CEOs from several of the hotel industry’s largest global companies said size doesn’t matter if hotel brands don’t remain relevant, provide what guests want and stay flexible enough to be top of consumers’ minds.
BERLIN—The hotel companies represented on a CEO panel at the International Hotel Investment Forum this week have approximately 90 brands between them, and that number may hit triple digits by this time next year, speakers said.
One factor behind that growth is shareholders pushing for it, but the CEOs of those companies, speaking on a panel titled “Global CEOs: Evolution of the brands,” said the principal reason they continue to add flags is the need to continue satisfying consumer demand.
One thing all the CEO panelists agreed on was that brands must be protected and constantly tweaked to remain relevant, which in turn will lead to leverage and scale.
Keith Barr, CEO of InterContinental Hotels Group, said the ultimate goal is to simultaneously provide value for owners and consistency for customers.
Barr told the conference audience that IHG’s next step is to “announce a luxury acquisition to sit above InterContinental Hotels. It will be something small that has a great customer proposition.”
IHG also is actively signing deals for its new midscale Avid brand, announced last September, Barr said.
“In the U.S., 75 hotels (are) signed,” he said. “It will be the new Holiday Inn Express for us, and it makes sense to grow this organically. But in luxury, it is far more difficult to grow in that way.”
Chris Nassetta, president and CEO of Hilton, quipped that in his view, his fellow panelists had far too many brands, while Hilton did not possess enough.
“We have launched five brands over the last seven years, and our attitude is to expand our network to serve more customers at different price points and geographies. It is all about satisfying needs that customers have, and to attract new ones,” Nassetta said.
Brand growth derives both organically and by acquisition, panelists said, although they shared different views as to how many brands is too many.
Sébastien Bazin, chairman and CEO of AccorHotels, said his firm created half of its 24 brands and bought the other half.
“Initially, I thought brands would not be so important, but I have been wrong,” he said. “Each brand has a different purpose, and that is what customers want. (Online travel agencies) will tell you this, too.”
“Don’t ever kill your (brands). Protect them. The customer wants purity. Create what is fun, sexy, different, but something else in a few years will be even more so,” Bazin added.
Pat Pacious, president and CEO of Choice Hotels International, said he wondered if there may be a natural brand-saturation point.
He said Choice, too, had bought half of its brands.
“If you get 30 or 40 brands, you turn yourself into an OTA,” Pacious said.
Pacious agreed with Bazin that brands must evolve and be nurtured, always with the idea of making sure they continue to be relevant.
Geoff Ballotti, president and CEO of Wyndham Hotel Group, said his firm acquired 19 of its 20 hotel brands, and said brands are not worth purchasing if they are not increasing the overall share of wallet.
“If a brand is not growing in terms of market share, then that’s a pitfall. If we are not growing that top line, we are not doing our job,” he said.
The speed required now in decision-making, design, signings and return on investment easily can lead to error, panelists said.
“There is a risk of being unsuccessful, misunderstood and wrong,” Bazin said.
“The problem with our industry is that we see our guests three or four times a day. Facebook sees its customers 12 times a day, and it costs us a bundle to acquire our customers. We need to go beyond the hotel space, (and) procure guests what they want,” Bazin said.
He cited one example as allowing consumers to book restaurants via AccorHotels’ digital concierge regardless of whether they’re guests in a hotel or not.
Panelists agreed that another top priority is keeping their brands top-of-mind for guests and all consumers.
“Fundamentally, we need an ultimately deeper and more frequent connection with customers; this is the future” Nassetta said. “(We need) a real connection and to do this without losing connection to the core business.”
“You need to have a different level of engagement pre-booking, and you certainly need that engagement after they have left,” he said. “It is about experience. … It is people serving people and creating unique brand experiences.”
Barr, Pacious and Bazin shared examples of how their companies are connecting with guests beyond traditional hotels stays.
Barr cited IHG’s partnerships with companies like Amazon and Shell.
Pacious agreed that hotel companies can use partnerships to get closer to consumers without a lot of extra heavy lifting.
“Catch your guest with more services, but Choice does not necessarily have to be the one to provide those services,” he said.
Bazin said consumer outreach initiatives—which make up a significant percentage of AccorHotels’ business—are important to the company because they raise awareness of the brands to consumers. This is particularly true for locals, who may live near hotels but not be regular guests.
More brands mean more hotels, which in turn means more owners in the mix, panelists said.
“We grow our business by our owners spending hundreds of millions of dollars on our hotels, and we have to be good stewards,” IHG’s Barr said. “Success comes from when you co-create with owners. … You cannot live in a vacuum and think you can all do it better yourself.”
Sometimes that means brands have to show tough love, he said.
“We have terminated more hotels than other hotel companies have hotels,” Barr said.
Bazin said keeping open lines of communication with owners is important. “We have to deliver on owners’ expectations, and the first thing we have to do is to listen,” he said.
Nassetta said a longer contract with owners helps solidify the relationship.
“I think it is appropriate to lock owners into 25-year contracts,” he said. “A longer-term agreement allows more perspective, and (Hilton puts) in a lot of blood, sweat and tears. Shorter terms lead to less alignment, and that leads to experiences that are not as good. Short-term mentality is not healthy, and I hope the industry does not go down that path.”