Detail is all for small hotel companies
30 OCTOBER 2014 6:12 AM
In the shadow of recession, small operating groups need a keen focus on the detail to help drive revenue and the value of assets.
MANCHESTER, England—With branded properties from large, global chains starting slowly to see increased traction and leveraging scale across the European landscape, smaller chains and operating groups must up the ante and pay particular attention to the details.
This was the central message—in a panel titled “Owner-operators: It’s all about you!” at this month’s Annual Hotel Conference in Manchester.
The clarion call is heeded by those operating in a leaner, post-crisis world.
“One thing we saw a clear need for was our own customer database system, and we put particular emphasis on making sure the information on it is correct. Actually, getting into that kind of detailed mindset, and the general sharing of best practices across the portfolio, is far easier if you are small,” said Richard Grime, managing director of Paragon Hotels Limited.
Paragon owns eight hotels and operates a further eight properties, all in the United Kingdom, under its Classic Lodges collection and, according to Grime, “receives 53% of its business through its own central reservations system, which is not that different from that delivered by the major brands.”
“The smaller you are, the more important is customer feedback and getting back to those customers. We have two people in Hong Kong that do nothing else. It’s not rocket science. Feedback goes all the way down the line,” added John Connolly, head of U.K. development at Dorsett Hospitality International, which has approximately 6,500 rooms under management (under three brands) but one hotel in the U.K., although a second is on its way.
His projections were that Chinese travelers would make up 30% of roomnights at those U.K. properties.
“We’re also trying to reinvent ourselves and deliver value through the asset as the company has risk throughout the life of its properties. We also are at a point where to compete with the big boys in global development we need to change our operating model. That said, at heart we remain developers,” Connolly said.
Sophie Gregorios-Pippas, managing director of Red Lion Leisure Limited, said she needed two pairs of eyes, one for customer care, the other almost perpetually trained on the accounts. The company owns two adjacent properties in the U.K., a Holiday Inn Express and the Red Lion Hotel that are both managed by Interstate Hotels & Resorts—which took over the management vehicle Chardon Management in September 2013.
“When you are as small as we are, there has to be an almost constant interrogation of the monthly profit-and-loss reports,” she said.
Connolly added that forecasts require not just sound interpretation so as to adjudge health of the numbers but also a full monthly analysis of each property, their markets and what might happen to those markets.
Non-hotel operator Tim Stoyle, head of hotel valuation at consultancy Savills, warned such a modus operandi was admirable but narrow in focus. Often the market is more interested in valuation and sustainability over the medium term. He also added that funding is freeing up and boosting acquisitions and development.
Driving value from a small base
Small operations must be lean and mean to drive business and value to the asset, the panelists said.
“Our distribution, revenue and marketing approaches and systems need to be correct, and a combined intelligence stemming from those allows us to fill holes in the calendar. We are reliant on weddings, and while we cannot pull the whole team out too often, every two weeks our revenue manager and sales director talk to our GMs and review the business of the next two weeks,” Grime said.
“That even extends down to making sure everyone is in the office when these meetings happen,” he added.
Limited staff, panelists said, puts particular pressure on small hotel groups, but size does not matter and revenues can be driven if they foster intelligent associations with online travel agencies and branded product.
“We sit down with Interstate to discuss when to close down third-party sites when the brand and operator start performing, and we have seen a good growth trajectory when we do this,” Gregorios-Pippas said.
The ultimate focus should be capturing guests and at all times extending and perfecting a relationship with them.
“Our job is to capture the guest at check-in, to find out as much information as we can,” said Grime, who added Paragon plans to add five or six branded and non-branded properties that would complement the existing portfolio.
“Dorsett is a firm believer in brands, but everyone is seeing that customers are becoming far more sophisticated in how they book. But yet at the same time hotels are becoming far more clever at how to capture them in the most direct manner,” Connolly said.
Stoyle said that a recent development he considers interesting is the number of new sub-brands arriving on the scene.
“I do not know how confusing that is to consumers, so booking through OTAs, especially for the occasional traveler, does often boost their confidence in their buy,” he added.