New Adventures in Hospitality

7th July 2010 (Last Updated July 7th, 2010 18:30)

EHMA president Peter Bierwirth discusses the latest trends and developments facing the hospitality industry and how to maximise the opportunities they offer.

New Adventures in Hospitality

Aside from the challenges of daily operations, hotelkeepers must also keep abreast of the latest hospitality developments. One of the most recent and high-profile trends has been the ‘staycation’, where people choose to take their holiday at home instead of travelling abroad. The staycation has not threatened upmarket hotels in central Europe, but the trend is a concern for holiday regions around the Mediterranean and will further trouble the ailing Spanish and Greek economies. Recent statistics indicate that 30% of German holidaymakers plan to spend their holiday this year in ‘Balkonia’ – on their private balcony.

In contrast, an increasing number of tourists are coming from China and India, where middle-class travellers are driving demand for holidays, particularly to Europe’s main tourist destinations. Another key demographic is European and American retirees, who have significant amounts of disposable income and leisure time. For hoteliers, they present a great customer base, especially when factoring in their growing familiarity with the internet and social media and the opportunities they offer.

Stormy waters

Environmental catastrophes such as the oil spill in the Gulf of Mexico will further sensitise people. Therefore, hotels that can show they care about the environment will win the favour of their guests. Sustainability will also remain a trend for years to come.

In conjunction with environmental disasters, global poverty and perceived injustice will further provoke violence and terror.

Because hotels are soft targets, crisis management and training responsible employees will be a major safety benefit.

Facts and figures

“Recent statistics indicate that 30% of German holidaymakers plan to spend their holiday this year in ‘Balkonia’ – on their private balcony.”

The hotel sector has a staff turnover rate of 30% – 50% a year. This is an alarming rate for a market dependent on people willing to work in the service industry. With ever-rising personnel costs and a decreasing labour pool of younger workers, standards of service may be affected if suitable staff cannot be recruited. However, creative remuneration packages, as well as professional career planning, could retain the best talent.

Another challenge for experienced hoteliers comes from finance companies, hedge funds and other kinds of professional investors. This is nothing new, especially for major hotel players. While deluxe hotels, particularly in Mediterranean countries and traditional European tourist locations, have generally been spared scrutiny from most institutional investors, the investment sector has identified the hotel industry as an alternative investment field and expects the same return as other assets.

For ordinary asset managers and hotel general managers alike, cyclical occupancy levels, turnover schemes and profit curves are difficult and frustrating to understand. A better understanding of the needs of both sides of the counter is required.

Financial investors and their asset managers will be more successful if they understand the intricacies of hotel keeping, where investments may pay off only in the long run and necessary expenses may show negative results immediately. Not every decision can be mathematically proven.

Conversely, experienced hoteliers must understand that the time of hotel investments made by people that don’t necessarily need a decent payback is over. Investors need profits and calculable, predictable figures. In this regard, IT systems are a blessing and a curse, allowing up-to-the-minute data and the benchmarking of countries, segments and target groups. However, it is sometimes difficult, if not impossible, to explain why a hotel in a German city is not making the same profit as an equivalent hotel in Italy.

Only mutual education, open discussion, workshops and other forums chaired by experienced hoteliers, bankers and investors will close the gap between hoteliers and asset managers. This will finally lead to better profits through motivated hotel staff, whose first representative is always the general manager. EHMA will contribute to promoting this understanding through education and information as well as active participation in open discussions.