Top executives of companies including Accor and Oyo Hotels & Homes shared their insights in to how they think brands must evolve to survive at the recent Americas Lodging Investment Summit.
LOS ANGELES—There is nothing more toxic to a hotel brand, or a collection of brands, than an “inability to accept the complexity of the world,” Accor chairman and CEO Sébastien Bazin said.
Speaking during the “Evolving business models’ session at the 2020 Americas Lodging Investment Summit, Bazin shared how he believes any brands ignoring that complexity are setting themselves up for failure.
“Those who are going to be able to win—and Accor will win—you’ll have to do something that is a true paradox …. I need to embark on a journey. I need to tell them where we should be in three or four years, and I have no idea how to get there,” he said. “And I cannot share with them that level of doubt, even though I’m doing it right now.”
That lack of clarity into the future of the world broadly was a recurring theme throughout the session, and at the heart of that uncertainty for panelists was the ongoing evolution of technology.
Ritesh Agarwal, founder and CEO Oyo Hotels & Homes, said better use of technology is a “clear focus” for his company in 2020. He noted it will be vital for success of properties in especially labor-challenged areas.
He pointed to Japan as an example of this need, where labor shortages have forced many hotels to restrict late-night check-ins due to an inability to find front-desk staff.
“We are putting in systems to make sure people can self-check-in without the requirement of human beings,” he said.
He noted technology offers both challenges for hoteliers but chances to solve the most pressing challenges.
“Big picture, I see this as an opportunity,” he said.
What is certain when it comes to technology is its continued omnipresence and the ever-strengthening influence of the largest tech companies, Bazin said.
“Today two countries, China and America, have put together dominance through 10 tech companies, which is a geopolitical move,” he said. “And you know without any doubt that those 10 companies will become stronger, bigger, and you’ll be more dependent on them as an individual and a corporation.”
A shortage, and a wealth, of human capital
The labor shortages in Japan that Agarwal referred to are far from unique to either that country or the lodging industry.
But Bazin also noted the fact that the hotel industry is so people-intensive can be viewed as a strength as long as companies are properly empowering their people.
“We happen to have 300,000 working under Accor brands,” he said. “Those are not numbers, they’re individuals. They have the ability to think, to act, to take leadership. They have hobbies. Give them power; give them liberty; give them oxygen; give them autonomy. They will make a difference when they’re going to be meeting someone. So work on that and defend it, because as big as Google and Alibaba are, they don’t have that human capital and they actually don’t want it because it’s costly.”
Paul Brown, a former executive with Hilton, IHG and Expedia who is now co-founder and CEO of Inspire Brands, noted the restaurant industry, and his company more specifically, is feeling the pressure of searching for “the right kind of human capital.” He said that requires companies to go after people from other industries who likely would not have come in to hospitality otherwise.
It’s about “the ability to continue to find great people, get them convinced this is the right place and the right industry to come in to,” he said.
The balance of growing
During the panel, Agarwal said he has been wowed by Oyo’s explosive growth of late, ending 2019 with 80 countries represented in its portfolio just seven years after launching as a startup in India.
But he noted there where clear areas the company “did get ahead of ourselves” in 2019, as evidenced by the need to do wide-scale restructuring, including widely reported layoffs across China, India and the U.S., which have been linked to issues with investor Softbank.
“At the end of the year for 2019, all of the management group got together and said, ‘What do we do right, and what could we have done better?’” he said.
Agarwal said the changes make him feel more confident of his company’s growth going forward.
“We are now prepared to make sure that as we go ahead in 2020, we are designed to grow again as quickly, but at the same time in a significantly more sustainable format,” he said.
Knowing the unknown
Arthur Orduna, chief innovation officer for Avis Budget Group, echoed Bazin’s sentiment about embracing the complexity of the world, laying out that a big part of his job is to identifying macrotrends and asking “how are they going to influence our business?”
He said for a business like his that’s built on how people move from place to place, important trends to identify include the increasing urbanization within the U.S., which now has “as many folks living in cities as are living in rural areas,” which he described as “a massive transformation.”
He noted brands need to identify trends like those and dig in to how they impact their core business models.
“For travel brands like Avis and Budget, there’s the pessimistic view of that in that we have a generation that’s growing up and not prizing the ability to drive in the same way,” he said. “I think you see with 16- to 18-year-olds right now—50% of them have a license in cities, while over 70% have a license outside of cities. And that gap is growing.”
Orduna said the key shift to this change for Avis Budget was shifting the business model to move away from just working in the consumer space.