THE PLANNING HAS BEGUN
The organisers of the Independent Hotel Show recently invited a group of hoteliers and industry leaders to breakfast at The Beaumont, to brainstorm ideas for this years event. The attendees were selected for their diversity; to help us identify key themes, challenges and opportunities the industry is facing now, in order to build the content of the show specifically around the needs of independent hoteliers. The topics that were most important to the group will feature across the editorial content of the show.
Read on for insight into the major subjects motivating your industry now...
The National Living Wage & Skills Shortage
This sparked a surprisingly diverse debate with regards to how the National Living Wage will affect hoteliers. Views ranged from: “its about time” and “this will encourage better quality staff into the hospitality space”, to those that were more damning of both how the government has handled the whole situation and the fact that for some of the hoteliers present, whose businesses were multi-site operations; the financial impact is huge. What was heart warming is that the staff were clearly the centre focus for the hoteliers around the table.
There was a united enthusiasm for the need to improve the skill level of those entering the hotel industry. Particularly in the regions, the feeling was that there is a lack of skilled and motivated staff available, if at all. Creating innovative pay structures such as “partnerships” was one suggested solution. Avril Owton MBE of The Cloud stated, “The staff at my hotel are more important than the customers for the success of the business. Happy, motivated staff will ensure that the customers will be happy too”. The impassioned Jonathan Raggett of Red Carnation Hotels shared this view, saying, “Motivation, support, & development are key. If you don't love this industry, you're probably not right for it and won't succeed in it”.
Dynamic Pricing & the Challenge of Driving Loyalty Online
Another discussion ensued around keeping up to speed with current room pricing trends, versus creating brand value by being more standardised with the rate strategy. Whether a hotel is located in a city or rural setting clearly impacts the pricing strategy. Imran Hussain of The Hotel Culture remarked,“Dynamic Pricing can cause huge elasticity to the point where eventually the public can become confused over the actual cost of a room”. But Penny Brewer from South Place Hotel suggested if you pair Dynamic Pricing with transparency and clever marketing, you might be onto a winning formula.
The debate on the relationship with OTA's elicited responses from all present. The general consensus was that OTA's are a necessary evil that must be managed. It was agreed that OTA's do provide a platform for positioning your hotel in front of potential customers that you would otherwise not be able to reach, but the peak of the conversation was around the hoteliers and their teams' ability to convert those OTA customers into loyal hotel guests. Thus using the OTA's to your advantage and not letting them control you. The nature of independent hotels and the fact that they can be more nimble and smart with marketing means they have to “work smarter rather than harder” when it comes to converting, as one hotelier said, “OTA's from evil to friends”.
The pricing and distribution debates led us to a discussion about loyalty and how the online travel space has changed the way customers are loyal. Peter Hancock of Pride of Britain felt that “customers are loyal to the booking process which is why they love using an online travel platform they are comfortable with”. One can relate to the concept that customers want a fast, easy booking process. Jeremy King of Corbin & King felt that “dynamic pricing is the death of traditional loyalty, which is essential for the success of independent hotels”.
Star Ratings – a Broken System?
One hotelier shared an experience of his hotel being denied a 5* rating for some surprising reasons. This experience of a very clinical approach to attributing star ratings certainly resonated with many around the table. Imran Hussain said: "The star rating system is broken. Independent hotels would better spend their time on getting customers to understand who you are and what you actually want to be as a hotel." But with independent hotels ranging from small operations to large luxury properties in the centre of London, star ratings will, in some cases, be more necessary than others.
Obviously, there is a relationship between star ratings, expectations & pricing so for a certain type of property it is important to be categorised in this way. But for those whom the star rating was never the objective, there are other ways to let your customers know the quality of your property is. Interestingly Penny Brewer felt that the future of classification lay in the customers' hands stating: “The new way of a hotel obtaining a ‘star rating' is through user generated content & reviews." Many customers now make their booking choice as a result of Trip Advisor or other review sites. So rather than chasing a falling star, perhaps some hoteliers should think about creating a hotel culture that translates into positive user generated content in review form, and paints a constructive picture of your hotel on social media, blogs etc.
The Food and Drink Opportunity
Food and drink has been a challenge for hoteliers for many years. Particularly with independents, it very much depends on location and style of property, as to how much emphasis should be and is placed on the food and beverage offering. With a real mix of hoteliers in the room, varied views were expressed on what is needed when it comes to F&B and how to make it successful. There was definitely an acknowledgement that hotels generally don't have a good reputation on this subject. Imran stated that, “Restaurateurs seem to be very good at becoming Hoteliers, but hoteliers are not so good at becoming restaurateurs”. What was agreed is that if you are going to do F&B, it should be done properly. And also that there is a great opportunity to engage with the local community and create your hotel ‘culture' through your food and drink offering.
The ‘destination restaurant' hoteliers in the room attracted their guests to stay through their reputation for quality food. Others ran a more simple B&B operation because that is what their customers wanted. Melvin Gold, a hotel industry consultant explained how consumer habits are changing. He presented the example of his 20-year-old daughter, who recently went on a European city break and chose a hotel with a room only rate to allow herself to find somewhere cool to enjoy breakfast. What she wanted was something more “local and authentic” than the breakfast buffet at the hotel. Peter Hancock stated, “Some hotels should just stop their F&B as they don't do it properly and it can become a huge financial burden.” Harry Cragoe of The Gallivant explained “A lot of hotels do what they're told, rather than doing what they think” and went on to suggest that hoteliers should use their own initiative, local market knowledge and gut feeling to decide what their food and drink offering should be.
The Funding Conundrum
For many years, the topic of gaining bank funding for an independent hotel has been hotly debated. The people around the table all had different views but communally felt there was greater concern around the risk associated with an independent hotel proposition than a branded property, even with a successful business model and well-thought-out plan. What was agreed is that it is easier to work with banks on larger rather than smaller projects, as they offer a greater risk and return ratio.
The nature of hotels being large investments makes it difficult to follow the restaurant world's route of seeking EIS funding. Crowd funding was considered, with success stories such as BrewDog's thriving pub business (now moving into hotels) the inspiration for discussion. Could this be the future funding path for many independent hotels? Some feared the prospect of having hundreds of investors to answer to. Most agreed that looking at alternative ways of structuring investment is however, the way independents will gain funding to grow and/or improve their properties.
One hotelier explained that despite positive signals from a funder, he decided against accepting the investment for a large hotel development project. Instead, he worked with the landowner to create a hybrid model that meant the landlord was the main investor. His reasoning was his fear of loosing independence, declaring, “the nature of independence means that you need to make sure your hotel is not run by a board stuck in a stuffy boardroom, as those people tend to not understand the essence of being independent”. So developing a favourable relationship between investor and operator is key to the successful operation of a hotel, particularly when striving to uphold the virtues of independence.