Raising room rates isn’t the only way to combat higher prices

BERLIN — Despite the challenges of the current macroeconomic outlook, asset managers and operators have an opportunity to stay ahead of the competition by improving productivity and efficiency, delegates heard at the International Hospitality Investment Forum (IHIF) in Berlin on Wednesday.

Watching the bottom line, harnessing technology, and investing in personnel are all ways to maintain asset value, although raising room rates is still a useful tool, panellists told moderator John S. Fareed, global chairman, Horwath HTL.

Ruslan Husry , CEO, HR Group, said: “Technology is a key tool for us today to improve performance. Front office tech is a key part of the guest’s digital journey, but it’s something we also look at for back-office, where we use tech to support things like book-keeping.”

Simon Vincent, president EMEA, EVP, Hilton agreed that “tech has an important part to play in rewriting the customer journey”. He added: “Our focus is on digitalising experiences to eliminate things the customer doesn’t need. We have successfully integrated a lot of disparate technologies into the cloud.”

Outsourcing options

Sabine Schaffer, co founder & CEO Europe, Pro Invest Group, outsourcing is a key tool in driving efficiency. “We try and centralise functions such as ESG management, procurement, accounting – they can all live off-asset. That means we only have customer-inclined staff on site. We also effectively outsource certain back-office business to India.

“Furthermore, we have experimented with outsourcing elements such as breakfast service, staff included – not just for financial reasons, although it did bring down costs – but to have a sustainable business model. The issue around staff is not just one of costs, but of finding and retaining talent.”

An attention to matters of personnel is a key factor in improving productivity, delegates heard. But Mohammed Alawadhi, managing director, Cheval Collection, conceded that it “hasn’t always been easy”. He said: “To create operational efficiencies, we have clustered a lot of roles, for example asking general managers to manage multiple sites. Key to that is also rewarding them sufficiently.”

Allison Reid, chief global growth officer, Aimbridge Hospitality, noted that “one of our biggest expenses is labour.” She added: “Costs have come down a tiny bit in relation to inflation, but it’s key to constantly monitor what is moving and try to understand if you can replace that with anything else.” When it comes to utilities, she said that her firm had been able to hedge against price rises by buying ahead of use.

Avoiding potential obsolescence

In a bid to avoid potential obsolescence in the sector, the panellists also discussed having a slightly more agnostic approach to the question of capturing leisure and business travellers.

Noted Reid: “We are all experiencing a return of revenues but it’s good to be aware that leisure may fall off in the future, while we think that business travel will come back. At some point, you have to get on the road and be with your customers – Zoom can only take you so far. That can also help with cost structures as business travel is a little less rate sensitive.”

Said Vincent: “The outlook for business travel is stronger than many have thought. Leisure may have led recovery in all markets, but from tracking mid-week occupancy rates, we can see that business travel is coming back. So far, revenues have been well above in leisure, are nearly there in business, and are still below previous volumes in big meetings and events. But the key metric is occupancy, and we feel pretty good about that.”

Concluded Schaffer: “Some of the increased cost positions we are facing we can pass onto the customer. But we have to ask how long that will be sustainable. It is true that more people are willing to spend more on experience and travel and less on ownership, but at the same time, inflationary pressures for customers remain an issue.”