LONDON—Despite an array of challenges, positivity remains the overriding factor allowing hoteliers to forge ahead, according to sources.
Panelists on “The view from the boardroom” session at the 2016 Hotel Investment in Europe Conference said it is not blind hope, but a state of affairs emanating from industry fundamentals.
Fredrik Korallus, CEO of Generator Hostels, said he was not sure the current peak would ever come.
“There is no peak. Look at the population growth of the planet,” Korallus said, whose Generator chain opened a property in Rome in August.
He said his Amsterdam asset, which opened in March, had been running at “95% occupancy since we opened.”
Kike Sarasola, president and founder of Madrid-based Room Mate Hotels, agreed, but added the industry still requires more innovation and learning.
“Look at Spain. Tourism is booming, but we need to diversify further,” Sarasola said. “In my portfolio, we have rooms, dorms, suites and residences. That’s the future, and if you have not seen it now, you will not see it in the future. We do have to wake up.”
He added it’s not enough to just sit back and enjoy the good times.
“We are living during a great time, with fantastic rates, but we are learning nothing, doing nothing and not taking advantage to upgrade our hotels,” Sarasola said.
He said executives need to think about what consumers want and need.
“Think more of the client. I am obsessed with the client,” Sarasola said “I have seen Generator come and Airbnb come, and the whole industry has to see these not as threats, but as advantages.”
Stuart Bailey, CEO of Splendid Hospitality Group, which designs, builds and operates luxury hotels in the United Kingdom, said luxury has much to learn from the industry’s other offerings.
“There are enough people on the planet to keep luxury alive, but you have to take these emerging segments seriously,” Bailey said.
The panelists said those who have ascertained what the customer wanted, executed that, took time asset by asset to create a strong overall portfolio, and believed and nurtured its staff were most poised for success.
“Getting the customer is one thing, retaining them is another,” Bailey said. “It’s not hospitality, it’s people.”
Investing in people
The hostel, budget and economy sectors see staff as the engine fueling growth, panelists said.
Korallus aimed at hiring “extremely local and mobile” employees, even if annual staff turnover is north of 50%.
“We consider that a good thing,” Korallus said. “We want diverse staff that can tell stories, who are one with the guest. This generates the magic that is Generator.”
Sarasola said he prefers more success at retention, with turnover at 4% per annum.
“The best way of visiting a city is to visit a friend,” Sarasola said.
Korallus said he is fine with departing staff ending up at another hotel, but recruiting GMs is the most significant challenge.
“We do need competitors, as we will all benefit,” he said. “We are ambitious, but GMs? It is very difficult for us, as we do not have big data, and they come to us bewildered.”
Bailey said data provided opportunities to make staffing more effective.
“Brands measure everything, but it is about taking all those numbers and data and turning it into something that helps the human element, understanding and empathy,” Bailey said. “In the U.K. we do not do much to attract hospitality—(it’s) the old cliché about are (staff) ‘of service’ or ‘in service?”
Sarasola said he and his staff often slept in their hotels to better understand them.
“On the next day, we share notes,” he said. “How many employees actually sleep in their hotels, and then they are expected to be able to tell guests about it?”
Ownership and challenges
The panelists said that only those who plan the future now will have a future.
Korallus knows Generator’s majority investor Patron Capital has a definite investment hold pattern and is actively looking to exit the hostel brand.
“Patron is a very visionary investor, taking a sector that others perhaps thought was dingy,” Korallus said. “The relationship is phenomenal and open, and there’s amazing trust.”
He noted the company is “now negotiating the first management contract.”
Sarasola’s brand is owned 70% by Room Mate itself and 30% by the Spanish fashion label Zara family.
“We have 12 hotels in operation.” Sarasola said. “All are leases, half fixed, half variable, and our next phase of expansion will be in North America.”
Panelists expressed some concerns going forward.
“I’m not worried about (the upcoming U.S. elections). We’ll leave that to others, but what keeps me awake is the legacy of the industry, the forms, the processes, etc., which are all out of date,” Korallus said. “Be good, be safe, be honest, that is it.”
Bailey said Brexit was a concern, but the U.K. remained a great place to do business.
“We did well in the U.K. with Brexit, talking ourselves into a recession. I call it ‘electile dysfunction,’” Bailey said. “We certainly need to be fit and agile for the future.”
Terrorism was the 800-pound gorilla in the room, panelists said, but there was little that could be done about the threat, at least by hoteliers.
“You should be worried, but do not let terrorism lead our businesses,” Sarasola said. “We were going to open three hotels in Istanbul, but we will now open two. We spoke to the owners, saying let’s take the hit together, but am I jumping out? No. Istanbul is a fabulous city.”