Mergers and acquisitions appeal to hotel companies both big and small, but while Marriott and AccorHotels dominate today’s megadeals, the CEOs of two smaller companies said they are content concentrating on their guests and growing organically.
LONDON—In light of recent mergers-and-acquisitions activity involving industry giants like Marriott International and AccorHotels, executives of the smaller global chains that—so far—have not taken part said their companies will concentrate on serving their specific niches.
Speaking at Deloitte’s 28th European Hotel Investment Conference at a panel titled “View from the top: On the bridge?” Mark Hoplamazian, president and CEO of Hyatt Hotels Corporation said Hyatt’s smaller size is nothing new.
“If the larger companies go from 4,500 rooms to 5,700, no principles of physics get suspended,” he said. “(Smaller global chains) need to be disciplined as to what sectors matter to us, otherwise only the largest would survive.”
Hoplamazian said those numbers pale in comparison with the scale of properties available on the major online travel agency websites. The acquisition of Starwood Hotels & Resorts Worldwide has the potential to create overlap for Marriott in some markets, he said. It also might result, he added, in smaller hotel companies with low penetration having space to grow as customers look for even more niche and experiential stays.
Hoplamazian and fellow panelist James Riley, group chief executive of Mandarin Oriental Hotels Group, said their companies will concentrate on being more relevant to their luxury-sector customer bases. Hoplamazian added he expects luxury to become a little more relaxed.
“Our true focus is on the high-end traveler,” he said. “We’re not looking to be everything to everyone everywhere, as you might end up being nothing to no one nowhere.”
Riley agreed and applied Hoplamazian’s thinking to Mandarin, which he said has very distinct positioning and is purely focused on its one brand.
“We are not interested in growth for growth’s sake. 100 assets in five years? Absolutely not,” Riley said, adding that his focus is quality, not “turning a tanker around midcanal.”
The Deloitte conference began Wednesday just as the result of the United States presidential election was announced. A portion of the “View from the top” panel turned their focus to the challenges ahead for the hotel industry, including geopolitical concerns outweighing macroeconomics.
Moderator Adam Weissenberg, global sector leader of travel, hospitality and leisure at Deloitte, asked the two CEOs what their worries were both in Europe and globally.
“There are a number of concerns for global tourism,” Riley said. “The move to free trade and movement of people seems to be going into reverse, but I would not rein back on investment.”
Hoplamazian wondered if the flow of labor would cause some friction in the industry, noting in his experience hotels in the U.S. were dependent on international employers on H1 visas, “many from Mexico.”
As for the United Kingdom, Hoplamazian said things look good for the short term. Travel, he said, will continue in all of Europe despite foreign exchange pressure as the continent’s history remains a huge attraction.
“Demand is up, and we are very confident provided we can manage costs,” Riley said.
That demand has led to the continued success of Airbnb and other sharing-economy providers, the panelists said.
Hoplamazian said Airbnb’s penetration in London has risen noticeably but only 38% of hosts rent single units. It’s likely the other 62% are run by so-called professional landlords.
“The lack of transparency is doing Airbnb no favors,” said Hoplamazian, who added pressure from lawyers and governments might be less if Airbnb and others could show they are helping hosts make ends meet.
Riley said hotels could counter this threat by not having staff stick to a script and showing more humanity to guests.
“If we can unleash the human spirit, we’ll be in great shape,” Riley said.