May 2019 - Hotel Analyst...CASHING IN AND OUT: NON-ROOMS REVENUE 26 Industry insight 30 YOUR FLEXIBLE FRIEND: NEW MODELS FOR NEW, OLD MARKETS 45 Industry insight 47

KEY TRENDS AND ISSUES IN HOTEL OPERATIONS

May2019

www.hotelanalyst.co.uk

Contents

INTRODUCTION 1

THEMARKETTODAY ERROR!BOOKMARKNOTDEFINED.

Introduction 2

Transactions 2

Performance 4

THEMODELS7

Leases7

Managementcontracts8

Franchising9

Manchising9

Softbrands 10

Thirdpartymanagers13

BLURRINGTHELINES:ASSETMANAGERSINVEST16

Industryinsight18

CASHINGINANDOUT:NON-ROOMSREVENUE26

Industryinsight 30

YOURFLEXIBLEFRIEND:NEWMODELSFORNEW,OLDMARKETS45

Industryinsight47

YOUCAN'TGETTHESTAFFTHESEDAYS 54

TECHNOLOGY:KNOWINGYOURPMSFROMYOURAPI 59

Industryinsight 65

PLATFORMPLUS:THERISEOFOYO 70

Industryinsight 72

www.hotelanalyst.co.uk 1

Introduction

Thehotelsectorhasfounditsfeetasamainstreamassetclass,providinginvestorswithrevenuesaswellasappreciatingassetsatatimewhenreturnselsewherearehardtofind.Lowinterestrates,

pressuredbondmarkets,otherassetsclassesbeingoverstretched,thetimehascomeforhotelstotaketheirplaceasrespectedinvestments.

Thesectorhasnotonlypiquedtheinterestofinvestorssuchastheprivateequitygroupswhichhavepoppedinandoutafterafewyears,butthepensionfunds,lookingforlong-termreturnsata

remove.Theyhavehelpedtobringcredibilityandalsopushedmoreevolutionintheindustry.Aswewillseeinthisreport,theevolutionofbricks,brainsandbrawns,hasseentheinstitutionsmovinguptheriskcurveandgettingintothemanagementpiece.

Withamoveintothemainstreamcomesincreasedscrutiny.Ownerswanttoknowwhattheyare

payingforandwhy,witheachlineofcostunderconsideration.Thecostofthebrands,thecostofdistribution,thecostofstaffing,ofthetechnologytoruntheproperty.Theopportunityforreturnsmaybehigh,butsoistheriskifthosecostsaren’taddressed.

Thisstudywillinvestigatethewaysinwhichtheoperatorsaretrainingandretainingstaff,aswellas

pickingapartthePMSsfromtheAPIsashotelsattempttoclawefficiencieswheretheymay.

Italsolookstothefuture.Thesectorisevolvingandpullinginnewplayersfromallovertheworld.WeinvestigateOYO,whichcountsAirbnbamongstitsinvestorsandhasboughta‘platformplus’modelintothemarket,combiningbranding,distributionandmanagementinafashionwhichsetsin

apartfromthetraditionalplayersandhasallowedittogrowrapidlyinAsia,withdesignsontherestoftheworld.

Italsolooksoutsidehotels,withcompaniessuchasAccorturningtheirattentiontomattersawayfromthebedroom,whereitcanbuildrevenuesandbuildloyalty.“Hospitalitymustevolvetowards

moreflexibilityandbeabletoopenthegatestonon-travellersforadrink,ayogacourse,afitnessroom,”saidSébastienBazinAccorHotels’president&CEO.

Hoteliersmuststarttolookateveryoneasapotentialsourceofrevenue,notjustthosewhoturnupwiththeypyjamasandasuitcase.Timetounrolltheyogamat.


Themarkettoday

INTRODUCTION

Theglobalhotelsectorhasfounditselfunderpressureasagrowingnumberofoperatorsandobserversstartedtofearthetopofthemarket,intermsoftransactionsandperformance.

Despitethis,despitetheexpectationthateconomicgrowthwouldslowandgeopoliticaluncertaintyslow,hotelpropertyperformanceremainedstronginto2019,travelandtourismwasanticipatedto

reachanotherrecordyearandinvestorsseekingmoreyieldwereincreasinglyturningtheirsightstowardhotels.

TRANSACTIONS

Lookingtotheglobalmarketin2019,JLL1forecastrobustlevelsofglobalfundraisingactivityforhotelinvestments.Close-endedprivatefundsraisedUSD28.8bngloballyinvehicleswitheithera

hotelfocusorahotelcomponentaspartofabroaderstrategyin2018.Thecompanyanticipatedthesefundswouldpursuemorelarge-scaleinvestmentstoefficientlydeploycapitalandshiftstrategiestowardprivatedebtfundraising.

Duringthepastfiveyears,approximately70.0%ofglobalhotelinvestmentsweremadebygeneralist

investorswhoinvestedinmultipleassetclasses.Givenhotels’attractiveyieldprofile,investorswereexpectedtocontinuetoseekentryintorealestate,particularlyhotels.

In2018,thelargestcapitalinflowstargetedEurope,drivenbyMiddleEastandAsianinvestors.JLLanticipatedinternationalactivitywouldincreasein2019,driveninpartbyinflowstoEurope,North

America-basedinvestorsturningfocustowardmarketsacrossAsiaandcross-bordercapitalexploringportfolioopportunities,includingthosewithassetslocatedoutsideofprimarymarkets.

Withtheleadinghotelbrandsaccountforlessthanone-thirdofhotelroomsgloballyandin2019,thecompanyexpectedtoseemoretargetedacquisitionsofuniqueconceptsandlocationsto

complementexistingproductofferings.

Recentyearshaveseennewinvestorsandinvestmentstrategiesemerge,enablinginvestorstoenterhotelrealestateinwaysbeyonddirectacquisitionofassets.Thesecantaketheformofdebtinvestments,strategicjointventures,recapitalisations,andrealestateandbrandM&Aactivity,

whichareexpectedtocontinuetobeprevalentin2019.

1https://www.jll.co.uk/en/trends-and-insights/research/hotel-investment-outlook2019


Themodels

Therearefivemainbusinessmodelswithinthehotelindustry,withanumberofoptionswithineachofthesemodels,theyareasfollows:

• Propertyfullyownedandoperatedbythehotelbrand;

• Propertyleasedbyahotelbrand,whichpaysrentforthe“walls”;

• Propertyownedbyathirdpartyandmanagedbyahotelchain;

• Propertyownedbyathirdpartyandmanagedbya“non-branded”specialistmanagementcompany;

• Propertyownedbyathirdparty,withafranchiseagreementwithahotelchain.

Lease

Aleaseisaninterestinthelandandthetenanttakesoverthepropertyforacertainterm.Assuch,underaleasestructure,thehotelcompanyholdstheentirefinancialburden.Thehotelcompanyin

thiscaseisatenantandassumesalloperatingresponsibilitiestogetherwithallthefinancialobligations;therefore,itenjoysthebenefitsifthepropertyissuccessfulbutsuffersallofthelossesifthepropertydoesnotperformadequately.Thehotelcompanyreceivesalloftheprofits,afterrents

havebeenpaid.Rentalstructurescanvarydependingontheamountofriskthattheinvestorisreadytotake.

Someofthepossibleoptionsare:

• Fixedfee:thisisafixedrentwithindexedgrowth.Thisformofleasestructurehasaguaranteedreturn,whichbearstheleastrisksforthepropertyowner;

• ShareofRevenue:inthisvariableleasescenario,therentiscalculatedontheamountof

salesgenerated.Inthiscase,thepropertyownersharessomeoftheriskslinkedtothelevelofperformanceofthehotel.Theydo,however,havetheopportunitytoassesstheperformanceofthehotelagainstmarketdata;

• ShareofNetOperatingIncome(NOI):inthisvariableleasescenario,therentislinkedtothe

NOIafteralltheoperatingexpenseshavebeendeducted.Thisscenariocarriesthehighestrisktotheowner,asitalsoincludetheoperatingriskofrunningthehotelandofferslittletransparencyastolikelyincome.

Boththerevenue-basedandNOI-basedrentscanincludeabaserent,whichisaguaranteedreturn

totheowner(hybridlease).Ahybridleasemightalsoincludesomeclausesthatcanbefoundinmanagementagreements,suchasanobligationtomaintainbrandstandards.

Source:HVS,HotelContracts-ToLeaseOrNotToLease


Blurringthelines–assetmanagersinvest

Assetmanagershavebeenagrowingfeatureofthehotelsectorforanumberofyears,withtheirprofilegrowingtotheextentthatbrokeragehousessuchasColliersandJLLhaveaddedthemasanessentialstringtotheirbows.

Aswedescribedearlier,assetmanagershavehelpedtoprovideanessentialrebalancingbetween

ownersandthebrands,speakingupforinvestorsastheflagslooktoglobaldomination.

Ontheoperatingfront,wehaveseentheseparationofthevariouselementsoftheinvestment.Itisnowcommonforthepropertytobeownedbyonegroup,bearthebrandofanother,andbeoperatedbyathird-partyoperator.Inaddition,restaurantsandotherfacilitiesmightbecontracted

outtoyetothercompanies,whomightalsohavetheirownbrandandloyaltyprogramme.Andclient/customerdataisnowseenasoneofthemostvaluableassets.Butwhoco-ordinatesalltheseactivitiesbetweenthestakeholdersandensurestherearenogaps,withassociatedriskforthe

investor?

Asthesectorhasevolvedtoincludemultiplepartieswithintheonehotel,sotheroleofthosepartieshavealsoevolved,withassetmanagersmovingclosertotheownersand,insomecase,becominginvestorsthemselves.

In2019FreoGroup,theEuropeanrealestateinvestmentandassetmanagementbusiness,acquired

a25%stakeinmanagementgroupMichels&Taylorforanundisclosedfee.ThedealallowedM&Tcloserparticipationindeals,withthegrouptellingHotelAnalystthatitexpectedtoseegreateralignmentasaresult.

AndrewHunter,managingdirector,FreoManagement(UK),said:“Freobelievesthatexpertisein

managedrealestateiscriticalforfuturedevelopmentandassetmanagement.HoteloperationsisaveryimportantpartofthisandweareprivilegedtobeabletoenterintoastrategicpartnershipwiththeclassleadinggroupofM&T.ThisrelationshipwillopenupsignificantopportunitiesforFreoand

itsinvestmentpartnersacrossthefullvaluechainofhotels,frominitialfeasibilitythroughdeliverytolongtermoperation.”

HughTaylor,M&TCEO,toldHotelAnalyst:“ThismeansthatFreoareeffectivelyabletohaveahotelplatformacrossEuropetohelpwiththeirinvestmentstrategiesandwecanutilisethattobepartof

theinvestment.Wewantedtoremainindependent,we’relookingtodevelopourrelationshipwithourinvestorclients,throughacquisitiontooperationsandexit”.TaylordescribedthemodelasclosetothatofWestmont,takingasmallequitystake“forinterestandalignmentandwecancontrolthe

deals.It’simportanttousthatnothingchangeswiththeplatform–butnowwecanparticipate.

“We’vealwaysbeeninthedealsbusiness,sincebeforeM&TandsincewesetupM&Tallourclientshavebeeninvestors.Theassetmanagementbusinessisthesmallestpartofthebusinessnow.We’reaone-stopshopforinvestors–weneverthoughtthattheassetmanagementmodelwouldbe

enough–therearen’tenoughfees.”

Commentingontheshiftingprofileofthehotelsector,Taylorsaid:“Ourcompanywouldn’thavebeenassuccessfulasithadbeenhadownersnotdivestedtheirassets.Theinvestorshavebecomea


Cashinginandout–non-roomsrevenue

Justsellingroomswasnolongerenoughforhotels,asinvestorsdemandedever-higherreturnsanditbecameapparentthatalotofspacewithinthehotelbuildingweren’tbeingusedorbeingaccountedfor.Hotelshadtostartthinkingbeyondsleep.

Anditwasn’tjusttofillthecoffersoftheinvestors.Guestswerebecomingincreasinglydemanding

inwhattheywantedfromhotels,but,reassuringly,inwhattheywerewillingtopayfor.

Non-roomsrevenuewasimportanttohotels’profitability,withHotstatsreportingthatprofitperroomathotelsinmainlandEuropefellby9.1%year-on-yearinJanuary2019-thelargestmarginofdeclineinthismeasuresinceAugust2016-pulleddownbyfallingnon-roomsrevenue._Hotels

reporteda1.3%dropinnon-roomsrevenues,whichfellto€47.10,equivalentto36.7%oftotalrevenue.ThefallingancillaryrevenuesincludeddeclinesinFood&Beverage(down1.5%)andConference&Banqueting(down0.8%),onaper-available-roombasis.

Accorwasoneofthefirstoftheglobaloperatorstoembracetheopportunitiesoutsiderooms,with

itsaugmentedhospitalityconcept,whichwassettoseeitmovefromhotelcompanytohospitalityplatformandserviceprovider.Andnotjusttoguests.

“Hospitalitymustevolvetowardsmoreflexibilityandbeabletoopenthegatestonon-travellersforadrink,ayogacourse,afitnessroom,etc.Inotherways,wearetargetingnon-travellersbybringing

hospitalityoutsidethehotel.Throughstrategicpartnerships,wearenowofferingourhospitalityexpertiseinnewplayingfields,forexample,suchasco-workingplaces,”saidSébastienBazinAccorHotels’president&CEO.

In2019thecompanyannouncedthatitwasgoingtoinvestEUR225movertwoyearsonloyalty,

partnershipsandbrandmarketing,includingthelaunchofloyaltyprogrammeAllandtherelaunchofsevenofthecompany’sglobalbrandsasitpursueditsaugmentedhospitalitytarget.

Allwasdescribedas“afullyintegratedglobalplatformintegratingrewards,services,andexperiencesacrossourentireecosystemtobringvalueeverydaylifewhetheryouwork,liveorplay”.

Thecompanyhadmadeanumberofpurchasesoutsidethetraditionalhotelsectortosupportthis,

includinginthecateringsectorwiththepurchaseofSaasplatformAdoriaandbackingthemanagementofPotel&Chabotinabuyoutoftheeventmanagementcompany.ThegroupalsolaunchedAccorLocal,whichallowedhotelstooffertheservicesoflocalbusinessesandservices,

whilealsoallowinglocalresidentstoaccessthehotel’samenities.

Ayearlater,25hoursHotels,whichcountedAccorasashareholder,trialledasimilarproduct,offeringservicetolocalresidents,notonlyguests.ChristophHoffmann,25hoursHotels’co-founder,toldHotelAnalyst:“Wearebecomingabitmoreanaloguewheneverythinghasbecomeabittoo

digital.Ourhotelgroupisnotfivestarbutwethinkthatpeopleappreciategoodadvice.Wewanttoofferservicestoourfriends,toourneighbours–weofferourneighboursrollsandbaguettesbeforetheygetup,it’seasyforus–wealreadyhavetherolls.”_

Therewasnoadditionalchargefortheservices,withHoffmanncommenting:“It’snotasomething

thatpaysoffdirectly.Wehavetohaveinterestingpeople,wehavetopayforthetechnology,itall


Yourflexiblefriend–newmodelsfornew,oldmarkets

Thegrowthofpeer-to-peerlodgingplatformssuchasAirbnbforcedtheglobaloperatorstopayattentiontotheleisuremarketinawaythatitneverhadbefore,preferringtofocusitsattentiononthebusinesstraveller,whoserequirementswerelargelyuniform,withaglobalspreadbeingof

uppermostimportanceratherthananyunusualarchitecturalordesignfeatures.Abed,abreakfastandmaybeaClubsandwichonroomserviceandmosthotelsfeltthattheyweresetandcouldturntheirattentionbacktodevelopingtheloyaltyschemeandputtinganother400hotelsjustlikeit

acrosstheglobe.

Theleisuretravelwashardtopredict,unprofitableandfickle,makingthemoflittleinteresttomanyofthebigbrandedstables,whichturnedtheireyetotheweekendtravelleronlywhenitwastheirbusinessguestscashinginloyaltypoints.Thesharingeconomyforcedachangeofviewonthem,

gallopingintothelimelightandshowingoffanewtypeoftravel.

By2019Airbnb,thelargestofthesharingplatforms,hadoversixmillionlistings,withanaverageoftwomillionpeoplestayingwiththebrandpernight,notnumberswhichthebrandscouldignore.Theyhadtocomeupwithcompetitorswhichgavetheleisuretraveller,whichoftentravelledin

packs,unlikethelonebusinessman,flexibilityofproductandoftenwithaneyetocost.

AccorwasoneofthefirsttoofferanewtakeonwhattheAccor’sJo&Joe_in2016ahostel-hotelhybridofferingwhichstartingatEUR25pernight.Thegroupplannedtohave50propertiesopenunderthebrandby2020“indestinationspopularwithMillennials”,withcitycentresitescloseto

trainstationsofkeyinterest.

AccorworkedwithUKdesigncompanyPensononJo&Joe–agroupwhichhadworkedoncampusesforGoogle,YouTubeandJaguarLandRoverbutneverhotels.LeePenson,CEOatPenson,saidthatAccorwaslookingfor,“Somethingholisticallygame-changingthatcan’tbedefinedbywhatwe

alreadyknowandexpect.Theydidn’twantahospitalityarchitectordesigner,theywantedsomeonewhohadn’tdonehospitalityeverbefore.Thisprogrammeneededanentirelynewoperationalstrategy,experience,priceandadventurousmodel.Myfirstpointertothemwastothinkabout‘It’s

NOTABED’.”

Andunlikeotherhostels,thiswasnotasimplerackofbunkbeds.Thebrandwantedtoaccommodatepeopletravelingalone,inpairs,ingroupsorasafamily,withavarietyofdifferenttypesofroom-some,yes,withbunkbeds,butsomewithyurts,hammockandcaravans.Therewere

apartmentsforuptofivepeoplewithprivatebathroomsandkitchenareas.Butwhatthebrandplacedmoreemphasisonwerethesharedareas,withabar,butalsoasharedkitchenspace.

SébastienBazin,Accorpresident&CEO,said:“CanwecompeteonpricingadvantageforAirbnbguests,canIreducebyIbisby40%andtheanswerisno,whichiswhywechangedourgears,not

loweringthepricingofexistinghotels,butinventingtheJo&Joeconcept,whichisnotsellingaroombysellingabedandbysellingabedwehavereshuffledthefloorplanandsoallofasuddenyouhavethesamepricingasAirbnbbecauseyouhave$12to$15perbed.Jo&Joeisapureresponseto

Airbnb.”_


Itwasn’tuntil2018thatoneoftheothergroupslaunchedabrandwithleisureinmind,thistimeHiltonwithMotto,whichitdescribedas“anewbrandtoaddresstheneedsanddesiresofthe

evolvingglobaltraveller”_.

“Hiltonpridesitselfonbeingaleaderinthehospitalityindustryandevolvingwiththeneedsofourguests,”saidChrisNassetta,president&CEO,Hilton.“InnovationisinourDNA,andasweembarkonour100thyearasacompany,weareinnovatingmorethaneverbefore.WithMottobyHilton,

wearebringingtomarketsomethingtheindustryhasneverexperiencedwithitsflexibleandaffordableroomproduct,desirablelocationsandguest-empoweredservice.”

Theproductfeaturedmultipleconnectingroomswithanaveragefootprintof163squarefeet,includingspace-savingfeaturessuchaswall-beds,loftedbeds,segmentedshowerandtoiletstalls,

andmulti-functionalfurniturethatcouldbediscreetlystowedwhennotinuse.ThecompanymaintainedthatthebrandwasnotaresponsetoAirbnb.

TrippMcLaughlin,globalhead,MottobyHilton,toldHotelAnalyst:“Weareverypleasedwiththeearlyinterestwehavereceivedfromownersanddevelopersaroundtheworld.Whilewecannot

divulgeonspecificsatthistime,thisisgoingtobeanexcitingyearforthegrowthofthebrand.Forexample,rightnowwehavedealsinvariousstagesofdevelopmentinprimeurbanlocationssuchasLondon,Copenhagen,Lima,Savannah,WashingtonD.C.,SanDiego,BostonandDublintonamea

few.”

Whilethebrandlookedtobegainingfavourwithowners,thereremainedtheissueofcost.Foldingbeds,movingwalls,allofthiscameatacost.McLaughlinsaid:“Mottoisfocusedondeliveringamoreaffordablecosttobuildandefficientstaffingmodel.Withmicro-roomsandcommonspaces

thatcanscale/flexbasedonsitespecifications,MottowillallowHiltontoenterprime,urbanlocationsandmarketswherespaceisatapremiumthatmightnothavebeenpreviouslyviable.For

example,ourmicro-roomconceptwillhavetheabilitytofitthreeMottoroomsinthesameamountofspaceastwoHamptonrooms.Mostimportantly,wearegivingownerstheopportunitytocreatetherightMottofortheirspecificlocation.Ultimately,specificmarketfactorsandoverallproperty

designandamenitieswilldeterminepricing/costs.Weanticipatepropertieswillbeamixofprimarilynew-buildsandadaptivere-usespaces,butwillalsoconsiderconversationsaswelliftherightcircumstancesarise.Thisflexibilitygivesusandowners/developerstheopportunitytoserveany

guest,anywheretheywanttobeintheworld,foranytravelneedtheymayhave.

“Theexcitementwehavereceivedfromthedevelopmentcommunityisdrivenbytheflexibilityweprovidetoowners.WithMotto,onesizedoesn’tfitall.Multipurposespacesaregrowinginpopularitybecauseoftheflexibilitytheyafford,andMottooffersdevelopersandownersaunique

levelofflexibilitytoitspublicspacesandF&B–thereistrulynoprototype.Ownerscanbringthebrandelementstolifeinawaythatmakesthemostsenseforthespecificsiteandmarket.WithalargerfocusonF&Bforexample,Mottoownerswillbeabletodrawlocalsintopublicspaces,and

revenuegenerationpersquarefootmeansabetterflowthroughtothebottomline.Thisalsoallowsownerstooffercompetitiveratesthatopendoorstocitiesandlocationsthattravellersdidn’tthinktheycouldafford.”

Thecompanysaidthatitexpectedtotakethelearningsfromcreatingamoreflexiblebrandand

deploythemthroughoutitsstable.McLaughlinsaid:“InnovationisinourDNA,andbeinginour


Youcan’tgetthestaffthesedays

Ashotelsseektoimproveserviceandsetthemselvesapartfromthecompetition,theyneedmoreandbetter-trainedstaff.Somethingwhichhasshownitselftobeinlimitedsupplyasexpansionhasnotkeptupwiththenumberofpeopleeyeingthesectorasthesourceofalongandfulfillingcareer.

IntheUKalone,staffrecruitmentandretentionhavebecomethebiggestissuesforUKhotel

managersaccordingtoresearchbyEY,whichfound28%ofmanagerscitingstaffconcernstheirkeyproblem,aheadof22%notingcostpressures.

Ofthoserespondingtothesurvey,90%wereseekingstaffforunfilledroles.Morethanhalfhadseenadeclineinnon-UKapplicants,sincetheUK’sBrexitvote.

ChristianMole,headofhospitalityandleisureforEY,said:“Retainingandattractingstaffremains

understandablythebiggestchallengeforhotelgeneralmanagersand,particularlywithBrexitmovingcloser,ashortageofmigrantlabourisanoverwhelmingconcernnotonlyforhotelsbutthehospitalityindustryasawhole.

“Thisisn’t,however,tosayBrexitissolelytoblameforrisesinstaffingcosts–theintroductionof

theNationalLivingWageandapprenticeshiplevycontinuetohaveanimpactand,withroomrategrowthatregionalUKhotelsinparticularslowingdown,hotels’abilitytopassonthesecoststocustomersisbecomingdifficult.”

Shortlyafterthestudywasreleased,MacdonaldHotels&Resortscitedrisingcostsasitannounced

planstocut50stafffromitsheadoffice.Inaletterseenbythelocalpressitsaid:“Oneofthefindingsfromthereviewwasthatouroperatingcostsareunsustainablyhighandwerequiretofocusonreducingtheseasapriorityforthisyear.

“Asaresultofthesevariousfactorswehavebeenleftwithnooptionbuttoconsiderimplementing

anumberofredundancies,aspartofawidercostreductionprogrammewhichwillalsotargetnon-essentialoverheadsandnon-staffcosts,butregrettably,oneofthefirststepswehavebeenforcedtoconsiderisreducingourgroupheadcountbyaround50.”

UKHospitalitywarnedthatthesectorwasfacingalabourshortage.UKHospitalityCEOKateNicholls

said:“Historicallylowunemploymentandhighemploymentisdrivinglabourshortagesinsectorslikehospitality.Ourmembersarereportingthattheyarefindingitincreasinglydifficulttofillvacancies.Businessesareconcernedthattheywillnotbeabletofindtheemployeestheyneedto

continuetogrow.

“Thisisonlygoingtobeexacerbatedifthegovernmentcontinuesdownthepathofseriouslyrestrictingmigrationpost-Brexit.WeneedafutureimmigrationsystemthatmeetstheneedsoftheUKeconomy,notonebasedoninflexibleideology.WeneedworkersfromtheEUtobolsterour

home-grownworkforcesandkeeppacewithgrowth,particularlywithunemploymenthistoricallylow.

“Accordingtothenewdata,wageratesaregrowing,onaverage,by3.3%,butwageratesinthesectoraregrowingevenfaster.Thesectorisworkinghardtofillvacanciesandinvestintheir


Technology:KnowingyourPMSfromyourAPI

Oneofthemostimportant,butmystifyingaspectsofhoteloperationsarethepiecesoftechnologywhichprovidethebackbone.

Deliveringagreatexperience–ateverytouchpoint–demandsanunwaveringfocusontheguest,andtheirneeds,fromthemomenttheycheck-intowhentheyleavethepropertyattheendoftheir

stay.

Technologycanhelphotelsachievethistotalguestfocus,byenablingthemtostreamlineprocessesandsimplifymanagementtasks.Modernpropertymanagementsystemsaresoftwareapplicationsfortheoperationsofhospitalityaccommodation.Apropertymanagementsystemissometimes

referredtoasahoteloperatingsystem,givinghoteliersevenmorescopetotransfertime-consumingmanualprocessestodigitalplatforms,freeingthemuptodirecttheirtimeandattentiontotheguestandgivingtheall-importanthumantouch.

Formanyyears,hotelPMSstendedtoberegardedasafrontdesksupportfunctionandlittleelse,

saidJamesSlatter,managingdirector,AgilysysEMEA.Nowtheywereabletocontributetoanbroadmixwithintheday-to-dayworkingsofahotel.Theyareconsideredanintegralpartofanyhotelthathasdesignsonreducingcostsanddrivingrevenuewhiledeliveringaseamlessguestexperience.

Asguestexpectationshaveevolved,sotoohavePMScapabilities.Providershavebeenquickto

embracetechnologicaldevelopmentsthatenhancetheirofferings,andthisissomethingthathoteliersareeagertotakeadvantageof.TechnologyhasprogressedtosuchanextentthatPMSsystemsarenowseenasthecommandcentreofhotelandresortoperations;pullingtogetherall

departmentsandworkflows,frombackofficefunctions,toguestroominteractions,roomcleaningandconciergeservices.

Today,PMShelpsautomatedailyoperationsandadministrativetasks.Withit,guestinformationandactivitiesarelogged,andadvancedreportingenablesseniorstafftooverseedailybusiness

requirements.ThiscentralviewpointaffordedbyaPMShelpsimproveoperationalefficiency,thusreducingoverallcosts.

AnessentialaspectofthelatestinaPMSisthatitallowshotelierstoenhanceandexpandontheiramenitiesandotherofferingstomoreguestswithoutdisruptingeitherstaffworkflowortheguest

experience.Thiscanbeappliedduringbooking,atcheck-inandduringtheguest’sstay.Takingthereservationstageasanexample,manysystemsintegratewithbookingengines,whichgiveshoteloperatorsthepowertoreducetheirrelianceonOTAs.Lookingatsomeoftheverylatestinonline

reservations,hotelsaremovingtowardcommission-freealternativesthatenablegueststoviewoptionsandavailabilitybeforeselectingtheirexactroomwithouthavingtocallthehoteldirectly.Thebenefitsofwhicharemanifold.

Firstly,itallowsthehoteltobypassOTAcommissions,asguestsbookingdirectlyremovesany

associatedfees.Secondly,directreservationsimproveoverallbookingrates-amorethanthreefoldincreaseinsomeinstances-asprospectiveguestsaremoreinclinedtobookrightonline,instantly.

Finally,guestdataisaddeddirectlytothehotel’sPMSsystemfromtheonlinereservationssothatwhentheguestarrivesonproperty,theirprofiledataisalreadyathand.Indeed,thisinformation


PlatformPlus:TheriseofOYO

Astheglobalbrandshavegrown,sohavethenumberofinvestorslookingtothehotelsector,drawnastheyaretothechanceforstrongreturnsoninvestment,withouttheneedtoparticipateintheoperationsofahotel.

Butasthesectorhasmovedcloserandclosertobeingamainstreamrealestateinvestment,so

investorshaveeducatedthemselvesandcometolookforotheroptionsthanthemainstreambrand,realisingthatonesizedoesnotfitallandsomehotelsmayneedonlytobefranchised,ortobepartofasoftbrand,ornotbeflaggedatall.

Agrowingtrendhasbeentowardsplatforms,whichprovidesomebranding,orsomedistribution,

butwithouttherigourswhichcomewithtraditionalbranding.Theymight,however,comewithasideofguidancewhenitcametooperations.

2013sawSoftbank-backedOYORoomslaunchedoutofIndia,feedingonthecountry’spositionasagloballeaderintechnology,butasaregionwheretheglobalbrandshadfoundithardtoexpand.

India’sreputationwasforluxury-beyond-luxuryinitshotels,butanythingunderthatlevelproveddifficulttoachieve.TheUK’sPremierInnpulledoutin2016afterhavingfailedtogaintractionandthelargeglobalsfoundthattheonlywaytogetintothecountrywaswithlocalpartnerswhocould

negotiatethebeaurocracyandlocalvagaries.Eventhen,thechancetoacceleratethroughfranchiseswaslimitedbecauseoftheneedtomaintainbrandstandardswithinexperiencedowners.

Throughuseofitsproprietaryappsforinventory-management,room-service,revenue-managementandcustomer-relationshipmanagement,OYOdeliveredpredictable,affordableandavailable

budget-roomaccommodationtomillionsoftravellersinIndia.By2019itwasalsoinMalaysia,UAE,Nepal,ChinaandIndonesia.

GuyParsons,CEOateasyHotel,describedthechallengeoftheIndianmarketasrequiring“agoodpartner.Youneedtohavesomeonewhocanunlockthelandandthecountryisenormous.It’svery

differentandOYOareattempting,inmyview,totackleareallypoorbottomendmarket.Youhaveabeautifulfourandfivestar,thenverylittlemidmarket,thenforalotoftheworking-classIndianstheyhavejusthorribleaccommodationandOYOistryingtooffersomeforthatsector.”_

In2018theplatformfinalisedafundingroundledbySoftBank,whichvaluedthebudgetplatformat

USD4bn,onafewmonthsafterChinesehotelcompanyHuazhuinvestedUSD10minthegroupasitexpandedintoChina.

MasayoshiSon,founder,chairman&CEOatSoftBank,describedhisenthusiasmforOYOtoanalystsonanearningscall_callingit“anext-generationtypeofhotelmanagement”.Hecommented:“Injust

twoyears,itgrewthenumberofroomsinIndiato100,000.Bytheendoftheyear,Iwouldsay150,000moreroomsormaybe200,000rooms,whichwillbe10timesmorethanTajgroup’srooms.It’scompletelyanewtypeofhotelandtheyaregrowingsofast.

“Theworld’sbiggesthotelchainintheworldisMarriott,andhowmanynetroomaddswerecreated

byMarriottmonthly?It’s8,000.Hilton,thesecondbiggest,7,000,andIntercontinental,thethird-biggesthotelchainintheworld,theygrewnumberofhotelsinlastthreemonths,2,000.OYOisnot

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May 2019 - Hotel Analyst...CASHING IN AND OUT: NON-ROOMS REVENUE 26 Industry insight 30 YOUR FLEXIBLE FRIEND: NEW MODELS FOR NEW, OLD MARKETS 45 Industry insight 47