The key to an interesting conference panel, I’ve discovered after three days at IHIF, is to put a cheeky Brit at the helm: CBRE’s Simon Johnson. HVS’ Russell Kett. Essec Business School’s Peter O’Connor. And while he wasn’t in attendance (or at least I didn’t see him), Strategic Hotels & Resorts’ Laurence Geller. The list goes on …
We Americans may be brash, but it’s these linguistic pranksters who know how to get an honest response from some of the hotel industry’s more tight-lipped elder statesmen—or at least how to ask an honest question.
Case in point: After taking Accor’s Denis Hennequin to task for the group’s convoluted restructuring of its economy brand ibis (which now comprises ibis, ibis styles and ibis budget), moderator Simon Johnson asked point blank, “Do you actually think customers will understand that?”
Of IHG’s recently announced Even brand he asked Chief Executive Richard Solomons, “Do you think a regular ol’ schlub like me will want a hotel where he can do pull-ups in the room and only get fruit for breakfast?” And in a somewhat sardonic turn, he asked Starwood’s Frits van Paasschen “It’s not working, is it?” regarding the company’s Le Méridien brand.
You won’t find that type of brutal inquiry at most American conferences, which is precisely why IHIF proved so insightful. I’ve been here since Sunday morning, and my head’s about ready to explode. Feel free to check out my up-to-date coverage, and stay tuned in the week ahead for more reports.
For now, however, here are 39 of the most interesting things I heard during panels, one-on-one interviews and elbow rubbing at the hotel bar.
1. Forget asset-light. Owner/operators are in vogue.
I’ve never heard so much talk about the importance of an owner/operator to the success of a hotel. The reasons ranged from the financial (Pandox AB’s Anders Nissen said an operator whose own money is at stake has a much stronger motivation for success) to the power play (KOP Group’s Ong Chih Ching said many Asian owners will begin to phase out brands to increase control and efficiency in their properties) to the experiential (Andre Balazs said owner/operators are much more likely to present an authentic, memorable experiences for guests).
2. Greece will collapse; it’s just a matter of when and who goes down with them.
3. The euro, on the other hand, will survive despite taking a few hits.
4. Development is dead in Europe as long as uncertainty surrounds the sovereign debt crisis …
5. … unless you have cash.
Companies from Asian real-estate developers (like SKKP Hotels) to major brands (like IHG, Starwood and Choice) to smaller homegrown entities (like De Vere) have a few irons in the fire.
6. The big brands are willing to throw down equity to get development off the ground.
Those instances are few and far between, however, much to the dismay of many eager, would-be owners.
7. Fixed leases are a dying breed.
Leases were a hot topic at the conference. In general, brands and operators aren’t touching the fixed arrangements with a 10-foot pole. It just doesn’t make sense to sign a 20-year deal for an asset that invariably will look nothing like it does at signing by the end of the arrangement. Further muddying the waters is the increased turnover of owners. “Why would I sign a 20-year commitment when I know the owner is going to sell as soon as the property opens?” one attendee asked.
8. Variable leases, on the other hand, are alive and kicking.
Even the brands are willing to take a bite on these.
9. Want to buy in Europe? Get in line.
Here’s something we’ve gotten used to hearing in the states: The bid-sell gap is too wide to cross at the moment—despite the insatiable demand on the part of buyers. Their money keeps piling up on the sidelines. Fortunately …
10. Banks will (finally) begin selling distressed assets this year.
The flood of assets that was supposed to drown the transaction market still hasn’t broken through the dam in Europe. There was a surprising amount of agreement that it will hit at the end of 2012. (I’ll believe it when I see it.)
11. Budget hotels are emerging as a hot investment class.
More than a handful of 5- and 4-star owners said they’re trading the high-life for a more profitable, higher-margin breed.
12. Forget high returns. Investors are happy with stability.
The old elementary expectation for a successful return on investment was near 20%. Today, many investors are happy with a steady 3% return given so much uncertainty in the eurozone.
Speaking of investment in the eurozone …
13. … the U.K., France and Germany still represent the most stable markets for investment.
15. … keep an eye on the Ukraine and Poland.
The hotel industries in each are emerging as attractive havens for investment.
16. … Russia represents one of the biggest opportunities for hotel investment in Europe.
I heard this more times than I could count. Apparently us evil media folk have given the country a bad rap, and hoteliers are scared to cross the borders. Don’t be. Get in now, or you’ll be sorry.
17. … ditto for Turkey.
18. … Scandinavia has developed a reputation for fostering strong, stable returns.
Thanks in part to local operators who many at the conference said are among the most savvy in all the industry.
19. … Romania and Bosnia have reported some of the highest year-over-year increases in tourism.
20. … stay away from Greece.
As if you needed a reason right now.
21. … the same goes for Italy.
22. … and Ireland.
23. … but don’t paint the Middle East with a broad stroke.
To begin with, the turmoil that was projected to spread through the region like wildfire never really panned out. Is there instability in certain markets (see: Cairo) and countries (see: Iran)? Yes. But even more regions represent a strong opportunity for the right operator with the right product.
24. The era of Asian investors importing Western brands into the region is drawing to a close.
I heard an interesting anecdote this week about Chinese consumers recycling their Starbucks cups when the coffee giant first broke into the country. After drinking their coffee, consumers would wash out the cup and reuse them for other drinks to essentially show off the brand. That was years ago, however. Today, the concept of brands is still incredibly important to Chinese consumers, but the market is starting to demand homegrown brands. The same goes for the hotel market throughout all of Asia. Despite the major chains’ aggressive push into the region, investors are more interested in Asian-bred products, which they can export as more and more domestic tourists begin to travel abroad.
25. Speaking of Asian investors … they view Europe as a testing ground to prove their mettle back home.
This one was shared by Ong Chih Ching of KOP Group. In an effort to bolster the company’s brand back home, she is seeking development opportunities in Europe. If successful, the moves she makes now will essentially give her a five-year head start on her Asian competitors, just from a reputational factor alone.
26. Asian investors also fancy a good prestige project.
Nothing like a sexy, high-profile hotel in the states or the U.K. to increase your street cred.
27. Last-minute bookings are a market reality. Embrace them.
The most common mistake around the topic is that “last minute” equates to “discount.” That doesn’t have to be the case. Several distribution experts said consumers book last minute not as a means to secure the best price, but rather because that’s when they need to book. As a result, hotel companies must distribute their product on the right channels to make sure their inventory is available when and where consumers need it.
28. “If you run hotels properly, if you control them properly, it is very, very difficult to lose money.”
Edward Wojakowski, who heads the privately held The Tonstate Group, shared that tidbit. One of my favorite quotes of the conference.
29. A passive owner is a bad owner.
It used to be that owners handed the keys to operators and let them drive off without supervision. Today, owners are much, much, much more protective of their assets. And why shouldn’t they be? As Anders Nissen of Pandox AB so astutely pointed out, “We invest 100% of the money. I think it’s quite clear that we have to be in the driver seat.” The best relationships between owner and operator are those marked by healthy tension, which is a sign there is pressure on both parties to generate the highest return on the asset.
30. GMs are like a child of joint custody.
Heard a really interesting debate surrounding “ownership” of hotel GMs during a panel on asset manager and operators. Because the owner signs the paychecks, many session attendees agreed the owner owns them. But because they’re prime directive is to fulfill the promise of the brand (when the hotel is branded, that is), others said the brand/operator owns them. I can see both sides. As a result, I certainly don’t envy these brave men and women.
31. Owners don’t buy a brand; they simply use it.
IHG’s new head of Europe, Angela Brav, was very clear about this distinction—and said it’s one of the main reasons why tension often emerged between the two parties. A “brandor” like IHG, she said, must guard their brands in order to ensure consistency and fulfill the promise each brand makes to consumers. That’s why the company and other chains are often viewed as too harsh or stringent with brand standards. But in the end, the brand is all they have, and Brav said she’d do what’s necessary to defend it.
32. Conversion is the name of the game.
The vast majority of expansion in Europe is being fueled by conversions. Choice Hotels International, for example, views its Europe operation as almost exclusively conversion-based, Steve Joyce told me. It’s a solid play for the company, whose 11 brands allow for such flexibility around different boxes, he said.
33. Change is coming.
The only thing certain about our future is that there’s nothing certain about it. “Change” was a recurring theme throughout the conference, highlighted by the University of Oxford’s Ian Goldin’s opening address about the outlook for the global economy. We are entering an age of unprecedented innovation, he said. Leaders, whether in government or hospitality, must be able to adapt and rally their workforces to accommodate this seismic shift.
34. Forget lifestyle hotels; think geriatric.
Life expectancies are increasing more than ever before, which means the largest segment of the traveling population will soon be those deemed “elderly.” Developers and brands should consciously be thinking about how to accommodate them.
35. You can’t hide behind brands anymore.
Differentiated guest experiences are still important, but several speakers reiterated the idea of hyper customization. That is, every customer expects the hospitality experience to be tailored around his or her particular needs and wants. And likewise, they’re more likely than ever to communicate those unique experiences via reviews sites and social media. That trend is undermining the traditional notion of brands as an aggregate. Even the most vulnerable brand can have its reputation tarnished if one particular guest communicates one particular nightmarish experience at one particular hotel.
36. Global industries need globally resilient strategies.
If the global economic downturn taught us anything, said economist Daniel Thorniley, it’s that we’re all connected—and more vulnerable—than ever before. The best global business leaders are those who can anticipate risks, see how the systems are connected and develop defensive strategies around them.
37. “Pray for China.”
So goes China, so goes the global economy, Thorniley said. The country’s government is attempting to manage its +9% gross domestic product growth into the more manageable 7% range. If they slip and that drops to 6% or 5%, that spells major pain for the rest of us.
38. The outlook for Europe is “challenging and terrible.”
Thorniley again. Not a particularly cheery bloke, that one.
I’m going to skip the usual goodies this week. I’ve run long and already owe my editors a few beers for having to fact check all this. But so as not to end on a negative note (sorry, Thorniley), I’ll leave you with perhaps the overarching sentiment of the conference …
39. The hotel industry is resilient and appears to be bouncing back.
I didn’t encounter a naysayer during the entire event. Does everyone share the same level of optimism? Of course not. But generally speaking, the feeling is opportunity exists and performance is on the way up. And that, my friends, is a note worth ending on.
If you have any other insights, thoughts or questions, I encourage you to share them in the comments section below. As for me, I’ve got a nine-hour flight back to the U.S. to catch. Cheers!
Email Patrick Mayock or find him on Twitter.
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