HOSPACE is the well-established annual conference organised by HOSPA, the professional organisation for hospitality finance, revenue and IT. Thursday 21 November once again saw HOSPACE deliver an excellent programme to an audience of 400 delegates, bringing together like minded people, listening to and questioning industry experts, and gaining real insight into the key issues affecting the sector.
Finance Panel
Addressing “The changing face of the funding landscape for the hospitality sector”, the Finance Panel comprised Paul Dukes – Chairman, Kew Green Hotels & Chairman, HOSPA; Graeme Smith – Partner, Zolfo Cooper Corporate Finance; Andy Lancaster – Head of Hotels, UK Sector Coverage RBS; Paul Beaumont – Head of Deal Origination, Downing LLP and Navneet Bali – CEO and Head of Development & Finance Meininger Hotel Group.
Finance is and has always been available, if the deal is good enough. There is now improved finance and liquidity in the market, supported by the lift in trading over the last six or so months. Indeed, the current market may be as good as it gets, with the market actively looking to invest, and lots of liquidity overall.
However, the owner/operator needs to be realistic – unlike at the height of the last ‘boom’ – and have a good business plan.
The assessment criteria have not changed, but are being applied more rigorously than in the boom years. All lenders are being more selective around such criteria as location, the borrower involved, and the business plan. Cash flow to service debt is obviously crucial, though London is seen as a separate market in which cash flow is less critical.
There are new sources of finance, making funding more accessible to different types of organisations. In 2006 the market was dominated by High Street banks, but there are now 40 to 50 different sources of finance, including newly active insurance companies as well as high net worth individuals and increasing investment from countries such as Russia, India and China.
Investment funding for independents?
There is investment available for independents, with or without a brand.
Whilst brands certainly offer reassurance to potential investors, they are looking more in depth and asking questions such as what is the competitive advantage of the property? How sustainable is its business? Quality of management team? Business plan? And so on.
Business plans can look very different once factors such as changing interest rates (from late 2015) are taken into account, also the effect of inflation and wage increases, and then there’s the need for capex where there has been under-investment on assets.
Overall, investor confidence is improving just as hotelier confidence is increasing.
Hospitality IT debate
The Technology Panel was concerned to discuss whether “technology is good for the hotel/hospitality business” and featured Bryan Steele – IT Committee Chairman, HOSPA; Jeremy Ward – Senior VP of IT, Kempinski; Timo Kettern – IT Director, Westbridge Europe; Andrew Jacques – IT Director, Apex Hotels; Carson Booth – VP Global Property Technology, Starwood Hotels & Resorts and Paul Squires – UK head of Wireless Portfolio, Motorola Solutions.
The Panel revealed a wide range of solutions and practices, as well as looking at the future: for example, Westbridge is working on pilot technology with BMW that is designed to permit guests to check in whilst driving from the airport to the hotel, bypassing hotel reception and proceeding straight to their room on arrival.
Kempinski have moved to the Cloud with Amazon, delivering cost benefits as well as flexible capacity: they can upgrade and downgrade servers as they need. For example, they upgrade at month end, when all Hotel FDs are trying to upload their accounts.
ROI on technology?
This proved difficult to pin down. The panellists agreed that technology must be used to deliver the best possible guest experience. However, some benefits can be measured, such as the use of tablets against the cost of printing guest directories in multiple languages. Or increased room spending as a result of easy to use in-room ordering on tablets: Kempinski have installed iPads in the rooms of two hotels, increasing room service sales by 40% and 15% respectively – and delivering a rapid ROI.
But there is a balance to be achieved between technology making the guest experience better, and technology that removes all human interaction and isolating the guest…
It is becoming very difficult for the hotel industry to keep up with the technology available to guests at home: but it is essential that guests can use their own devices to access information and communicate.
A final thought: retail often leads the way in its use both of technology and of data – hotels should keep a close eye on the technology being applied by hotels, and consider how it can be applied in their own businesses.
Revenue Management Debate
Here, the Panel was examining how to integrate all the feeds for revenue management. The experts discussing a range of issues facing revenue generation included Lawrence Hunt – COO, Lowcosttravelgroup; Brian Hicks – VP Revenue Management, IHG; Howard Langer – Global Capability MD – Pricing and Promotions, dunnhumby; Uli Pillau – MD, hetras and Monique Jaspers-Wijn – Global Head of Partner Marketing, Travelport.
After initial introductions and thoughts from the Panel, the ever-thorny issue of OTAs was approached. Whilst IHG has as much as 90% of business direct in some hotels – and uses a strong loyalty programme to support this – many hotels now have as little as 20% booking direct.
It was accepted that OTAs are highly effective, their websites are carefully designed to maximise sales, and they are here to stay. In addition, they will develop their own loyalty programmes, not making it easy for hotels to re-capture share of sales. Hotels will therefore have to become leaner, faster, more efficient, and use technology more effectively.
It was commented that every hotel cannot be cheapest – hotels therefore have to sell on their quality and value, and get cleverer at upselling guests, and selling them more services.
It was also noted that 20% of customers deliver 80% of profit: hotels need to know which 20%, and why. They can then apply that knowledge to growing the most profitable and reducing the least profitable.