At the keynote session at Deloitte’s 30th European Hotel Investment Conference, CEOs of two of the world’s top hotel chains issued a call for focus, balance and understanding the continually changing face of global travel demand.
LONDON—Some of the top leaders in the hotel industry said hoteliers have to do a better job cutting through the “noise” to succeed in the future.
Speaking at the keynote session titled “View from the top” at Deloitte’s 30th European Hotel Investment Conference, Federico J. González, president and CEO of Radisson Hospitality AB, and Keith Barr, CEO of InterContinental Hotels Group, said the industry needs to focus better on serving the growing number of global consumers who have an inherent desire to travel.
“You have to be prudent and invest in the future,” Barr said. “It would be easy to convince yourself not to get out of bed in the morning with all the noise out there. You have to be intelligent as to how you go forward, but do not be paralyzed by the noise.”
“There is far too much gossip,” he said. “On the other side of things, consumers have much more information today, so no matter what happens from a geopolitical stance the question is, what is the consumers’ behavior to that change? The other threat is that with the global population getting wealthier, how can hotels and brands satisfy that increase in travelers?”
Barr said despite any inklings of gloom it is an extraordinary time in the industry. The tailwinds that exist, the demographic shifts perceived and the purchasing power that continues to grow all support that statement.
“So, what markets to do you lean on and when?” Barr said. “China is amazing, and we are seeing that growth in other markets such as Vietnam. Everyone for the last three years have said we’re at the top of the cycle, but no one knows. … that is usually event-driven.”
Barr said there is a danger in designing brands around too narrow a demographic, and he included millennials in that worry zone.
“We misplayed the whole millennial card for too long,” he said. “They now have kids and a mortgage. Designing a brand around a generation is certainly not the way to go.”
González said his Radisson Red brand was somewhat designed around millennials, but ultimately the brand is about customers enjoying the stay and that is not exclusive to any one age group. Having such an outlook is sensible as it can only add demand, he added.
The ability to understand and forecast the future will be key in determining who will be successful going forward and who won’t be.
“The U.S. was the most dominant market, but you have seen all the major hotel companies going more global,” Barr said. “Understanding where those growth markets are and expanding there intelligently with brands that actually mean something, brands with clear swim lanes, but with differentiation and consistency in service.”
Barr added such thinking and product will go a long way to satisfying that increase in the inherent need to travel.
“And it will continue to create value for owners,” Barr said. “There are so many opportunities that it is possible to pursue, but you have to concentrate on the ones where you can win.”
Balance and focus
González and Barr are convinced that the increase in wealth in places such as Asia and Africa will transform the travel industry. The job of hotel companies is to understand those cultures.
“(Hotel) experiences cannot be global experiences. There has to be a balance between global brands and local experiences,” González said of another potential pitfall of rolling out a brand.
“The days of group Chinese travel with someone holding an umbrella are over,” Barr said. “When I started in China only a few years ago I needed a bag of cash, but now all is mobile, and they’ve leapfrogged. Desktop hardly exists there.”
González said it’s unreasonable to expect full occupancy night after night and building rapport with guests is more important.
“Also gone is the idea of opening a hotel, and it is 100% full,” he said, who added the industry has become far better at creating experiences, as well as pricing and have more of a direct relationship with consumers.
Barr spoke of two loyalists—the first who stays at around 75 IHG properties a year and writes to Barr a monthly email, the second who stays at 159 U.S. Holiday Inns a year.
“There is deep brand loyalty, but you have to work hard,” he said. “You can lose it. The question above that is how do you make those brands resilient? Customers move at such a pace, and they expect to have a closer relationship with us.”
Technology will continue to be a major factor in underlining this loyalty and making customer journeys as seamless and frictionless as possible, the two CEOs concurred.
“We are spending a lot of money on (property management systems) and reservation systems and on the back office,” González said. “There is a huge effort on technology to make sure all these systems travel fast across your portfolio to increase operational efficiencies, all before you even go to your consumer with technology.”
Barr said his company is making efforts for its properties to be supported by better technology.
“IHG is now 100% cloud-based,” he said. “The last Holidex property dropped off very recently. The industry is making large pivots to get away from very fragmented systems, so if I change one little thing, do I have to change this thing in 5,500 different properties along with a third-party? No, there is one switch. That takes costs out of the business.”
The biggest risk is to make sure that any choice of technology “is the one that delivers,” González said.
“And one that will not disintermediate us from the customer,” Barr added.