hilton, Accor and Whitbread are all responding to the evolving marketplace.
Patrick Fitzgibbon, SVP for development in EMEA at Hilton, revealed that the group’s new Motto brand was the result of considerable deliberation: “We’ve been talking about this for three years’. The first opening in central London was under construction, but around a year from opening, and the brand brings elements of hostel flexibility to its hotel offering.
Motto will be compact, with 14 sq m modular rooms, but those rooms will feature flexible furniture layouts, and Hilton’s designers have rethought the interconnecting door, to enable rooms to be combined for groups and families. “We’ve looked at linking whole corridors of rooms,” said Fitzgibbon. He declared the concept was designed to appeal to two audiences – “the investor, and the customer”. Being able to adapt rooms to suit families or groups of friends travelling together was, he said, a big opportunity: “Something hotels have not done well for years, is accommodating groups quickly and simply.”
The concept was reckoned to work in adaptive reuse of buildings, and Fitzgibbon said up to 25% of rooms in any Motto scheme could be without windows.
The Motto format was based on offering compact space in great city centre locations. Despite the high cost of such sites, Fitzgibbon was confident hotel investors would find the format attractive. “If you can put these in the right place, you can yield right.” He said a Motto could be built for around GBP80,000 per key – “it’s pretty comparable with a Hampton” – and expected the majority of sites to be franchised or owner operated.
At Whitbread, the Premier Inn team had opted to take a shot at the sub-budget sector, with their new Zip concept. Mark Anderson, managing director property and international at Whitbread, said Zip would target a sector reckoned to be worth GBP0.75bn a year in the UK, “and at the moment about two thirds of the sector is independent”. With a price point starting from GBP19, it could also pick up those who might otherwise stay with a friend or take a taxi home from the city.
The compact rooms would have two beds, which can be moved together if needed, and there will be a basic food option alongside delivered in options. Anderson said Zip was trading location for value, with its locations deliberately out of the city centre, to reduce land input costs. The first would be a conversion of a Premier Inn on a site outside the centre of Cardiff, with a second site in Southampton. For now, the idea was to build Zip as a UK brand, but Anderson said it could follow Premier Inn into Germany: “in high price markets like Berlin, Munich I could see that”.
Operational cost issues were also pushing the brands towards joint sites, often combining a hotel brand with an extended stay brand. Asli Kutlucan, senior partner for development and acquisition at Cycas Hospitality, declared herself a fan, loving the efficiencies that a pairing creates. In London, StayCity has recently agreed a deal on a site it will share with Premier Inn, while in Paris, a tri-branded site is currently being negotiated. “We’re seeing this more and more,” said Christabelle Morgan-Desouches, head of development for Accor’s Adagio aparthotel brand: “Half of my projects in Europe are double branded.”
Hotel developers were also eyeing up high streets, where traditional retail was suffering from as consumers move online; one UK shopping centre was recently put up for auction with a GBP1 starting price. “The decline of retail is opening up some interesting opportunities for some hybrid development,” said Kutlucan. And both Whitbread and Hilton see opportunities to take their new brands into high streets. “I think the above ground floor space offers a great opportunity,” said Fitzgibbon. “If others such as student accommodation providers come in, we can make the high street more vibrant.”
Alongside changing product demands, consumers were also changing the way they sought out new adventures and places to stay. Cedric Gobilliard, senior vice president of Accor’s lifestyle division, said his new properties now rely on social marketing and word of mouth spread via social media, to grow bookings: one new South American property has already gathered more than 40% occupancy at opening, without the use of any traditional promotion.
HA Perspective [by Chris Bown]: Consumer tastes and behaviours are changing, and as more and more increasingly sad-looking British high streets are demonstrating, a failure to adapt leads to a number of unhappy outcomes. For investors, the value destruction is alarming. So it is ironic that retail, once a stalwart mainstream property investment, may yet see the alternatives coming to repopulate and rescue town centres, with student living and hotel brands bringing back the buzz to urban landscapes.
It is easy to become blasé about new brands, but with Motto and Zip, two major hospitality groups have spotted opportunities in the market, and are going for them. The contrast between asset-light branding, and investment-led returns, was laid bare by the differing approaches. Whitbread has spotted a market sector it feels is not currently adequately provided for, and is going to grab that with a planned national roll-out that it can, probably, do at speed, once it has trialled the format and got it right. Hilton has to sell Motto to those that will build their hotels, as well as demonstrating it has created a new product that will fit neatly between hotel and trendy hostel markets.
While Zip is largely aimed at finding its customers from those using mom and pop B&Bs, there will be some existing chains worrying about its arrival. Anderson admitted the brand could challenge EasyHotel in a few locations. But close to the Cardiff testbed site, we suspect the manager of the city’s rather tired, first generation Campanile will also be having sleepless nights, once the white van men, rugby fans and visiting contractors get the hang of booking into Zip.