The good, the great and the – sometimes – downright innovative came together in Berlin this month to discuss the state of the hospitality industry and make their voices heard both on and off stage.
On the face of it, it was “business as usual” and so the on-stage messages contained few surprises. But by and large it was in the panels and off-stage discussions on innovation that would have provided some inspiration for the next generation of hoteliers. The pace of structural change in our industry is accelerating, driven by new technologies, new owners and fresh thinking; and the opportunity to create new concepts, business models and solutions is unprecedented.
Here are our key takeaways from the conference:
- The economic outlook in Europe is cautious with interest rates anticipated to rise in the short-term, on the back of creeping inflation.
- Political risk has been heightened, with elections in France (April) and Germany (September). There is inevitable nervousness, given last year’s Brexit vote and successful Trump campaign.
- Political change is a concern for the industry, particularly if it results in more inward looking policies around immigration, employment and visas.
- Despite this, European hotel investment volumes are expected to remain at similar levels to 2016 (€17.8bn, down 25% on a very active 2015, according to HVS).
- Operational risk was highlighted. P&L analysis from HotStats revealed persistent erosion of GOP margin in the UK, for example, due to rising operating costs (labor, distribution, food).
- European RevPAR increased 2.1% in 2016, despite terrorist attacks in Paris, Brussels and Istanbul. Diverted leisure demand drove double-digit growth in Spain and Portugal.
- Europe-wide supply is regarded as benign, with a few notable exceptions, including London.
- The owner/operator relationship remained hotly debated. Proactive investors are seeking ways to work more profitably with branded and unbranded operators, with the rise of powerful third-party operators and franchising.
- The operator/online travel agency (OTA) battle has become more strategic. The “frenemies” recognise both sides can benefit, as the Marriott Vacations/Expedia deal demonstrates. That said, the brands are working hard to convert guests to loyalists who book directly.
- Brand innovation increases consumer choice and also attracts new customers. Within a brand portfolio, a new product becomes a driver of loyalty. The Marriott/Starwood merger and Accor’s diversification strategy are underpinned by a vision to meet all their customers’ accommodation needs.
While we’re still behind the curve as an industry in terms of transformational solutions, there is growing acknowledgement that we need to create or source these by innovating inside and outside the industry, through competitors, suppliers, academic institutions, service providers, start-ups, and entrepreneurs. This will drive the next transformational phase in the hospitality industry and this is what will excite our next generation of employees and leaders.