Owners focus on strong foundations as cycle turns
 
Owners focus on strong foundations as cycle turns
18 SEPTEMBER 2019 8:21 AM

Owners of hotels across Europe and Asia at the International Society of Hospitality Consultants conference said no matter what part of the cycle they’re in, a strong identity and ability to roll with change ensure success.

VIENNA—As the hotel industry cycle turns, owners are turning their thoughts to performance, labor and management issues, focusing on strong foundations to maintain strength in a changing environment.

Owners of hotels across Europe and Asia talked about their strategies and current thinking during a panel discussion at the recent International Society of Hospitality Consultants conference.

Planning, flexibility
Advance planning and the flexibility to respond to market changes as needed are key, speakers said.

“Our industry is cyclical; it’s supply-and-demand-driven and after a long time up you’ll have down time,” said Michael Manz, director of ASW Group, a Zurich-based investment group. “So when people ask me if we’re prepared for a downturn, I say the aim is to have the variance as low as possible between up and down. By focusing on yourself and the strengths of your product, you can achieve.”

One way Rudolf Krizan, COO of Best Hotel Properties, dealt with the downturn in his home market of Bratislava, Slovakia, was to reconsider the branding on some of his portfolio as the market turned. He converted a Bratislava property into a Luxury Collection-branded property and “doubled the results” of the hotel. The company also owns hotels in Moscow and London and manages others in those markets.

Amruda Nair, director of Araiya Hotels & Resorts, added that hotel owners must be able to adapt quickly, since market conditions can change based on a variety of factors.

“We’ve had a change of government (in India) and it’s actually quite promising; there are dramatic rollouts in terms of policy change,” she said.

Supply-and-demand dynamics across India are improving as well, Nair said, which is creating upcycle conditions.

“We had tremendous supply growth in 2014 and 2015, and at the end of 2018 we saw the beginning of an upcycle,” she said. “Given the size of the market and the strength of domestic consumption, demand has caught up and we’re beginning to see overall (revenue-per-available-room) increases across the country.”

The importance of concept
Owners on the panel talked about how important a strong concept is for hotel properties, and how it can contribute to employee loyalty.

“There’s just not enough labor wherever you are,” Krizan said. “This is the major problem of every hotel GM, but it’s also my problem.”

He said his company’s solution has been to find GMs who really understand the brand and can translate that to employees.

“We want operators who think like owners,” he said. “We want GMs who think like us—business people and inspirational leaders. They can then attract people like us, too, especially in the younger generation.”

Saad Audeh, chairman of Campbell Gray Hotels and director of the Audeh Group, echoed that statement.

“We work with our GMs to make sure they have ownership of the product. We make sure they fall in love with the hotel,” he said. “Each GM is proud of what they’re doing, and we see that reflected in social media.”

Having a solid concept alleviates market fluctuations, Manz said.

“When the city goes down 10% or 20%, your property needs that foundation,” he said. “We believe that every property has the DNA of its concept before it even stands there. The concept will create retention, so that when there is a downturn, you can be OK and increase your market share proportionally to the overall market share of your city or region.”

Franchise flexibility?
In an era where flexibility for hotel owners is critical, some panelists said they see pros and cons in current franchising and management agreements.

Krizan’s company operates four hotels under brand franchise agreements and said it uses brands to raise visibility.

“We see the franchise as viewing the investor to see if he has courage and resources enough,” he said. “In the future, we hope brands will offer luxury brands for franchise because it makes sense—it’s more sellable to investors.”

Manz voiced concern over current typical franchise agreement length.

“The terms are just too long; standard franchise (agreements) are for 20 years and (management agreements) are even longer,” he said. “It’s just not the right model to do something for 20 years today.”

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