Challenges around costs, seasonality and ESG metrics are all affecting the bottom line in hospitality investment, but there are interesting new ways to drive alpha, delegates heard at the Resort & Residential Hospitality Forum in Athens, Greece.
In conversation with Alexi Khajavi, president of Questex, Konstantinos Santikos, director, Santikos Collection, reflected on how his favourite lesson at business school had been “managing costs”. He said: “The first cost you tackle is your biggest one and in hospitality it is labour. It is a very sensitive cost, it has to do with people, but labour is the number one issue for tackling profitability.”
Driving revenue
He added: “At the same time, labour is driving revenue for you.” Santikos noted that furniture, fixtures and equipment (FF&E) was another significant cost but said that it was part of strategy, and “you can see on a spreadsheet if those investments make sense”.
Li Zhang, senior vice president, Brookfield, said that a key approach to driving alpha was thinking about real estate on a “per square metre basis”. He said: “Can we add additional rooms or add amenities to increase the appeal of an asset, or diversify its audience? Would that bring in folk during the shoulder seasons, perhaps with group travel?”
He also recommended that investors assess the aspirations of the audience they are targeting, to understand “how to cater to them and how to reach them”. He summarised: “It’s about creating the best product we can for our guest, plus the optimum design for that”.
Seasonality matters
Returning to challenges around the workforce, Santikos said that operating seasonal properties added an extra level of complexity to hiring and retaining staff. “We actually didn’t realise how big a challenge seasonality is until we started managing a city property and saw how smooth everything was from a labour perspective. You don’t have significant staff turnover in a hotel that runs 12 months a year, and you can carry out renovations while the hotel is operating.”
However, he said that seasonally run hotels have their own advantages, with the biggest being the fact that “you can restart every year”. He added: “You can look at what is wrong and fix the non-performing parts of your hotel. City hotels only had the chance to do that during Covid.”
Zhang said that Brookfield had grown increasingly comfortable with seasonality “from a broader investment perspective” in markets like Greece, which nevertheless enjoy a pretty long season. He added: “The labour component is the biggest area of focus, and if you have staff housing that helps retain and attract talent, as well as creating a workforce community.”
He recounted plans for a pipeline opening in Val d’Isère, managed by Brookfield backed hospitality company Experimental Group, where the hotel manager was looking into rotating staff after their summer shifts in its Ibiza property to work the winter season in the French Alps. “This helps from a seasonality perspective,” he said.
As for assessing other major expenses, Zhang said that amenities often deserved bigger spending “in order to nail them and make them very exciting”, while when it came to rooms, “you just need a quiet, comfortable place where you can have a good night’s sleep. Essentially, it just needs to be functional”.
Added Santikos: “With the rise of blended travel, you no longer identify the target group and create the hotel around them. For hotels where guests mix business and pleasure, F&B should be stronger, staff need to be knowledgeable, so that business guests that enjoy their stay will also come back for the leisure trip.”