Hotelier trinity – an industry insight

London, autumn 2016, is a market steeped in uncertainty. With the pound’s standing against the dollar lower than at any point since the mid-1980s, debate continuing to rage surrounding what form a post-Brexit UK might take, and a marked shift in tone when it comes to foreign workers – the Conservative Government has even floated the idea of companies having to disclose details of non-British employees – the only thing hoteliers, operators and investors can be certain of is how little they know. Those looking for a tonic in the form of some bullishness and bonhomie could have done a lot worse than to wander down to the Hilton Bankside in late-September, where three hospitality leaders were doing their best to remind their peers of just how many opportunities still existed for those smart and brave enough to seek them out. Stuart Bailey, CEO of Splendid Hospitality Group (SHG); Fredrik Korallus CEO of Generator Hostels; and Kike Sarasola, founder and president of Room Mate Hotels, were providing their ‘view from the boardroom’ at the 2016 Hotel Investment Conference Europe (Hot.E) and, from their vantage point at least, it looked far from gloomy.

Representing three distinct operating models and segments, topics of conversation included the need to move away from an overreliance on data, how operators might learn from emerging disruptor models, getting closer to one’s clients, and the seismic shifts taking place in marketing and distribution models.

Enter Brexit

As with any conversation that takes place in London these days, from boardroom to beer garden, it wasn’t long until minds turned to Brexit. Generator only has one UK property, Sarasola’s not there yet, though revealed that he was still very interested in the London market, but SHG’s portfolio consists of 20 properties across multiple brands, from limited service to luxury, located exclusively in England and Scotland.

“We’re very good here in the UK at trying to talk ourselves into a recession,” Bailey began. “Nobody really knows what Brexit will look like. The only approach is to ensure you’re ready for all eventualities so that you’re not taken by surprise when it does happen. Does single market exposure concern me? It certainly makes things easier in terms of forging and building relationships. I’m not too worried; it’s a great place to do business and will continue to be so.”

Sarasola was less convinced. “I’d be a little worried if I were you; invest in Spain,” he suggested, eliciting laughter from his audience. “In these days, I feel one has to diversify. One particular Spanish operator decided to focus only on the domestic market and was hit particularly hard by the financial crisis.”

Sarasola pointed to booming hotel markets in the Mediterranean, but felt a number of lessons had not been learned from previous hard times, and that certain players needed to break out of a state of passivity. “The numbers are incredible, but I feel we’re not taking advantage of those circumstances and the industry is failing to evolve,” he began.

“Our industry saw OTAs go by, then Airbnb, and we just sat there. We should stop seeing those things as a threat, and ask how we can take advantage, not just accept what’s happening. Why should a guy in Atlanta who knows nothing about hospitality be running the world?”

Sarasola is in the midst of launching a serviced-apartments model that he feels inhabits a niche between Airbnb and the hotel spaces. He also pointed to Generator as a modern operator that had positioned itself to meet a distinct and growing market segment.

“We’ve been labelled a disruptor, and perhaps we are,” acknowledged Korallus. “We certainly aspire to be a lifestyle brand. Generator operates in the shared accommodation space and has revolutionised what has long been considered a drab segment.

“We compete with a lot of sectors, but it’s the first time in my career I’ve been able to say we don’t have a direct competitor. The sweet spot for us is that we really hit the nail on the head in terms of satisfying the younger generation.”

Changing rooms

Through working with the more established brands such as Hilton, Holiday Inn, Mercure and Ibis, an argument could be made for Bailey representing the more traditional arm of the hotel industry on the panel, but SHG had not been immune to the winds of change.

“We dabbled with Airbnb and put a property out there, but decided that, ultimately, it wasn’t the right way to go,” he revealed. “This doesn’t mean it won’t be in the future; there is certainly a rising market.”

At the same time, Bailey has been working in the unbranded boutique and lifestyle space, seeing whether SHG might develop a brand of its own, and believes the traditional hotelier is increasingly rare within the contemporary hotel market, even among the large international chains.

“They’re a dying breed, and it’s a long time since I came across somebody in a pinstriped three-piece presenting me with a leather-bound menu,” he laughed. “Almost all hotels are changing the way they work.”

All three agreed that the lifestyle space and a general move away from formality and cookie-cutter concepts towards the experiential had transformed the manner in which staffing must be managed. Korallus pointed out that the average age of guest and employee at a Generator property was the same: 24. “If you walk into one of our hostels, you cannot tell the difference between the two,” he said.

“They socialise and engage in a way that would never be allowed in a traditional hotel. Our labour turnover is around 50%, and we consider that a good thing: a lot of our staff are also travelling, spending a few months in the city. At the same time, we also want super-local people who can tell the stories of a destination and really give you that DNA.”

Sarasola, who bases the designs of each of his hotels around the tastes and lifestyle of an imaginary local resident, also believes that staff must be closer to the client than ever before. “When I talk to hoteliers, one of the first questions I ask is whether their people have slept at their hotel,” he explained. “If not, how can you relate to the client?

“Before I open any new property, my entire staff stays there. We take notes, and over breakfast the following morning I’ll ask questions and lead discussions.”

For all the talk of the human element, we also live in an age of big data, performance metrics and KPIs. How conveniently does that marry with the desire to give staff more autonomy? “There’s a legacy of bureaucracy that the industry must deal with – processes, forms and, frankly, BS – that is often completely irrelevant,” Korallus said. “The industry is full of great hoteliers who have the backing of big brands with big systems and big manuals, analytics and data. We don’t have any of that, so when they land with us, they wonder what planet they’re on.”

Bailey does not always have the freedom to reject such tools out of hand, but believes it’s not the data itself that’s the issue, more what numbers you choose to listen to. “Brands can measure everything, but a huge amount of that data is unreadable. We’re in danger of making spreadsheets in order to make spreadsheets. What you’re looking for is the stuff you can really drill down into without getting bogged down. What ultimately matters is the customer satisfaction metric: what’s the return rate?”

Going on instinct

Sarasola, a former equestrian who represented Spain at three Olympic Games, clearly relishes his outsider status and seemingly puts as much weight in intuition as pure numbers. “I’m currently opening hotels in Istanbul, we’re closing a deal in Paris right now, so imagine how intelligent I must be,” he quipped. “The numbers might not look so good right now, but you have to take a longer view. I want to be in those markets, whatever the numbers say. We have 23 hotels open now, with another seven opening in the next 12 months. I’m the one who goes out there, looks at properties and makes the ultimate decision. Of course the numbers matter, but you must also trust your instincts.”

While access to metrics can offer a greater sense of control, in other areas a greater degree of autonomy must be ceded to one’s clients. Nowhere is that more true than in the marketing and social media space.

“Our marketing is 80–90% consumer-generated,” Korallus revealed. “We don’t have control any more – nobody does. I recently commissioned a video for about £75,000. We have a group of four kids, going around our system, making films that generate more views than anything we’ve ever paid for. They’re free to do whatever they want. Social media is incredibly powerful and video is taking over, dominating what we do. It’s very fluid and difficult to manage.”

Bailey agreed that tech platforms were transforming the manner in which stays were chosen, booked and managed at an unprecedented rate. “Digital personalisation, putting the consumer in total control, is the future,” he said. “Hotels should be bidding for your business, rather than the guest having to trawl through page upon page of properties.”

As the conversation drew to a close, it felt as though we were re-entering the realms of uncertainty. However, even as everything seems to be in flux, some truths remain absolute. “We’ve witnessed recession and gone through hard times,” Sarasola acknowledged. “People may not change their car or buy a new suit, but what we’ve seen is that they’ll still take a few days’ vacation. That will not change.”