MANCHESTER, England—Europe’s top hotel-chain CEOs remain energized about the United Kingdom’s resiliency, albeit with a few small worries, but the same cannot be uniformly said about the eurozone and other mainland European markets.
That was the feeling from the opening panel titled “Top dogs talk hotels” at 2014’s two-day Annual Hotel Conference that began Wednesday in Manchester, England.
“We’ve seen steady and consistent growth in the U.K., but our U.S. headquarters certainly remains somewhat worried about what is going on in the rest of Europe,” said Michael Wale, president, Europe, Africa and Middle East, Starwood Hotels & Resorts Worldwide.
“The rest of Europe is a little sluggish, although Netherlands and Germany is doing well and Italy and Spain are picking up,” said Steven Daines, CEO, Hotel Services, North Europe and Russia, Accor, the other chain represented on the panel that has a large footprint.
“I see no real threat to U.K. growth,” Daines said.
Such resiliency has shone rays of sunshine across other sector operators.
Shane Harris, CEO of Jupiter Hotels, which has midscale properties scattered across 32 U.K. markets, said he saw double-digit growth in 2013 and 2014, and his sector demonstrates great opportunity for private and institutional investors.
“Our challenge is how to get the budget customer back into midscale,” he said.
For the other smaller player, Tony Spencer, managing director of Shire Hotels, profitability is still under pressure.
“Rates are improving nicely, but they are not quite where they were,” Spencer added, referring to how things were pre-2008.
The company, which has six 4-star hotels, all in the U.K., is looking for one to two more over the next two to three years, with one being inside London’s orbital M25 freeway.
Clouds present?
Northern Europeans tend not to get too excited even when they might have reason to be exactly that, panelists said.
“One challenge in the U.K. regions is to regain meetings and conventions business. Average rates per delegate are down in real times 4%, but corporates are coming back, which is encouraging and key,” Jupiter Hotels’ Harris said.
Spencer agreed, saying that although day meetings are largely back, residential conferences are not.
Although not welcoming recession, Wale was forthright in saying that “every recession sharpens (the hotel industry’s) wits and bears new fruit.”
“The macroeconomic and geopolitical problems that seem to come up with every week are worrying but also must be analyzed rationally. Ebola has killed more than 4,000, which is terrible, but malaria has killed far, far more,” Wale said.
The challenges and risks to this experienced panel remained ultimately firmly in the operations camp, including problems in attracting top personnel, making sure those employees are multi-trained and encouraging banks to fund capital expenditures, not just new builds.
In-house challenges
Panelists said that the main in-house challenge regards building the correct infrastructure around product delivery in terms of operations and distributions. There is no need to be scared of the online travel agencies, for hoteliers have learned a thing or two, they said.
“OTA business is the cream at the top. You can switch them on and off, but if you switch them off too often you cannibalize yourself. That said, 80% of my business—the weddings, the corporate business—I have to go and get myself. It remains in my hands,” Harris said.
“There has been something like a 500% increase in mobile bookings, which is huge, and that requires a lot of changes on the operations side. Namely, how to merge technology with operations,” Wale added.
Panelists were united in saying that technology provides guests with a welcome choice as to what interaction they have with the hotel as long as it enhances the experience and does not take the place of the human touch.
“Technology ultimately allows our guests to free up their time,” Daines said, adding Accor’s new deputy CEO, who joined in January, came from the technology sector.
Harris said the hotel industry needs to do far more in terms of innovation, be that in technology or other hotel provision.
“It is shocking how far the hotel industry is behind. When I started, hotels were where you went for fine dining, but we are being killed by the gastro-pubs, and there has been no innovation in (food and beverage) since. Not to be too negative, but any innovation we’ve seen has all been back of house,” Harris said.
UK-specific worries
While things are looking rosier in the U.K. than other parts of Europe, panelists still see things to be concerned about that are specific to the region. The looming general election in 2015 was among them, especially in light of a recent by-election win by the United Kingdom Independence Party, which champions an end to immigration and the leaving of the European Union.
“If we had to rely on employees from solely within the U.K., we’d be in trouble,” said Starwood Hotels’ Wale.
A show of hands among AHC attendees showed that all but one wished to remain inside the European Union.
Shire Hotels’ Spencer voiced worry about the power of U.K. utility companies, a huge part of the hospitality sector’s expenses, and while agreeing with the need to reduce value-added taxes (sales taxes) on tourism and hotels, he said he is cynical in that he believes it would just come back in the form of another tax.
Reducing U.K. VAT was an issue uniting the panelist top dogs.
“A 5% reduction in VAT will lead to the creation of 100,000 U.K. jobs and result greatly in U.K. gross domestic product. Everyone should get behind it, and it also would level the playing field in Europe,” Wale said.
Panel moderator Michael Hirst, consultant, CBRE Hotels, who has been instrumental in lobbying the government in this respect, said that the reduction would be a “£1.5 billion ($2.4 billion) cost to the government (in reduced tax income) in the first year but be fiscally neutral over five years. But both the Conservatives and Labour (political parties) are dead set against it.”
“As an industry, we need to stand up for what we do. We see the pride we have among ourselves but need to far better promote that outside of the sector,” Daines added.