by Georges Panayotis
Is the order of the hotel world undergoing major changes? It is enough to look at how the world hotel ranking has changed to be convinced. At the head of the ranking, where volume counts and thus where the economy and midscale hotel industry feed portfolios thanks to the franchisees, the domination of Anglo-Saxon groups is being contested by the new Chinese players that can rely on an immense territory that is still under supplied and has considerable financial means.
Acting with determination, Chinese groups are using a strategic plan to conquer the hotel world that appears to leave historic Western groups indifferent. These groups are too busy resolving their brand distribution and marketing problems and thinking about a new approach to rebuild their margins. For traditional actors, Asia is decidedly too complicated, even with simple ideas, so they appear to modify the battle plan to avoid renunciation. But alliances, new capital, complete acquisitions mean Eastern nations are being served all of Europe, and tomorrow America, on a silver platter. The Great Khan received Marco Polo sumptuously at his court to better seduce him and open the Western Gates to the Middle Empire. History just repeats itself with an added touch: the acceleration of time. Changes no longer require the lifetime of a generation to take place.
In the highly mediatized luxury hotel segment, Middle Eastern capital is what is changing the deal. With their sovereign funds and personal fortunes, Emirs and their large extended families shop in London, Paris, Rome and Geneva. Not only do they build themselves a pile of trophy properties, but they offer themselves the keys to the greatest and most profitable hotels, with the right to choose or change the operator in order to stimulate brand competitiveness.
And what does the global hotel industry do in light of these major changes? Large hotel groups have already accomplished a first major change by mutating from builders of their own networks to an essential role of manager and franchiser. But the movement does not stop there when faced with the challenges of the digital economy that has transformed our planet into the only viable terrain. Size is not just a goal, it has become an imperative for occupying all the geographic space and all the clientele segments. Thus we may now expect a new restructuring trend in which the number of players will be reduced by allowing them to rival with distribution giants. While online distribution is generally handled by OTAs, refusing to give them global control over the supply is the only strategy for re-establishing balanced strength.
This can also lead to original strategies, which are already being adopted with “collections”, labels that are offered to upscale independent hotels to be integrated into the inventory of groups. Who says the same approach cannot be used for standard or economy products within the context of a new version of consortia backed by global groups? More than the brands belonging to each group, it is the possibility of playing with the phenomenon of “commoditization”, which puts price before the property’s identity. The challenge is risky to avoid upsetting current franchisees, who continue to believe in the added value of the brand, and to avoid waving a red flag in front of the OTAs, which definitely have the financial means to retort.
But hoteliers have been reproached so much for missing several revolutions that they should be encouraged to explore new directions before it is too late. The main goal is to rework the operating account to revive the margins, without which the future remains compromised.
