all in it TO­GETHER

Cather­ine Chetwynd finds out what in­creas­ing con­sol­i­da­tion in the ho­tel in­dus­try could mean for travel pro­grammes

The Business Travel Magazine - - Hotels -

At first glance, it would ap­pear that in­creas­ing con­sol­i­da­tion in the ho­tel in­dus­try is a bad thing for travel buy­ers, re­duc­ing com­pe­ti­tion and in­no­va­tion, and re­mov­ing any in­cen­tive for hote­liers to ne­go­ti­ate rates.

Al­though there is still talk of the po­ten­tial for fur­ther mega merg­ers, fol­low­ing Mar­riott and Star­wood's get to­gether, that is not the salient point: “More crit­i­cal is the ac­qui­si­tion of the small brands by large ho­tel com­pa­nies,” says con­sul­tant to the in­dus­try Melvin Gold.

Ex­am­ples of this in­clude IHG’S tak­ing over of Prin­ci­pal Ho­tels and Re­gent Ho­tels; Ac­cor’s pur­chase of Möven­pick, Fair­mont, Ma­mashel­ter and more; and most re­cently, Mi­nor Ho­tels' plans to take full pos­ses­sion of Spain-based NH Ho­tels.

“It does have an im­pact on com­pe­ti­tion and cre­ates chal­lenges,” says founder of Black Box Part­ner­ships, Raj Sach­dave. “There is less room for healthy, ro­bust con­ver­sa­tion about rates and it al­lows chains to be smarter about how they man­age in­ven­tory as clus­ters, de­pend­ing on whether they are in one brand or com­pet­ing brands, to give greater re­turns for the port­fo­lio.”

Sach­dave adds: “But with con­sol­i­da­tion, com­pa­nies are sell­ing off prop­er­ties so there is al­ways the op­por­tu­nity for smaller to mid-scale play­ers to bring in some re­ally nice ho­tels with good catch­ment and loy­alty, and that brings the op­por­tu­nity to in­vest in the busi­ness.”

In ad­di­tion, “Gen­er­ally, con­sol­i­da­tion im­plies less com­pe­ti­tion and higher prices but sub-brands and prop­er­ties un­der the same group um­brella still com­pete with one an­other,” says Se­nior Global Di­rec­tor of Ho­tel Sale & Strat­egy at Amer­i­can Ex­press GBT, Pauline Hous­ton. “It also means com­bined loy­alty pro­grammes and ho­tel com­pa­nies are likely to work to­wards one co­he­sive and ap­peal­ing pro­gramme.”

This al­lows trav­ellers po­ten­tially to earn more points across a wider range of ho­tels. This can boost cor­po­rate pro­grammes, with the op­por­tu­nity to mo­ti­vate trav­ellers to book and stay within a pre­ferred part­ner group, while pro­vid­ing them with ben­e­fits that im­prove their travel ex­pe­ri­ence.

Con­sol­i­da­tion also gives trav­ellers greater choice. If sev­eral com­pa­nies merge, they are pro­vid­ing a far greater di­ver­sity of brands un­der one ban­ner and pro­vided that ban­ner is the pre­ferred group in a travel pro­gramme, em­ploy­ees can pick from more styles of ac­com­mo­da­tion while on the road.

Spend­ing power Con­sol­i­da­tion of brands can mean con­sol­i­da­tion of spend for buy­ers, bring­ing more clout – al­though it can also mean they have all their eggs in one bas­ket.

“Con­sol­i­da­tion does not ham­per our abil­ity to ne­go­ti­ate dis­counts at all,” says Cor­po­rate Pur­chas­ing and Global Cat­e­gory Man­ager Travel & Mo­bil­ity for Con­ti­nen­tal Teves, Rüdi­ger Bruss.

“In Europe about half of the ho­tels are owned or man­aged by one of the brands and oth­er­wise they are lo­cal prop­er­ties. In the US it is dif­fer­ent: at an in­ter­sec­tion, on each of four cor­ners are two ho­tels of dif­fer­ent brands of the same group – but there is still com­pe­ti­tion, even more so be­cause sup­ply is so con­cen­trated.”

Bruss con­tin­ues: “You do get mo­nop­o­lies of ho­tels on oc­ca­sions, es­pe­cially in lo­ca­tions that are not in the top tier of cities such as Grimsby, where you are lucky to get a ho­tel at all. There we are faced with only one or two ho­tels but that’s be­cause we are in a lo­ca­tion which has dis­ap­point­ing sup­ply – and that is of much more con­cern than Mar­riott buy­ing Star­wood and throw­ing to­gether their port­fo­lio.”

Size mat­ters Larger ho­tel com­pa­nies will gen­er­ally have more prop­er­ties in more places, mak­ing them stronger com­peti­tors with a greater abil­ity to meet busi­ness travel de­mands in terms of ser­vice and pres­ence.

“These com­pa­nies are of­ten renowned for their con­sis­tent, re­li­able stan­dards and ef­fi­cien­cies, com­pared to bou­tique ho­tel and shar­ing econ­omy op­tions, which can be more of a gamble,” says Pauline Hous­ton.

That said, the lat­ter two cat­e­gories are be­com­ing more pop­u­lar with cor­po­rates and presenting hot com­pe­ti­tion to legacy ho­tel groups. In ad­di­tion, smaller groups are per­ceived to be able and will­ing to pro­vide a much more per­sonal ser­vice. It will be in­ter­est­ing to see whether larger com­pa­nies prove able to re­tain that cul­ture when they ac­quire smaller groups.

Their abil­ity to dis­tance them­selves from the orig­i­nal brand may play to their ad­van­tage. “Ma­mashel­ter by Ac­corho­tels and Cu­rio by Hil­ton are both up­scale ho­tel brands with a greater em­pha­sis on in­di­vid­u­al­ity within the port­fo­lio of a larger cor­po­rate ho­tel group, but they main­tain their brand­ing in or­der to dif­fer­en­ti­ate the of­fer­ing of their par­ent firm,” says Se­nior Di­rec­tor Global Lodg­ing at Egen­cia, Kevin Mauf­frey.

Mar­ket pres­ence Charles Hu­man, Man­ag­ing Di­rec­tor for HVS Hodges Ward El­liott, high­lights Rüdi­ger Bruss’s point about the Eu­ro­pean ho­tel scene: “The mar­ket re­mains very frag­mented in terms of brand­ing, man­age­ment and own­er­ship, par­tic­u­larly in Europe,” he says.

“I can­not think of any city, in Europe at least, where the Mar­riott/star­wood merger has put them in a dom­i­nant po­si­tion. The Mi­nor/nh deal is as much op­por­tunis­tic as strate­gic, with NH re­main­ing a rel­a­tively small player,” he says. “It is be­com­ing harder for big brands to ex­pand in ma­ture mar­kets. They come at a sig­nif­i­cant cost, which is be­com­ing harder for own­ers to jus­tify.”

It is also worth not­ing that the ex­pan­sion of the big ho­tel groups is fa­cil­i­tated through ac­qui­si­tion, man­age­ment con­tract and fran­chise agree­ment, so al­though they all sail un­der one badge, they are still com­pet­ing against each other for mar­ket share.

Steve Fitz-costa, Di­rec­tor of Sales – Busi­ness Travel, for Ac­corho­tels, sees the sta­tus quo as an op­por­tu­nity for travel buy­ers. “The de­vel­op­ment of brand port­fo­lios and in­ven­tory bring with them more struc­ture and choice to the mar­ket­place. In turn the travel buyer has a much stronger, clearer voice when it comes to ne­go­ti­at­ing rates,” he says.

“How­ever it is im­por­tant that buy­ers and ac­count man­agers work with ho­tels to help guide them through the sourc­ing process and for ho­tels to un­der­stand the buyer’s re­quire­ments. Ho­tel groups need to be aware of be­ing too ag­gres­sive in the mar­ket­place – when there is a high level of com­pe­ti­tion from ri­val own­ers and brands, this also works to keep a ceil­ing on price.

“Each brand within Ac­corho­tels has a unique propo­si­tion de­vel­oped to meet the spe­cific needs of that mar­ket,” says FitzCosta. “The re­cent ac­qui­si­tions by Ac­corho­tels have been care­fully con­sid­ered to com­ple­ment rather than com­pete with ex­ist­ing brands and ge­o­graphic ter­ri­to­ries.”

Whether you see ho­tel group con­sol­i­da­tion as a cup that is half empty or half full, it does not nec­es­sar­ily rep­re­sent the death of com­pe­ti­tion, as those with tabloid ten­den­cies might have you be­lieve.

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