BERLIN—Hotel guests have traditionally been binary: leisure-driven or corporate-driven, with the latter typically delivering higher total revenue. For hotel owners and operators, focusing on just one group is not the way forward.
Hoteliers of late are stumbling on perhaps not a novel idea but one that needs more consideration: juicing out every dollar, euro or pound from every corner of an asset.
“Ultimately, you're trying to find as many ways as possible of generating revenue out of [an] asset," said Philip Ward, a senior advisor, at KSL Capital Partners, at the 2022 International Hospitality Investment Forum (IHIF).
He gave the example of The Belfry, a UK hotel and resort known for its golf. “You manage an asset over time, with a view to different types of customers. For instance, at the Belfry during the week, typically, [many] business people go there for offsite seminars. Then, on the weekend, or during the school holidays, it will be families. So it's the same asset, same product, same service, but used by different populations. You end up having a very nice revenue profile.”
There is now a growing realisation amongst owners and operators that only targeting one source of business business is not the best way forward.
Torsten Kuttig, director hotel development, ECE Work & Live GmbH, said he had noticed that business hotel operators now want to open resorts, and leisure operators are interested in city-centre hotels.
“Before, you had business on one side and leisure on the other and they were different," he said. "Now, many are in the middle and they offer everything."
A New Way Forward
What is driving this change? “The different needs of the guest were always there before, but probably the pandemic and then the shift to remote working highlighted the fact,” said Theo Bortoluzzi, business development manager for Kerten Hospitality.
In many ways, the working population has become more mobile, although the medium- to long-term outlook suggests that high-paying corporate travel will never return to its pre-pandemic levels.
Investors, developers and operators are therefore adapting to capture both leisure and business demand or the whole guest.
Increased costs and operational complexity are two potential downsides to providing both business and leisure facilities.
Operators are seeking the most profitable ways to design their properties for now and the future. Village Hotels in the UK offer a wide range of work and leisure amenities. At its newest hotels (two new-builds and a conversion of a Hilton) the brand decided not to include a space for large meetings.
In contrast, Resident Hotels do not include any communal areas. They do not even serve breakfast; instead, each room has a mini-kitchen and a grocery-delivery option. The business model works because the hotels, in central London and Liverpool, are surrounded by cafes, bars, restaurants and attractions.
William Laxton, CEO of Mactaggart Family & Partners and a director of Resident Hotels, said: “People are realising that their room rate might be too high because it's subsidising the loss-making bar where no-one is buying a drink and the tepid water in the Jacuzzi that no one's been in since yesterday. And I feel that cynicism is healthy because it's challenging. Giving guests what they really want and what they feel they need and what they're prepared to pay for is a kinder and more sustainable model.”
Rather than being a loss, guests spending their money elsewhere in the neighbourhood is creating value for the business, Laxton said. “It’s good for capitalisation rates, good for micro-location values and good for the quality of tenants.”
Outside major cities, there is increasingly a requirement for mixed-use and hotel developments to serve the needs of the local people, which means more infrastructure and more amenities, noted Kuttig.
Speakers said businesses needed to concentrate on what they do well but at the same time be able to react to opportunities.
Daniel Johansson, director of development and acquisitions, Cheval Collection, said: “As a business, you constantly need to adapt and evolve and keep your concept current because the needs of the guest haven't changed dramatically, but I certainly think you're missing out on an opportunity when you can activate the space for many different uses.”