UK hoteliers weigh brand vs. independent proposition
UK hoteliers weigh brand vs. independent proposition
23 DECEMBER 2019 8:07 AM

In uncertain and challenging times in the hotel industry, hoteliers said a brand flag often provides needed support. But they argued the flag has to stand for something.

MANCHESTER, England—With revenue per available room flattening, or even declining, and cost pressures and supply increasing, that old cliché of the perfect storm is raging across the United Kingdom hotel industry, according to sources.

When storms such as these rage, shelter often is taken under the flags of brands, said panelists during a session at the recent Annual Hotel Conference titled “Tales from the tribal wars,” consisting of executives from two major brands, one startup and an independent.

Karan Khanna, managing director for the U.K. and Ireland at InterContinental Hotels Group, said guests respond positively when they see brands making significant investments.

“We have to be careful not to run the risk of having sticker brands,” Khanna said. “There is no point in just creating brands to create a supply-side situation. They have to stand for something for guests and offer owners a commercial proposition.”

Stephen Cassidy, SVP and managing director for the U.K. and Ireland at Hilton, said a successful brand begins with keeping owners at the heart of everything.

“Supply in certain markets provides like-for-like challenges,” Cassidy said. “We are driving the top line, but we must be very thoughtful of bringing a new brand into a market. It must have value and come to scale quickly. There are another seven or eight brands (Hilton) could bring to the U.K., but that will be done carefully and in cooperation with owners, who ultimately will tell us.”

He gave an example of how Tru by Hilton might be introduced into Europe.

“You can see where that would fit naturally, but at the moment we’re very happy with Hampton (by Hilton), with 30 in the U.K. and 25 in the pipeline,” he said.

Independent and newcomers also need to be proactive, said Kevin Charity, CEO of Coaching Inn Group, which has 15 provincial U.K. assets. Charity said 70% of his revenue comes from F&B and agreed business conditions are tough.

“But we are ahead. Three years ago when Brexit arrived, we decided to sweat every inch of the building,” he said. “This is the right strategy. Key costs, especially employment, are up, and you simply have to recruit better and retain longer.”

Charity said maintaining staff relationships is as important as caring for guests.

“Controversially we treat our staff as the first guest, the guest as the second,” he said. “If you treat the former well, they will treat the latter better.

“Brands do work,” he added.

Jeremy Sanders, head of U.K. at Oyo Hotels & Homes, said Oyo is benefitting from more investment, the latest round resulting in a £1.5-billion ($1.9 billion) injection in early October that will result in more partnerships with independents.

“Our core product is to partner with independent hotels,” Sanders said. “That’s our long tail, to help performance and enhance guest experience, but we are aware of the macroeconomic landscape.”

Sanders spoke of deep partnerships and revenue guarantees.

“We do this hotel by hotel. (Business performance) is hugely sophisticated in the U.K., with both challenges and opportunities, but we are ambitious, and the only way we’ll get there is to persuade each hotelier day by day,” he said.

Sanders said Oyo is looking at where its investment will have the most impact in terms of average daily rate and guest experience.

“Our ADR will rise, and we will take a look at distribution, to have a broader range of (online travel agencies) on our own platform. In addition, it is about having amazing partnerships such as in procurement,” he said.

Khanna said investment and marketing spend does help.

Charity agreed.

“Brands are in the best position, especially against independents who have not spent sufficient capital. (Those independents) can tap into firms such as Oyo and survive for a while,” Charity said.

Khanna said for guests, the experience is most important.

“If you do not deliver the right guest experience, guests will vote with their feet, and then it is a slippery slope to ADR decline,” he said.

Sanders said not only will the U.K. hotel industry lose, but all of the U.K. will suffer if the right government support is not put in place to help boost small- and medium-sized businesses.

The biggest competition among hotels, branded or independent, remains over staff, panelists said.

For independents, labor is particularly tough, requiring some risk, Charity said.

“We are not just competing with the hospitality business but all business,” he said. “A couple of years ago, we invested £100,000 ($130,100) in a training kitchen, which was a sell, but it’s been a great success, and most of our staff comes from this now.

“And with better food,” he added.

Cassidy compared the problem to a battle.

“The war for talent has never been greater, and it is critically important to provide not only an incredible experience for our guests but also for those we recruit,” he said. “This is where the key point of differentiation will be to drive the top line when the pressures are on the bottom line.”

Cassidy said one glimmer of hope in the uncertainty of Brexit is that he has seen a 15% jump in the number of applicants from the U.K., although hoteliers have extended efforts in that direction.

“The apprenticeship scheme has gone from 150 to 400 per year, with more flexible working arrangements, which drives more diversity and inclusion, a virtuous circle. Yes, it is challenging, but we have seen great outcomes,” he said.

Oyo is investing in people, Sanders said.

“Oyo is heavily involved in training, such as with housekeeping apps,” he said. “We’re working across the P&L every day.”

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