Brand representatives speaking during the CHRIS+HOLA Connect online conference said they believe the challenging conditions for hotels in Latin America could spur more to join brands to access their larger distribution platforms.
GLOBAL REPORT—Brand officials believe that distribution challenges in Latin America could lead to a flight to brands in heavily independent markets.
Speaking during the “Brands and management structure” panel of the CHRIS+HOLA Connect online conference, Mario Carbone, managing director of Mexico and Central America for Hilton, said being overly reliant on a single distribution channel is a recipe for disaster in a low-demand environment.
“I’m a big believer in diversifying your channels,” he said. “If I’m an independent heavily reliant on the (online travel agencies) or an independent all-inclusive (resort) heavily reliant on the wholesalers, it can be a risky game on the long term. You are at their mercy, and you’re unable to revenue-manage because you just have that one channel.”
Jeff Stephenson, VP of U.S. franchise development for G6 Hospitality, agreed, but said the brands still aren’t for everyone in the region.
“It all depends on the style of the hotel you have,” he said. “If it’s a 20- to 30-room little boutique hotel somewhere nice that people just wander upon and you’re doing well, then the brand might not be for you.”
Salo Smaletz, VP of development, Latin America, for InterContinental Hotels Group, said brands are also vital in the region right now because of the guidance and support they provide while navigating the crisis.
“When this whole thing started, I think the world was lost and without any guidance,” he said. “The brands grabbed the bull by the horns and started plans and actions to give comfort to owners because there were guidelines and a plan.”
For all those reasons, Carbone predicted an uptick in brand conversions in the near future, albeit coming at a time when “new development will slow down and take a hit.”
“At Hilton back in the financial crisis of 2008 and 2009, post those years, our pipeline dramatically shifted from new-builds to conversions,” he said. “In a normal year, we probably see 25% of our pipeline is conversions and the remainder is new-builds. But then after the crisis, we saw the conversions chunk grow up to 47%.”
Carbone said this also leaves a big opening for the soft-branding approach many brands have taken in recent history, and even traditional brands have evolved to “allow more flexibility in their design.” This has been important in getting more unique properties into their systems in various markets.
“It’s a platform that’s a blank page to allow you to create whatever design for them and still be able to put it in (to the distribution platform),” he said.
Management vs. franchise in Latin America
Smaletz said that “while there’s probably not as much as we’d like to see,” Latin America has a growing amount of qualified third-party operators, making franchise agreements more viable. Brands and owners must be careful who is operating their hotels, though.
“The No. 1 promise of all of our brands is we want to make sure the guest has a consistent experience wherever you stay,” he said.
Carbone agreed that third-party managers “have come a long way.”
“A few years ago, there was a lot more scarcity,” he said. “But now we see more than 40 operators.”
But those operators are comparatively less sophisticated than their U.S. counterparts.
“It has forced us to have more centralized support,” he said. “Compared to the United States, we have to do a lot more hand-holding in Latin America, to kind of guide them. These operators can be very good, but maybe they don’t know the nuances of a brand, so there has to be a lot more hand-holding to help them navigate it.”
G6, which is present in Mexico and Central America, doesn’t own and operate outside the U.S., Stephenson said, which means there was a lot of work and research that went into maintaining brand standards in the region. He said maintaining a consistent experience came down to finding preferred third-party management partners.
“So we worked with a couple of large management companies here in the U.S. that manage everything from full service down to economy properties that were already established in the regions where they could learn our standards and agreed to manage for us from the brand perspective,” he said.