Yes, as there are some common themes emerging from our work as a consultant advising hotel management service providers.
Over the last 10 years, lots of efforts have been made to separate ownership from operation. Lenders and investors believe the industry structure results in more focused management, better run businesses, higher profits, and higher asset values. In our view, these outcomes will only arise if the hotel industry addresses the inputs. The reshaped 21st century hotel industry must remember that its roots are in hospitality.
We are seeing a lot of new hotel brands being rolled out by the big chains, by operators catering to particular market segments and by entrepreneurs. Creating a hotel brand is a holistic process involving setting brand standards, service standards, Standard Operating Procedures (SOPs) and design guidelines. Hotel brands need to recognise what retailers have discovered – that the mass market is gone and customers want to be treated as individuals with their own specific requirements.
The proliferation of brands in the market means more competition between branded hotel operators. Hotel owners seeking hotel management contracts or hotel franchise agreements now demand more flexibility. They want to design their own relationship with the operator/brand – not just the fee structure – but which services the operator/brand owner provides. That’s where hotel management service consultants can help. We help negotiate the right agreement between owner, operator and ‘Brandco’.
Changing needs of the Hotel Management Service
Looking back is helpful, but it doesn’t help us anticipate the future or implement processes to ensure the long-term survival of a hotel brand. To understand this, let’s remember that business economics and psychology are merging. The concept of ‘rational’ consumer behaviour is being replaced with understanding how customers/guests actually behave. Evolutionary influences mean we are more reluctant to act as ‘rational’ consumers, e.g.:-
- Over the years, the herd mentality has been shown to be useful. It’s relatively safe for me to take the family on holiday to Costa del Sol because my neighbour has been there with his family and they enjoyed the experience. Copying what other hotels do successfully means our hotel is also more successful. Copying how successful retailers sell, can help hotels be more successful in selling. Avoiding major price differentials with our competitors ensures that we both trade successfully. There are limitations and sometimes the ‘master stroke’ is to make an independent assessment of the market rather than follow-the-leader.
- It’s now widely accepted that the ‘endowment effect’ means we value objects we own more highly than similar objects we have never owned. Hoteliers will do well to remember that their target guests will almost always prefer to stay at home than in a hotel or at friends.
How often have we heard that a hotel general manager has become too proprietorial and can’t see the competitive threats because he is basking in his own achievements? How often have we seen hotel owners valuing their hotel at a multiple of X times EBITDA but turning a blind eye to the fact the one down the road was sold at a multiple of less than X?
The Evolutionary Path
Help your hotel business develop further by understanding its evolutionary path and by recognising the mechanisms and rules for its future success.
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