Hotel brands are facing increasing pressure “to grow, and to grow fast,” according to Jerome Briet, chief development officer (CDO) EMEA, Marriott International. “That includes into secondary and tertiary cities or destinations that we were not present in before,” he adds. “We will inevitably take more risks as we franchise in those locations.”
One of the chief challenges around rapid growth remains “labour shortages”, according to Patrick Fitzgibbon, SVP development EMEA, Hilton. “Labour will continue to be a challenge unless we continue to give everybody the tools that people want to work in hotels.”
He adds: “If we can't make the workplace somewhere that new generations want to come and work in hospitality, then it will always be difficult to deliver against your brand promise. So that has to be a real focus - how you make it an environment that we all want to be in.” He notes that while many people stay in the industry for life, “there is a significant number of people that come into hospitality for a very short period of time and then go: our challenge is how we keep them because that allows us to run better businesses.”
One instrument for offsetting labour challenges is technology, which if used right, can also solve “pain points” for guests, Fitzgibbon adds. “Ultimately we're in the business of serving people -making sure that our focus is on developing systems that allow and enable those operating the hotels to do it more simply, more easily, to be able to give customers what they want.” He cites guests not wanting to queue to check in or check out, recommending “investing in technology to allow guests to check in before their arrival, choose their rooms and, more importantly, text us when there's a problem to solve.”
Balance sheet management
For Felicity Black-Roberts, vice president development Europe and North Africa, Hyatt Hotels Corporation, unit growth often starts with “managing the balance sheet”. She says: “We've been real estate heavy for a long time. We have had a 10-year, publicly stated strategy to be asset light and we are moving through that - the latest disposition was the Park Hyatt Zurich.” Black-Roberts notes that selective sales also allow for selective acquisitions – including management platforms like the recently purchased “Apple Leisure Group with its all-inclusive brands”. She adds that a key goal is to “bring more brands into our stable… while remaining asset light.”
For Tobias Reinecke, head of development EMEA, Choice Hotels, which are purely run as franchises, expansion often involves “speaking directly to the owners of hotels and letting them know where we can provide cost savings - not just where we can deliver on the top line - but where we can help in terms of cost savings or operational efficiencies.”
He notes: “There is something of a continuation of the Covid challenges around staffing, energy costs and so on, so they're looking at what our technology stack looks like, how we integrate with other platforms or other distribution systems or sales platforms, and also how our systems integrate on an operational basis.”
Franchising vs. leases
Adds Briet: “A lot of what we do in Europe is franchise. Last year we were north of 80% franchised for Europe and that's including Turkey, which arguably is a little bit more managed.” He notes that Marriott “does a lot” in the DACH countries, i.e. Germany, Austria and Switzerland, which are “heavily lease-dominated markets, and as a listed entity, we're not particularly hungry for leases given the impact on our balance sheet”. The solution is to “work with third party operators; we support them throughout that process and they bring us a lot of opportunities”. He adds: “We actually also bring them a lot of opportunities, especially when we get approached for a lease.”
Briet concludes: “The issue remains when you have a tight financing environment, and you have owners or landlords pushing their rents to cover the debt service, ending up with very, very skinny margins. We've seen a few of these challenges over the past 12 to 18 months.
“I think there will probably be more as there is a big wave of refinancing coming up, but we are here to support them, so we use our balance sheet and make sure that they stay strong through a tough time. That pays off – it’s a relationship industry, and ultimately we’ve just got to stay close to them.”