Brands optimistic on opportunities to increase scale
 
Brands optimistic on opportunities to increase scale
29 MARCH 2017 7:47 AM

The “View from the top” is the pace of change has never been faster for the hotel industry. Best Western and Marriott executives discussed strategies for navigating that change. 

ATLANTA—What keeps the leaders of the hospitality industry’s big brands up at night?

For Best Western Hotels & Resorts President and CEO David Kong, it’s “the pace and scale of change” that sometimes causes him to lose sleep.

“I’ve been in this business a long time, and I’ve never seen change happen so fast and at such a magnitude,” Kong said during panel titled “A view from the top” at last week’s Hunter Hotel Investment Conference.

That change, he said, is driven a lot by “technology expectations, which are constantly evolving, the competition and what they’re doing and investing in … and disruptors,” like online travel agencies. “All of these things are very troublesome, and certainly make it more expensive to operate hotels … and tougher for brands to compete.”

The challenge is no one knows quite what the future will bring, said Liam Brown, president of franchising, owner services and MXM Select Brands, North America, at Marriott International.

“What is the strength of our brand … and how do we sustain it over time?” Brown asked. “It’s a very dynamic world we live in. Business can be upside down in a heartbeat.”

Rounding out the panel was Robert Sarver, chairman and CEO of hotel lender Western Alliance Bank, who said that a successful company has to be “open to change, willing to embrace change … willing to be aggressive at making change, and equally aggressive to admit mistakes and go in a different direction.”

Bright outlook
So far in 2017 that change has included adjusting expectations tied to macroeconomic factors, which have shifted and in many cases are still in flux after the U.S. presidential election.

The good news is that the first quarter has shaped up “to be much better than expected” from Best Western’s perspective, Kong said.

“I’m very encouraged about the rest of the year,” he said. “It’s a pleasant surprise that the stock market has done so well. Any time that goes up, it bodes well for our industry.”

Brown agreed there are encouraging signs, noting that for Marriott the pace of group bookings is up.

“May to October, we typically run strong occupancy, and there’s no reason to believe the summer won’t be good,” he said.

But on the lending side, Sarver said optimism about the economy still is tinged with uncertainty.

“The real key is whether that optimism is going to be confirmed by things actually being executed politically in the country,” he said, indicating promises of tax reform and infrastructure spending by President Donald Trump.

From a lender’s perspective, Sarver said, “It’s been a great run. … Oftentimes, runs are not good for as long as you want them to be. … Having said that, there’s hope this recovery has a few more years in it. I think it could, but it may not.”

Brown said he is fairly confident that the hotel industry’s current up cycle has “maybe three years left in it.”

• Read “Investors: 2017 deals pace might ease path to downturn” from the Hunter Hotel Investment Conference.

Strategies of scale
To stretch the cycle that far will require vision, ingenuity and flexibility, panelists said.

For Best Western, that’s about seeing and seizing opportunities, Kong said, citing the company’s venture into the economy segment with the launch of its SureStay brand in fall 2016.

“We are looking at the economy segment as full of potential,” Kong said, where Best Western hopes to develop a recognized brand leader. The company’s strategy when building a brand, he said, is “to start with quality first as a foundation.”

“We’re off to a great start,” Kong said, with 100 SureStay hotels signed this year.

Scale is a vital part of the strategy for both Best Western and Marriott, the executives said.

“We recognize that in the world we live in you have to be big … to compete,” Brown said, referring to Marriott’s large stable of brands as “a big, Olympic-sized pool, maybe multiple Olympic-sized pools.”

Being big, he said, opens up “tremendous revenue synergies and cost synergies” and “the ability to really drive presence globally.”

More brands means more leverage, Kong said, such as the ability to negotiate more-advantageous terms with OTAs, which are forced to recognize that they “need you more than you need them,” he said.

But strength does not come from mergers and acquisitions alone.

“Aside from M&A, you’ve got to be creative,” Kong said, which means thinking about partnerships and alliances.

He cited AccorHotels’ marketplace as a model, with which the company has opened up its online booking portal and loyalty program to select independent hotels.

“That’s made their website that much more relevant, and added choices for consumers,” Kong said. “That’s something that’s worth exploring as well.”

People first
All of this, of course, boils down to building connections with guests, panelists said.

Technology can play a big role when properly used, Brown said.

“The constant challenge is how do you free up leadership (and) associates at hotels to create those great experiences for guests?” he said.

Things like mobile check-in can enable that.

“Engagement at a human level, that’s what people remember,” Brown said. “And how they felt after. That’s what binds people to you.”

It’s important, too, to think about the ways in which guests will want to interact with the hotel in the future, Kong said.

“In 10 to 15 years’ time, when boomers are not traveling as much, they’re going to be replaced by a whole new generation who grew up with iPads and devices,” he said. “How do they want to interact with us? We have a plan for that.”

That plan involves mapping out the guest journey every step of the way.

“We know in testing, for example, that our customers want to communicate with us through texting versus a phone call,” Kong said.

Success with guests starts with empowering and inspiring employees, Brown said. He referenced Marriott’s vision: “Take care of your people, and they’ll take care of the customer.”

“I think that should be all of our legacies: What opportunity did we give people to grow and develop?” Brown said.

Kong added that, as a leader, he is constantly working to become a more effective instigator.

“How can I instigate imagination and innovation? That’s the key to our future success,” he said.

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