What a difference a year makes. In November 2016, Deloitte’s European Hotel Investment Conference (EHIC) kicked off on the morning following Donald Trump’s election to the US presidency. Delegates seemed almost shell-shocked; blearyeyed from a night spent watching one of the most surprising political events of our lifetime unfold.
The US’s first hotelier president was referenced time and again, but it felt as though nobody knew quite how to react. Hotel leaders have had to learn to expect the unexpected over the years, but putting proceedings of the preceding evening into any sort of context so soon after the event proved difficult for even the most seasoned executives.
Fast forward to the morning of 8 November 2017. Upon entering The Dorchester, a number of familiar faces were instantly recognisable, though looking somewhat fresher than 12 months prior. The world hadn’t ended – in fact, the European and US markets were booming – and the networking ahead of the first session of the day was a little less one-note.
Global concerns
However, success can breed its own form of uncertainty, as alluded to through the title of this year’s event, ‘Heading into thin air?’ “Many of you have raised concerns as to where we are in the cycle,” acknowledged Andreas Scriven, head of hospitality and leisure at Deloitte and making his return to the firm after ten years away. “To help us make sense of the economy, the market and the outlook, we have again assembled a superb group of speakers, including the CEOs of both global hotel operators and investors, a great mix of small and innovative brands, and the established heavyweight – and, of course, Roger Bootle.”
The latter has become something of a cult superstar over the years at EHIC – indeed, he was one of the few attendees in 2016 willing to dismiss the likelihood of Trump making any great difference to general market performance. The economist returned to the subject of the US and Trump this year, as well as spending time focusing upon the global recovery and future risks; economic recovery and political risk in the eurozone; and the UK and Brexit.
“Overall, I’m pretty optimistic about the world economy; the US, China, it all looks okay to me, at least in the short term,” said Bootle. “Clearly, the eurozone is performing well and that’s going to continue for quite a while, which is good for them and for us over here in London.
“I’m optimistic about the UK and we’ll see a surge in UK-led exports and the squeeze on UK consumers should soon end. Of course, there’s doubt about if Brexit is even going to happen, but, if it does, I’m sure we’re going to be fine.
“I’m less confident actually about the political future of the EU, which I think faces some very serious challenges. In terms of monetary policy, we’re entering a very different world to the one we’ve inhabited in the past few years.”
Bootle was followed onto the stage by Robin Rossmann, managing director of STR, for a more industry-specific performance review. “There’s huge reason to be optimistic about European performance overall, despite all the challenges faced we’ve seen occupancies at an all-time high, rising above recession, terrorist attacks, increased supply and private rentals
“UK hotels did benefit from sterling devaluation as a result of Brexit, but expect slower RevPAR growth next year and increased cost pressure, “ he said. “We’ve seen cities that have been the subject of terrorist attack show great resilience. Mediterranean city performances have soared since 2014 and the region’s resort market has done even better.
“The fundamentals of our industry are incredibly strong. People are focused on experiences and they want to travel more. While the economy remains stable, I expect it to continue outperforming the rest of the economy as a whole.”
Optimism prevails
This sense of optimism was pervasive throughout the day’s proceedings and certainly in evidence during ‘The View from the Top’, always one of the highlights of this annual event. Unusually, there were two hospitality leaders in the hot seat this year, Olivier Chavy, CEO of Mövenpick Hotels & Resorts, and Pandox CEO Andres Nissen.
“Fundamentals are good,” replied the latter, when asked by Scriven about the state of the market. “Economic growth is there. The middle classes are becoming richer, and are travelling more. That’s positive. In that perspective, I don’t think we should compare to 2008. Because the economic circumstances [have changed].
“On the other hand, we know historically that the economy will go down. We’ve had growth for so many years, something will change. But I think for there to be a dramatic change in the market today, there’ll need to be some sort of recession, or something terrible. Of course, there’s de-acceleration, but there’s still growth in most of the market – especially if we’re talking about Europe and North America.”
“I’m concerned about the geopolitical situation in the Middle East,” acknowledged Chavy. “We’re obviously very exposed in the GCC; it’s an evolving story in Saudi and Qatar, where we have 12 properties.
“It’s also a concern because [while] inventory is still growing in Dubai and the UAE, and arrivals are growing too, the number one growth in Dubai this year are Chinese and Russians, [but] the Chinese have a lower buying power. So I’m less bullish about the Middle East, for sure.”
Having discussed various regional outlooks, with particular time spent on North African recovery, conversation soon turned to where the next opportunities might lie. “When I was starting in this industry over 30 years ago, it was small and fragmented,” Nissen reminisced. “Today, it’s the fourth largest in the world, standing for 10% of global GDP. So, we need to focus on the future [based on] the drivers we see today, rather than on how things were in the past.
“What do we see? Scandinavia is always very expensive, so it’s easier to get out of Scandinavia. I see opportunities across Europe: in Germany, the Netherlands and the UK.
“Also, hopefully, Spain; we’re not there yet, so maybe we’ve missed the train. I also see a lot of opportunities in Canada: there’s a very strong US economy, and a favourable currency, which drives a lot of traffic into the country.”
The state we’re in
There was more talk on various growth opportunities during the ‘State of the Industry’ roundtable, featuring Coley Brenan of KSL Capital Partners, IHG’s European COO Stephen McCall and Zoku co-founder Hans Meyer. Much of the conversation surrounded the increased prevalence of specialist brands, with Meyer’s Zoku a recent example.
“It’s a new category,” he explained. “What we tried to do is move away from the old hotel idea, and distinguish ourselves from other players in the industry. What I feel like is that we’re moving from a hotel mass market to a mass of niches. If you find the right niche, the right target audience, and you base the entire experience around that particular target, you can be extremely successful.”
“You’ve got to be very wary of categories and definitions,” cautioned McCall. “Lifestyle/boutique is the largest growing segment, but if you ask people to be specific about what a lifestyle hotel is – as distinct from a boutique hotel – or even what ‘boutique’ actually stands for, you’re going to get a range of different answers. It’s more than just design, which was one of the characteristics of lifestyle hotels a couple of years ago. It’s now [more] careful, thoughtful design, much more intelligent in terms of what the guest is looking for.
“That whole journey starts at the edges. There’s definitely a place where you see mainstream brands evolving as they take on some of the characteristics of some of the more innovative brands on the outside, which then filter through to the mainstream. That sort of thoughtful evolution is what we’re trying to do.”
Delegates got to hear from some of those operators on the edges during the ‘Revolutionising Hospitality’ session, which featured Florian Kollenz of 25hurs Hotels, CEO of Equinox Hotels Christopher Norton, and The Student Hotel Group founder Charlie MacGregor, as well as Accor’s SVP for development in Europe Christian Giraud.
The final panels of the day were given over to technology, with Jonathan Witter, CCO of Hilton, delivering a presentation on digital trends of tomorrow, before roundtables on ‘Opportunities through Technology’ and ‘Owning the Customer’.
“It’s all about making sure you have the infrastructure in place,” said Geraldine Calpin, CMO at Hilton, during the second of those three sessions – she was joined on stage by representatives from Starwood Capital, Google and Cambridge Analytica.
“Ten years ago, we introduced a single property management system across our estate, which has since allowed us to do digital check-in, mobile door keys and various things that some of our competitors are unable to do.
“We can build upon that plumbing. Have we got all the plumbing in place? I don’t know. But we’ve certainly laid the [digital] infrastructure, which allows us to do things now that wouldn’t have been thinkable ten years ago.”
Question of ownership
The discussion around owning the customer looked at how one could use the sheer amount of information at a hotelier’s disposal to increase business and loyalty, though not all contributors fully accepted the premise.
“As a customer, I don’t want to be owned by anyone,” argued Osama Hirzalla, vice-president for European sales and distribution at Marriott International. “Brands are really trying to deliver a personal experience, and deliver a specific outcome that turns customers into a specific advocate for that brand.
“By doing so, in a compelling way, I believe you start to get to the ‘sweet spot’ where your customers prefer your brand over any other brand. It’s really around advocacy and loyalty, and it’s not about the notion of ‘I own a customer’ or ‘I own that individual’.” “I find the obsession that our industry has developed around these ideas of ownership incredibly bizarre,” agreed Carmen Hui, commercial director at Booking.com. “Have you ever considered yourself, at any point in time, to be owned by a hotel, brand or any other intermediary?
“New technology, the evolution of these very smart devices, is going to make this quest even more elusive because more control will be in the individual’s hands.
In my mind, we’re much better off dropping this obsession and going back to basics, stimulating and attracting customers in a way that helps you optimise returns on investments.”
European Hotel Investment Survey
Each year, attendees of the Deloitte European Hotel Investment Conference take part in an industry survey that focuses on the UK and wider European market.
Focus on Europe
Amsterdam retained its position as the most attractive hotel investment destination in Europe, with almost a third (32%) of respondents ranking the Dutch capital in the top spot.
Industry concerns
More than two thirds (67%) of hotel investors said that terrorism was the main risk to the European hotel industry over the next five years, followed by lack of economic growth (50%) and black or grey swans (28%).
Expectations for growth
According to the survey, hotel investors are broadly optimistic about 2018 growth prospects in the Regional UK hotel market, with the majority of respondents expecting RevPAR growth to be between 1-3%.
Millennials to drive business
Looking to wider industry trends, almost a third (32%) of hotel investors expected millennials to drive business for the hotel and leisure sector over the next five years.
