On 2-4 March 2015, over 2,000 delegates from across 70 countries gathered at the Hotel InterContinental Berlin for this year’s International Hotel Investment Forum (IHIF.) Top of the agenda was how to meaningfully chart new ways forward for the hotel industry, as it begins to consolidate during a brightening economic outlook. Yet, amid rock-bottom interest rates and commodity prices, it seems expansion in infrastructure has become the easy option. Instead, an overarching theme at the conference was not where to source finance or which group to partner with, but how hoteliers can adapt to the disruptive effect new technologies are beginning to have across the industry.
The first day of proceedings began with some good news, with managing director of Christie + Co Chris Day announcing that strengthening demand and revpar growth was continuing to indicate that, against a backdrop of falling oil prices and a rise in secondary transaction growth, "[there are] no signs that hotel transactions will lessen across the whole of 2015… hotels continue to offer great value and very solid investment returns for innovative buyers". That being said, there was considerable feeling among participants during the session ‘Riding the Investment Cycle’ that such gains should not be overstated. On the ground, "business is neither good nor bad, but challenging and unpredictable," said Dr Edward O Wojakovski of Tonstate.
Healthy discussion
One point of contention emerged over what priority online travel agency (OTA) metrics should be accorded within projections of overall growth. To Puneet Chhatwal of the Steigenberger Hotel Group, such websites certainly "add considerable value to companies of our size", but conceded that the data they provided had to be "used wisely".
Federico J González Tejera of NH Hotel Group agreed, adding that the danger lies in an overreliance on such figures. Without the solid translation of these metrics into concrete sales, Tejera suggested, page views on an OTA are merely reflective of potential revenue, and announced – not without some measure of pride – that NH continues to solicit 50% of its overall business directly.
The tone of the next session, ‘Colliding Megatrends: Innovation, Disruption and Sharing’, could not have been more contrasting. A discussion of how to adequately future-proof the hospitality industry for the next generation of discerning patrons, the emphasis was placed in particular on enhancement over addition, to "make the real more fun than the virtual" in the words of Leo Johnson, author of Turnaround Challenge: Business and the City of the Future.
According to Dr Graeme Codrington of TomorrowTodayGlobal, this meant keeping in mind the advancing age of guests – there is now an 80% chance that if you were born in the 1990s you will live through three centuries – and CEOs alike. Indeed, it had been the failure of the sector to "sort out our technology" and counter the relative technological illiteracy of its senior corporate officers that had given web-based competitors like Airbnb such a head start.
Adapt to new possibilities
A possible vision of what the industry could look like should it fail to adapt accordingly was provided by Chip Conley, Airbnb’s head of global hospitality and strategy. While investments in hotels remained a viable option, Conley asserted that this was only so long as it’s done by those entrepreneurs and companies "who are smart about investing in technology". With a business model that focused on facilitating travel rather than accommodation, Airbnb’s strategy coordinator was keen to convey the importance of injecting a healthy amount of inconsistency to a business model that relies overwhelmingly on the importance of localisation and subjective experience to its customers.
Additionally, this focus on facilitating travel over accommodation had been one of the reasons why over 20 million people called on Airbnb’s services last year. Declaring that he still felt more like a "student" than a dedicated hotelier, with a determination to "stay humble, stay curious and continue to learn", Conley’s presence at the session only reinforced the impression of Airbnb as an insurgent force daring to shake up an industry that, at least according to a report published that day by Grant Thornton, has found itself lagging behind most others in prioritising the ‘sharing economy’.
Awards season
The highlight of the second day’s proceedings came with the presentation of IHIF’s Lifetime Achievement Award to Barry Sternlicht, chairman and CEO of Starwood Capital Group. Contemplating a career that, over the past 23 years, has seen SCG expand to employ 1,050 staff and amass assets valued in excess of $38 billion, Sternlicht confessed that it had been his close working relationship with customers that had prompted him to fall in love with the hotel industry.
"There is creativity and it’s a team effort, and you are always trying to surprise the guests. At the end of the day, it’s all about the people," Sternlicht said before adding that he felt especially lucky to work in an industry increasingly populated by dynamic young innovators, stressing the newfound potential for hoteliers in beginning to target specific demographics as a route towards further growth.
Similar themes were in evidence during the presentation of the Young Leader Award to Greg Bows, founder and managing director of the volunteering organisation African Impact. In a field described by the president of the International Society of Hospitality Consultants as "nothing short of spectacular", Bows’ contribution was hailed by his sponsor as reflective of "someone who provides truly unique and mind-blowing experiences" across the developing world. Upon receiving the award, Bows went on to say that, "aside from the personal honour, this award is an important recognition of the volunteer travel industry. In building African Impact over the past decade and helping shape responsible tourism through this, I am confident in the power that volunteer travel can have in generating positive change globally. To be acknowledged by an industry forum as influential as IHIF is hugely gratifying and very exciting."
To boldly go
Expansion into new frontiers remained a theme in the popular ‘CEOs Panel’ later that morning. All participants in the discussion agreed that lower interest rates and oil prices looked set to make 2015 a good year for the industry globally. Yet, amid several announcements by the likes of Qbic Hotels, EHL and Accor of new construction programmes and partnership agreements across Europe and China, Gerald Lawless of Jumeirah Group was keen to point out that not all growth had to come in bricks and mortar. While Jumeirah is now set to expand from 82,000 to 150,000 keys on an average rate of $600 a room, this was going to be matched by a renewed focus on converting the ten million hits on the company’s website into the maximum number of room bookings. Plainly, Lawless said, "If technology is not helping to personalise the customer experience, it is not working."
Sébastian Bazin of Accor, meanwhile, was keen to point out the opportunities his company was exploiting by aggressively expanding across China. Partnering up with local operators Huazhu and China Lodging would, he said, allow Accor to exploit the rising demand for rooms on the part of an increasingly affluent middle class, and demonstrate that interested Western parties needn’t begin building a presence in the country’s market from scratch
"I don’t believe in competing with the Chinese operators. You need to be there, you need to be visible, so the decision is to partner – then you must decide who to partner with," he said.
However, for the other participants, another possible new model, governed by the primacy of technology in leading guest experiences, was more convincing. Commenting on the most striking champion of this model, Stephen P Joyce of Choice Hotels International said that the appeal of Airbnb to millenials "is something the hotel business should be looking at as it is very relevant for our customer set". This sentiment was echoed by Arne M Sorenson of Marriott, who said that his company’s move to include free Wi-Fi as standard in all of its hotels was positive proof of its priority to giving the customer realistic value for money.
With the final day closing with a range of ‘In the Round’ sessions on specialist subject areas and regional hospitality trends, the overriding message from the conference was one was of an industry that continues to go from strength to strength. Not only are sales healthier than they’ve been in a long while, but there’s a growing willingness in the sector to remedy structural weaknesses in performance amid an increasingly diverse sales environment. While this means that the majority of mainstream hoteliers do not need to throw caution to the wind just yet, the impact of new technology – existing and potential – remains relatively unpredictable.
Next year’s Hotel Investment Forum will be taking place 7-9 March 2016 at the same venue. Assessing whether the industry is beginning to adapt to evolving consumer demands, particularly those from guests well versed in how new technology may enhance their hospitality experience, will undoubtedly be one of the issues discussed next time around.
