The view from the top at HICAP Update

Piers Brown By Piers Brown
Uploaded 23 March 2015

Boutique Hotel News was media partner for Hotel Investment Conference Asia Pacific Update 2015 hosted in Singapore. We caught up on all the hotel news and insight from leading owners and operating brands in the region.

The View From The Top - Regional Leaders Speak Out
Moderator: Tony Ryan, principal, Ryan Lawyers
Panellists:
Thorsten Kirschke, president, Asia Pacific, Carlson Rezidor Hotel Group
Barry Robinson, president and MD South East Asia and Pacific Rim, Wyndham Hotel Group
Bernold Schroeder, CEO, Pan Pacific Hotels Group
Alan Watts, COO, Asia Middle East and Africa, IHG

Conversation started with a focus on each respective panellists' lifestyle brand portfolio and recent activity.

Kirschke said his company launched the Corvus Collection and Radisson Red brands in 2014, and commented that there are no plans for more and "too many brands is not a good idea - one has to be careful of cannibalisation."

"Knight and Dream are gone, and we have added Dolce Hotels and Resorts in Europe," said Robinson, citing a slight thinning out of the hotel brands within the Wyndham Hotel portfolio - "our Trypp brand is about being flexible (to owner and guest requirements) in the lifestyle hotel sector."

Watts, already heavily in the lifestyle hotel sector with Hotel Indigo and the recent acquistion of Kimpton Hotels, said there are no plans to roll out the Even fitness and lifestyle brand from North America and "we have two Hualuxe hotels open in China with around 16 in the pipeline."

"Our new North American boutique hotel brand - Kimpton Hotels plays above Hotel Indigo, and there's plenty of white space to trade in for those two hundred hotels - it's early days to talk expansion outside the United States. Kimpton do social media and relationships best, stays are more leisure based and we're learning."

What is a lifestyle hotel?
Kirschke, perhaps unsurprisingly felt 'lifestyle' was an overused term and is simply about the hotel industry rejuvenating itself. "The demographics of the travelling world population are getting considerably longer, and a lifestyle focus is a necessary consequence of staying in business. Preferences change, the way hotels are used is changing, life's changing, the way we consume digital media requires a different formula to address traveller needs. We need to grow with one another and expand the portfolio and drive shareholder value and customer perception," he said.

Watts agreed: "There's a new behaviour of travellers, it's a 'mindstyle'. This places a new financial formula on hotel development - do hotels require doormen, twenty four hour room service, a pool? this is rounded in reality now."

Distribution, OTAs and revenue management
"Today distribution has changed everything'" said Schroeder.

Ryan, having recently stayed at Mama Shelter, asked the panelists to comment on whether this hotel brand was scalable and can make money. Robinson said sure, it's about location, location, location. "The challenge is the cost of distribution," said Watts and whether Ryan would have actually found it if he wasn't in the hotel industry. "There's definitely space in the boutique and lifestyle hotel sector - it's a social media lead hotel."

Having recently attended a conference where OTAs were described as "frenemies", Ryan asked whether hotel brands should embrace or ignore OTAs, using the comparison of buying hotel rooms online to buying shoes online - "it doesn't matter about guest experience".

"The consumer is still making the decision," said Watt, which prompted Ryan to share some consumer research interviews which highlighted that boutique hotel brand recollection is generally quite low. "Guests don't remember the boutique hotel they last stayed in, but they remember the OTA they booked their stay with."

"Revenue management is so sophisticated you can manage OTAs - the next threat to us hoteliers is their loyalty programs," said Schroeder. The conversation moved onto managing OTAs and inventory, with Kirshke highlighting that in some locations a hotel may have relationships with over one hundred OTAs, and is busy loading rates all day long.

"If a hotelier tells you he has a great revenue manager who changes rates twice a day, you're missing out. You can't manage OTAs on property, you're changing rates by the second."

"The distribution question is a massive topic of scale - without it you're not really getting anywhere," said Watt, stating seven from 10 of IHG's guests book through their distribution channels.

The general view was that the last planned channel of distribution should be derived from direct bookings, which Schroeder said was 35 per cent for Pan Pacific's hotels. Robinson stating it was less for Wyndham based on the amount of brands being managed within the portfolio, and Kirschke refusing to offer a figure.

Kirschke reminisced: "It's a maturing relationship and depends how you view the OTA in general. We used to ask for more business from them, based on location, brand and product. I think OTAs are cooperating more with hotels. They are a complementary channel, not your primary bed and butter." 

 "It's like everybody wants a piece of the action (with a product) that's scalable - take Apple for instance, referring to their likely imminent future entry into the OTA sector," said Ryan.

"Expedia creates first-time users - that's when we need to focus on 'stickiness' of customers, we are selling nothing else other than emotion," said Kirschke. Schroeder didn't seem concerned about OTA commission rates, provided they were managed: " Pan Pacific negotiates OTA hotel deals as a group, commissions are not too bad - travel agents used to charge around 20 per cent if you added up all the fees in the sales process."

Impact of Airbnb, vacation rental and alternative accommodations
The panel's general view was that there is a lot to learn from the likes of Airbnb. Kirschke highlighted that room sharing and renting is nothing new, and the concept has been very well relabelled using a digital experience platform: "It doesn't mean they weren't (the concept) around 20 years ago, and the same issues apply today with Airbnb (safety, security) - I don't think it's a threat, they only address around a third of Carlsson Rezidor's business," he said.

Robinson took the opposite view, believing Airbnb and similar outfits are "competitors to Wyndham's rental brands like English Country Cottages, which is branded and a controlled environment - you know what you're getting."

With Airbnb and other vacation rental websites, "there's a whole lot of fraud going on, people turn up and the property's not there for instance." Watts' view was that the vacation rental sector drives more inventory in the market: "It's a facility, probably a different customer type. That tier of the market has always been there, these aren't backpackers - they pay $250 SGP."

Ryan asked whether a hotelier should consider refining one's product due to Airbnb and short term rental competition? Kirschke responded saying he felt it had lead to a necessary "rejuvenation of traditional property" and would force hoteliers to think differently and focus on "authenticity, individualisation and to dedramatise the experience - the hotel industry has been doing this for decades - I almost feel like hoteliers are fighting insanity as we're not trying to do the same over and over again. Luxury experence and perception has totally changed, and I think we do a relatively good job within geographic nuances - take Radisson Red in India for example"

"Traditional hotels are not being built any more. There's growth in the condohotel sector and longer stays - Airbnb is a great business model. Tourism (APAC) is growing at 20 per cent more than country GDP growth. Low cost airline carriers, cruise ships and more casinos is creating much more demand, the pie is getting bigger and bigger," said Ryan

Chinese guest opportunities
Ryan highlighted that Boeing had placed a mega order of 39,000 new planes to be supplied over the next few years, with around 42 per cent destined for Asia: "Of these 85 per cent are the narrow type which are supplied to the budget airlines - that's a whole lot of growth expected."

The panel was asked to comment on Accor's recent hotel megadeal with Huazhu (China Lodging) totalling over 2,000 hotels in China making it the strongest pipeline in the country.

"It's like peeing in your pants at winter time - good for the first 30 secs," said Kirschke, to hoots of laughter from the audience."You need scale to promote scale - it's a smart deal and good luck to Accor. There is no place you wanna be other than Asia - the most exciting place on the planet."

Ryan felt there could be wins for Accor attracting the Chinese guest using its global hotel brand footprint and the loyalty card to drive hotel stays - "there's 18 million Accor loyalty members, and Huazhu has 32 million - seems a great opportunity to drive awareness of Accor brands, not just in China, but as those Huazhu loyalty card customers travel overseas and become more accustomed to Accor's portfolio. There are 67 million Chinese households ready to travel, but less than two per cent have passports. Visa restrictions are easing as well, the Chinese have access to 89 countries, it used to be 40 not long ago," he said.

www.hicapconference.com

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