Lim­ited ser­vices, tough chal­lenges

With the chang­ing hos­pi­tal­ity bench­marks, lodg­ing schemes are evolv­ing and a new breed of ac­com­mo­da­tion mod­els that are more con­ve­nient and for­ward-look­ing is de­vel­op­ing. Ralph Nader, CEO at hos­pi­tal­ity con­sul­tancy firm Am­ber Con­sult­ing, high­lights the c

Hospitality News Middle East - - CONTENTS - am­ber-con­sult­ing.com

The rise of select and lim­ited ser­vice ho­tels in a global mar­ket that is evolv­ing faster than ever is im­pres­sive. Ac­cord­ing to STR Global, select-ser­vice rooms ac­counted for nearly 70 per­cent of new sup­ply in the US in 2014 and 2015. Most ho­tel chains are de­vel­op­ing their own af­ford­able select-ser­vice brands and are adopt­ing an am­bi­tious plan to fur­ther ex­pand this cat­e­gory. Vib by Best Western, Tru by Hil­ton and EVEN by IHG, are all new, grow­ing brands re­cently launched in the seg­ment. The Mid­dle East is also wit­ness­ing the take-off of this trend. While the re­gion has a long his­tory of fo­cus­ing on up­scale es­tab­lish­ments, it seems this luxury seg­ment is com­ing to sat­u­ra­tion. Trav­el­ers’ habits are chang­ing: quick busi­ness trips, short, tran­sit stays and tighter bud­gets will make for most of the de­mand growth in the re­gion. For these rea­sons, lim­ited and select-ser­vice ho­tels will un­doubt­edly be the in­vestors’ and trav­el­ers’ pre­ferred choice.

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There is no stan­dard def­i­ni­tion of this type of ho­tel or ‘in-be­tween’ es­tab­lish­ment. Lim­ited-ser­vice ho­tels usu­ally don't have restau­rant fa­cil­i­ties, although they might in­clude some very ba­sic ameni­ties, such as laun­dry ser­vices. Be­tween the lim­ited-ser­vice and the full-ser­vice ho­tel lies a hy­brid cat­e­gory; the select-ser­vice ho­tel. These es­tab­lish­ments of­fer the fun­da­men­tals of lim­ited-ser­vice ho­tels, with a se­lec­tion of ameni­ties sim­i­lar to full-ser­vice prop­er­ties, but less ex­ten­sive. For ex­am­ple, lim­ited F&B of­fer­ings, such as grab and go, break­fast only, a few small meet­ing rooms and a small gym. There­fore, to­day’s mar­ket is there­fore fac­ing a revo­lu­tion; a cat­e­go­riza­tion shift from ‘rat­ing scales’ in­clud­ing up­scale and mid­scale, to ‘as­sets-scale’, such as lim­ited, select and full.

The chal­lenges

These new ac­com­mo­da­tion mod­els present a dif­fer­ent set of chal­lenges led by fewer rev­enue streams and brand eq­uity. With lim­ited F&B of­fer­ings, select-ser­vice ho­tels are un­able to rely on a top­notch restau­rant to in­crease rev­enues. This could be par­tic­u­larly frus­trat­ing in a mar­ket like Dubai, where ho­tel restau­rants ben­e­fit from be­ing the only es­tab­lish­ments per­mit­ted to serve al­co­hol. To­day, the UAE’S ho­tels heav­ily rely on this mo­nop­o­lis­tic ad­van­tage. Most ho­tels de­velop unique F&B con­cepts that con­trib­ute sig­nif­i­cantly to the fa­cil­ity’s rev­enues. They also con­trib­ute to the ho­tel’s brand eq­uity, since Dubai's vis­i­tors, more than any other city in the re­gion, will select a ho­tel based on their din­ing ex­pe­ri­ence ex­pec­ta­tions.

No room for er­ror

‘Ev­ery penny counts’, would make an ac­cu­rate sum­mary of the busi­ness model that lim­ited and select-ser­vice ho­tels need to adopt. Bud­gets should be closely mon­i­tored and daily re­ports con­stantly

In­vestors should be aware of the chal­lenges ahead and make sure they have a sound, mit­i­gat­ing plan in place prior to open­ing

shared with man­age­ment. Cost in­creases of just a few hun­dred dol­lars could sig­nif­i­cantly im­pact the bot­tom line, es­pe­cially when it comes to small ho­tels (i.e., those with less than 200 rooms), which make up the ma­jor­ity of lim­ited and select-ser­vice ho­tels. Solid and, ad­mit­tedly, of­ten te­dious pro­cesses need to be put in place to en­sure money is not wasted and that prof­itabil­ity is max­i­mized.

Min­i­mal space, max­i­mum value

‘Sav­ing space will save money’ is an es­sen­tial rule for these types of ho­tels. Find­ing ways to re­duce the size of the rooms with­out sig­nif­i­cantly im­pact­ing the cus­tomer’s per­cep­tion of com­fort is a key chal­lenge. For ex­am­ple, Hil­ton’s Tru brand sim­ply re­placed the built-in clos­ets in their rooms with ‘land­ing zones’ for the lug­gage and a few wall hang­ers, while de­vel­op­ing spe­cial light­ing to help the rooms ap­pear larger. Mini-bars, work­ing desks and TV desks are among the other el­e­ments that can all be con­sid­ered for re­vi­sion or even re­moval to save space.

Pres­sure on hu­man re­sources

Select and lim­ited ho­tels can­not af­ford the luxury of a large team to han­dle daily op­er­a­tions. The man­age­ment team there­fore has to be very well-rounded, ef­fi­cient and care­fully se­lected. Just like the gen­eral man­ager, each as­sis­tant man­ager should have a com­pre­hen­sive un­der­stand­ing of the way the ho­tel works and where sav­ings mat­ter the most. This ap­plies to other staff as well. As la­bor costs need to be closely mon­i­tored, cross-func­tional job de­scrip­tions are com­mon; your front of­fice man­ager might also in­spect your room, while the waiter should be able to over­see food prepa­ra­tion. This multi-faceted ap­proach en­hances the guest’s ex­pe­ri­ence, since the points of con­tact are of­ten the same per­son, and cuts down on la­bor costs. How­ever, the sys­tem in­evitably also puts ad­di­tional pres­sure on staff. One so­lu­tion con­sists of cut­ting staffing costs by heav­ily in­vest­ing in tech­nol­ogy so­lu­tions, like self-check-ins, to re­duce pres­sure and in­crease ef­fi­ciency.

Keep­ing the clien­tele

One of the strong­est chal­lenges the in­vestor will face, es­pe­cially in the Mid­dle East, is en­sur­ing their clien­tele know what to ex­pect. Mid­dle Eastern trav­el­ers are used to tra­di­tional ho­tels, with a plethora of val­ueadded ser­vices. In select and lim­ited-ser­vice ho­tels, rooms have less ameni­ties, with the ab­sence of a mini-bar or closet. Although clients are most prob­a­bly aware that they’re step­ping into a ho­tel with fewer fa­cil­i­ties, they might ac­quire a de­gree of frus­tra­tion and an un­founded neg­a­tive per­cep­tion of the qual­ity of the ac­com­mo­da­tion. A com­modi­ti­za­tion risk might well oc­cur, where the busi­ness trav­eler selects his ho­tel solely based on the price. The key to suc­cess is for the ho­tel’s man­age­ment to keep a cus­tomer­centric cul­ture, while en­sur­ing the pro­vi­sion of some level of sup­port in sat­is­fy­ing their clients’ needs. One ex­am­ple is be­ing able to rec­om­mend a se­lec­tion of nearby restau­rants.

What to con­clude

Given the im­pact on the Mid­dle Eastern re­gion of lower oil and gas prices, re­gional in­sta­bil­ity and chang­ing de­mo­graph­ics, the num­ber of select and lim­ited-ser­vice ho­tels is un­doubt­edly go­ing to in­crease, caus­ing fierce com­pe­ti­tion. In­vestors should be aware of the chal­lenges ahead and make sure they have a sound, mit­i­gat­ing plan in place prior to open­ing. In­vest in good man­age­ment, de­velop solid pro­ce­dures for op­ti­mal ef­fi­ciency, adapt to the coun­try’s cul­ture, ed­u­cate the clien­tele and man­age the costs very care­fully.

Most ho­tel chains are de­vel­op­ing their own af­ford­able select-ser­vice brands

Lim­ited-ser­vice ho­tels usu­ally don't have restau­rant fa­cil­i­ties, although they might in­clude some very ba­sic ameni­ties, such as laun­dry ser­vices

‘Vib’ by Best Western

‘Tru’ by Hil­ton

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