Photography by Mark Green

In March, amidst a backdrop of European and international political and economic uncertainty, more than 2,000 delegates from 80 countries gathered at The International Hotel Investment Forum (IHIF) at the Hotel InterContinental in Berlin, Germany to celebrate the 20th anniversary of this event.

Overall, the mood of the industry was optimistic, albeit cautious, as all indicators pointed to a generally strong appetite and demand. “The world economy is set reasonably fair,” said Roger Bootle, Chairman of Capital Economics, in his address. The conference program was crafted to include both a retrospective of the previous 20 years of the hospitality industry, as well as a look at emerging and future trends looking forward to the next 20 years — including the accurate implementation, efficient analysis and productive use of technology as a significant focus for the hotel brands.

Additional themes included the continued prominence of alternative accommodation providers, such as hostels and Airbnb, which are pushing the hotel sector to adapt as the traditional boundaries blur. During his keynote speech, AccorHotels CEO Sébastien Bazin said hostels and Airnb “were the companies that the industry needs to watch; they are very good and what they are doing is legitimate.” Interestingly, he did not mention that Accor is buying a company doing Airnb-style operations — so instead of trying to beat them, it is joining the home-sharing platform.

When it comes to OTAs, Bazin joked that “when they grow, they take something away from me, but they also bring me traffic. Every year that passes, OTAs are growing three to four times faster than we are. It means you need to tap into what they do. Think differently and adapt.”

Unlike most hotel companies that are franchise concentrated, AccorHotels manages more than 70 per cent of its hotels and franchises less than 30 per cent. “Brands are only sexy if you can engage in new a contract with owners,” Bazin said, adding that his company opens one hotel every 36 hours.

The breakout seminars highlighted innovation and differentiation, which remain vital to survival and success in this fast-moving, consumer-led market.

One speaker shared that OTAs such as Expedia, Priceline and spend almost $12 billion a year on advertising; so how do hotel brands compete? Cody Bradshaw, senior vice-president and head of European Hotels at Starwood Capital said “in the next 20 years, something has got to give — the brand fees are not that different to the OTA fees.” Other topics discussed throughout the conference included reasons behind the growth of Airbnb, such as lagging supply. Thanks to low-cost airlines, travel numbers are steadily growing. In 2012, the numbers hit one billion and by 2015, overall arrivals had reached 1.2 billion — a compounded annual growth rate of five per cent going forward — and if hotel supply is lagging behind at two per cent, that leaves a gap of three per cent that needs to be filled. That is where Airbnb and home-sharing services have jumped in. The European travel landscape was also a hot topic in the wake of terror attacks and dramatic elections. The consensus was that Europe seems to be holding steady and that Brexit hasn’t had an effect yet. France and Brussels, meanwhile, are recovering from recent terror attacks that hurt visitor numbers while Paris is on the rebound, albeit slowly.

Europe’s investment scene is changing, delegates heard, with private equity in the U.K. almost completely flat. Investors are now eyeing central Europe, where there’s ample product available with distressed bank lending. This puts the U.K. and mainland Europe in very different positions — the U.K. is a seller’s market at the moment while Europe favours buyers. Germany and Holland have an enormous amount of new supply coming in, while portfolios are changing hands in the U.K.

Other topics discussed included: The impact of mergers and acquisitions on brand identities. Following the Marriott/Starwood merger, the industry will be watching to see how the company fares with 30 brands. The number of brands in the industry “grows every day,” but will they ultimately diminish the value of any parent brand? “Do clients now realize that in checking into a Curio or a St. Regis they are getting a Hilton or a Marriott?”

Looking to the Eurozone, many speakers discussed the major divergences between countries; Ireland and Spain showing particularly strong growth while Italy had very little. They referenced the various significant political events on the horizon and said “no one remembers a time so fraught with political risk,” and also “if there is a fracturing in the Eurozone Brexit it is likely to spread.” The U.K., since Brexit, has had a growth rate at the rate of 0.8 per cent GOP, so there are reasons to be optimistic; although inflation is increasing and earnings don’t look set to match this increase which will result in a squeeze on people’s incomes.

The merger between Marriott and Starwood might have been completed in late September 2016, but that was just the beginning. Since that time, owners and their asset managers have awaited confirmation that related merger expenses would be “net neutral,” as initially promised. Then, in March 2017, communication came down the pike detailing “Project Tetris,” which refers to Marriott’s planned integration of Starwood properties into Marriott’s finance model. It’s one of many expected initiatives directed specifically at Starwood-branded hotel owners.

Stephen J. Renard is president of Toronto-based Renard International Hospitality Search Consultants


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