Hotel CEOs talk shop in our roundtable
Mergers, branding among topics in changing industry
T his year opened on a new landscape for the hotel industry. Marriott International completed its purchase of Starwood Hotels and Resorts, making it the largest hotel company in the world, with 30 brands. Other companies followed suit with mergers and acquisitions to compete.
Marriott is hardly the only force to reckon with in the industry. Vacation and home-stay rentals such as Airbnb continue to vie for travelers’ attention. Online travel agencies such as Expedia and Booking.com and last-minute booking apps such as HotelTonight offer alternative options for travelers looking for deals. Gone are the days when travelers had to call a hotel directly or enlist a travel agent for help to venture out into the world. This has complicated things for traditional hoteliers.
USA TODAY assembled four top hotel executives at the Americas Lodging Investment Summit in Los Angeles in the L.A. Live JW Marriott hotel Jan. 24 to discuss challenges and opportunities facing the industry. Participating in our annual roundtable were: Geoff Ballotti, president and chief executive officer of Wyndham Hotel Group; Niki Leondakis, CEO for Hotels and Resorts at Two Roads Hospitality; Elie Maalouf, CEO for the Americas at InterContinental Hotels Group; and Greg
Mount, president and CEO of Red Lion Hotels. USA TODAY’s Nancy Trejos moderated the discussion. The text has been edited for clarity and length.
Q: Last year the big news was the Marriott acquisition of Starwood. While we’re not seeing deals like that quite yet, we have seen some movements such as Commune and Destination Hotels merging into Two Roads Hospitality, Red Lion purchasing Vantage, Wyndham buying Fen Hotels. What other types of moves do you foresee this year, and why is there still such a need for these mergers and acquisitions?
Two Roads’ Leondakis: We will continue to see people in the hotel industry expanding to other related industries, just like AccorHotels ( bought) One Fine Stay (a vacation rental business). You’ll see more people in the industry exploring other related travel industries and becoming more of an overall service provider.
Red Lion’s Mount: Some of the smaller regional brands — those with 50 to 250 hotels — are starting to feel a little insecure and that they may not be relevant going forward. So they need to seek a little bit of a safe harbor. At least in our case, I know our guys (Vantage) were very worried about technology and where things were going and felt that if they didn’t sell that they would be become irrelevant going forward. So I think you’ll see more of it.
Wyndham’s Ballotti: Size matters; consolidation will continue. You mentioned our acquisition of Fen this year and Dolce last year. Of our 18 brands, 17 have been acquired, and we’ll continue to look for opportunities along that line. IHG’s Maalouf: Typically, when you see acquisitions in the hotel industry they are to achieve generally one of three things: Either more brands or more geography or more scale. Now, (mergers and acquisitions is) only one way to achieve those. ... The focus on mergers and acquisitions should be broader within the focus on what are your strategies to add one of those three essential components to have the right heft in the global hospitality industry. Q: Speaking of more brands, we see new ones all the time. Marriott has 30 brands now. How do consumers distinguish among these brands? Are we over-branded?
Ballotti: I don’t think we’re over-branded. Consumers are smart, and consumers are looking for great value and great experience. We open two hotels a day, and that’s got to be our primary focus. But when a brand fits from a geography standpoint and when a brand makes sense to add it to a loyalty program to give that consumer more choice in terms of aspirational options where they could vacation, absolutely there is room for more brands.
Mount: I was very fortunate to be involved with Starwood during the time that W was created and other brands were retooled, and I hearken back to that and came away with the knowledge that it was really a lot about creating an aspiration for a consumer or mirroring their current lifestyle. Some of the bigger hotel companies are forced to push some new brands out because they need to get more market share in the market. For us, it’s not about more brands. In fact, with our recent acquisition, we’re probably going to scale back. Q: Can you name two of the top trends in hospitality for 2017?
Leondakis: One that I see a lot of is provocative design. There’s a moment, an Instamoment that is intentionally done through design so that people will Instagram it. People are taking advantage of the marketing aspects of social media.
Ballotti: The trend you’re hearing from all of us is the importance of our loyalty program and making sure that we’re offering — whether it’s through the consolidation of new brands and experiences that we’re adding — new aspirational options for redemption. Q: What are your thoughts on those hotel companies experimenting with robots as concierges and butlers? Maalouf: Our guests really want both, which is a bit of an inconsistency. They want the ability to reach out to us through different forms, but they want us there when they really need us.
Leondakis: It’s giving people a choice and not forcing technology on the guest for technology’s sake. It has to somehow improve or take the friction out of their experience. Q: What about those smartphone keys? How
has that worked out? Mount: With our loyalty rewards program, we have full capability for guests (using mobile devices) to check in and choose their room like you see on an airline. We’ve eliminated front desks from our hotels. We have a guest agent to check you in if you want to do it the old-fashioned way. But is that still disconcerting to some guests? Our people understand that someone’s walking in with a piece of luggage, they’re probably checking in, so they’re approaching them and greeting them. Q: What about Wi-Fi? A lot of you now are offering that for free, but what else are you doing to make Wi-Fi better at a time when guests are coming in with three or four devices?
Maalouf: It’s not for technology’s sake, it’s actually for the human factor because our guests are telling us they want to live in our hotels the same way they live at home. Last year, we introduced IHG Connect, which is the fastest bandwidth and fastest Wi-Fi connection, dedicated lines for our owners, remotely controlled, cloud-based, not because we want to add technology to the hotel and reduce cost, which we are, but because we want our guests to feel at home where they are.
Leondakis: Two years ago, we rolled out across our Thompson brands, SMS technology — texting with the guest — not because we wanted to be the coolest brands out there but because it increased the guests’ engagement. Of those that adopted, over 90% engaged throughout their stay in interactive communication with our employees. It’s the
way they operate in their daily lives. Q: Are you still going after Millennials as aggressively as you have been, and is it paying off ? And what are you doing not to alienate older generations?
Ballotti: For far too long, there’s been a perception in the economy and the mid-scale space that folks paying economy and mid-scale rates don’t deserve that authentic service. Millennials are seeking great value, great rooms, exciting experiences. They’re looking for what we all are.
Maalouf: You need to appeal to broad demographics and broad mindsets. There’s another statistic we have to be aware of, and that is that as of this year, over 50% of the U.S. population is over 50. And they have over 70% of the wealth in this country, so it’s not over for us. Ballotti: But in the next 10 years, 60% of our check-ins will be Millennials. Leondakis: The trick is to balance without creating an experience that’s exclusionary. Of the Boomer Generation having all of this disposable income and wanting to travel, it would be foolish of us to not consider that that is a huge opportunity to relate to, but at the same time, if we don’t pay attention to Millennials, we’ll be extinct pretty quickly. Q: Let’s move on to the disruptors and Airbnb. So why do you think people choose these vacation homes, and how are you tailoring your offerings to compete with them? Leondakis: We’re not trying to compete. We’re very clear on what the differences are. There will be occasions in people’s lives to stay in a home. It might be a family reunion, it might be a bridesmaid’s gathering of girlfriends. There will also be a need for another type of experience that is in a hotel. For business travelers, while there will be some adventurous people who will stay in someone’s home, the need for Wi-Fi, the guarantee of electricity, hot water, an iron if you need to press your shirt, and back to humanity and the services that a human can provide a guest who has a special need or someone in trouble or needs a problem solved, there will always be the customer who wants that type of experience, so we’re
choosing to differentiate vs. compete.
Ballotti: We’re the leader in the managed vacation rental business primarily in Europe. We are all looking for new experiences and for us, the beauty of having cottages and castles and boats on the rivers plying the English countryside is that we’re the best of those and folded them in as redemption options for our loyalty program. Our issue isn’t with Airbnb. It’s with the operator that is operating an illegal hotel on a platform that we take issue with as an industry association. Q: Speaking of competition, how about online travel agencies (OTAs)? A lot of you are offering discounts to people who book directly through you. How has that been working out, and what is your relationship with these OTAs?
Mount: 52% of the rooms booked in the U.S. are booked through an OTA, so it’s a pretty significant marketplace. We looked at it and said, “How can we better utilize it as a marketplace?” We struck a deal with Expedia and others that they give access to our loyalty rates online. They’re marketing our brands. They’re spending billions of dollars to get eyeballs to their sites. We looked at it as an opportunity to get connections with their customers. For their consumer to get that rate, they have to sign up as a loyalty member with us, and what that does is it gives us the ability to market one-to-one.
Maalouf: What’s great about this industry is there isn’t just one right strategy that works for everybody. We started the direct booking campaigns in 2015 in Europe and then launched in May in the United States. Now we’re up to 4,500 hotels on our book-direct plan, but let’s just step back and realize that book direct was always the way that hotels did booking. Before anything was around, you’d pick up the telephone, you’d call the hotel, see if they had a room, what was the rate, and you’d call the next one. So we’re not coming up with anything new. It’s really not a discount to our guests. It’s 2-6% if they join our loyalty plan and book direct. It’s actually a message that it’s more expensive to book differently.