The 20th International Hotel Investment Forum 06.03. - 08.03.2017
The 20th International Hotel Investment Forum took place at the Hotel InterContinental Berlin, Germany. Kerry Gumas, President and Chief Executive Office, Questex LLC welcomed over 2,000 delegates from over 80 countries to the conference. Gumas outlined that the programme for this yearâ€™s event was split into three distinct days; day 1 would focus on rethinking hotel investment over the last 20 years, day 2 would examine the various business models across the industry and day 3 would explore innovative in its various forms with the hospitality sector.
Providing the economic outlook was Roger Bootle, Chairman, Capital Economics who started his presentation stating â€śthe world economy was set reasonably okâ€ť. However, looking to the US, he predicted that President Trumpâ€™s promise of an increase in spending and a reduction in taxes would lead to a surge in borrowing and an increase in government debt. Further uncertainties for the US include the rising dollar and whether Trump will stay the course of his term in office.
Looking to the Eurozone, Bootle noted major divergences between countries; Ireland and Spain showing particularly strong growth whilst Italy had very little. He referenced the various significant political events on the horizon and said; â€śI canâ€™t remember a time so fraught with political riskâ€ť and also noted that â€śif there is a fracturing in the Eurozone, it is likely to spreadâ€ť. Looking at the UK, Bootle noted three quarters of growth at a rate of 0.6% and reasons to be optimistic although inflation is increasing and earnings donâ€™t look set to match this increase which will â€śresult in a squeeze on peopleâ€™s real incomesâ€ť. Looking specifically at the City of London he said that it would â€ślose a bit of business and some jobs, but it will be marginal. Its position will remain strongâ€ť. Looking at Europe he said â€śthe last thing Europe needs now is stability, because stability means stagnationâ€ť and he concluded by stating that in his opinion â€śinterest rates were going to go up sooner, further and fasterâ€ť than widely predicted.
The next session was 20/20 Vision: Looking Back 20 years, Looking Forward 20 Years hosted by Michael Hirst OBE, Consultant, CBRE Hotels, in conversation with Alison Brittain, Chief Executive, Whitbread and Richard Solomons, CEO, IHG. Hirst started with a retrospective look at their organisations and Brittain highlighted that â€śWhitbread was born in 642 to brew beer and we are still brewing, albeit coffeeâ€ť. Both Brittain and Solomons hail from the banking industry and Hirst asked what skills they felt they had bought with them from this industry?
Brittain responded that she had experience across commercial, corporate and retail banking and these areas bought different skills but the retail banking side provided knowledge in high street management skills, digital technology, procurement and cost management.
Both Solomons and Brittain are non-executive directors at M&S and Hirst asked what value they bought to this role. Both agree that the impact of digital and the challenges faced by any global franchise business are similar and therefore there were lessons to learn from the retail industry. Brittain said she can â€śbring independent experience and also gain a huge amount of insight. Each industry has the same problems but framed differentlyâ€ť.
When asked about the significant changes IHG has faced over the last 20 years, Solomons said the decision to adopt an asset light approach had been one which was â€śpartly about returns but a lot about focusâ€ť. He also said that the technology change was huge and thirdly that there was now a real focus on guests and IHG were developing brands around guests. He said IHG had seen its highest level of openings since 2007/2008.
Asked about the future of Whitbread, Brittain said they were â€śhappy with our structureâ€ť. Whitbread are very unique and own and manage, either by freehold or leasehold, all of their properties. Brittain believes this is how they manage their service proposition. Whitbread currently have 85,000 new rooms scheduled by 2020.
On expanding their brand offering, Solomons said â€śitâ€™s really important we continue to have brands that stand for something. we donâ€™t want another â€śme tooâ€ť brand â€“ itâ€™s got to deliver something to the marketplaceâ€ť.
Asked about what they predicted was the biggest changes to the industry in the coming 20 years, Brittain said â€śartificial intelligence (AI) and roboticsâ€ť and Solomons said technology, specifically mobile. IHG have seen a growth from $0 â€“ $1.6m in 5 years of their mobile business. Solomons added â€śtechnology lets you own the guestsâ€ť.
European markets that operate similarly to the UK are growth prospects for Whitbread and Germany is a key focus. Brittain felt they were never going to the get to the scale required to operate effectively in Asia so they pulled out of the region.
10% of the IHG pipeline is Europe, specifically Germany, UK and Russia. China is also a key growth market. â€śwe have cycles, we have ups and downs, and what is really important is taking a long term viewâ€ť said Solomons.
The next session on the programme was Hotel Investment Today, a collection of presentations from industry experts followed by a discussion. Starting the presentations was Robin Rossman, Managing Director, STR who provided the hotel performance trends. Salient points included that 2016 had been positive generally, in terms of RevPAR growth, but areas that had been affected by terrorism were clearly visible and suffering. 2017 is expected to be a good year with hot markets including Amsterdam, Barcelona, Dublin and Madrid, recovery markets that are seeing stabilisation include Brussels, Moscow, Paris and Milan and over supply is affecting London. Edinburgh, Manchester and Frankfurt. Demand significantly outpaces supply in Barcelona.
Jamie Chappell, Global Business Director, Horwath HTL provided delegates with insight on hotel investment in the global economic and political climate and stated that 2016 was the third strongest year on record in terms of hotel transactions. He said that â€śbanks are still lending, private equity is dropping off but weâ€™re seeing a significant increase in funds, particularly in Europe, who are chasing after assetsâ€ť.
Andreas Scriven, International Managing Director and Managing Director Consultancy, Christie & Co discussed consolidation and M&A activity noting that â€śhotel development will shift from mature to emerging marketsâ€ť and that we will see â€śsignificant capital coming from Asia and Middle East fuelling M&A dealsâ€ť along with â€śpressure from industry disruptersâ€ť. Interestingly he foresees a â€śtransformation in booking behaviour with major investment requirementsâ€ť. He concluded by saying â€śthere is no end in sight for consolidationâ€ť
Philip Ward, CEO Hotels and Hospitality Group EMEA, JLL concluded the presentations with insight into cross-border investment. He noted â€śChina has increased investment in the hospitality sector by 80% from 2012 to 2016â€ť and urged us all to â€śremember these global trends have been positiveâ€ť. He felt there was renewed interest in the hospitality industry from the Middle East - particularly upscale, luxury assets in major markets. Having just visited South East Asia, he saw that the region was very active. He also said that â€śUS funds were showing an interest in the UK and Spainâ€ť and that overall there was â€śstrong appetite and strong demand, a very positive outlookâ€ť.
Rossman felt alternative accommodation, including hostels, would be the most significant change to the hospitality industry in the next 20 years. Scriven noted the resilience of the sector and how it reinvents and reincarnates itself continuously. Ward noted that â€śthe emergence of hotels as a mainstream real estate asset and the development of lodging REITsâ€ť has been one of the most significant changes to the industry over the past 20 years. All speakers agreed that the sector was experiencing a blurring of previously clear boundaries and responding to this would be a challenge for the future.
The second annualÂ HAMA Europe 2017 Asset Management Achievement Award was then presented to Chris Pfohl from Pyramid Hotel Group & Angelo Gordon by Theodor Kubak, President, HAMA Europe Chapter, Senior Investment Manager, Union Investment and Chad Sorensen, Partner, CHMWarnick.
The next session, Investors on the Spot: Updating the Fundamentals of hotel Investment, was moderated by Nick van Marken, Global Head â€“ Hospitality, Deloitte in conversation with Coley Brenan, Partner, Head of Europe, KSL Capital Partners, Zachary Schwartz, Vice President, European Hotels, Cerberus Capital, Sanjay Singh, Managing Director, Fico Corporation and Desmond Taljaard, Managing Director â€“ Hotels, London & Regional. The session started positively with Singh saying he was â€śreasonably confident in the UK as an investment target for the next 6-12 monthsâ€™ timeâ€ť. Taljaard said the EU referendum results in the UK created a â€ś4th quarter dip as people started to get nervous but this had now stabilisedâ€ť. Brenan noted that â€śthe refinancing risk today was very different to that seen in the last cycleâ€ť. When asked about the importance of a brand, Taljaard replied that he would flip the question around and ask â€śwhat value the brand can bring to the hotel?â€ť. He feels that the economics of branding will start to be questioned but â€śif brands can find a way to keep the costs of the value they add in balance then there would be a place for themâ€ť. The debate turned to the OTAs and Taljaard said that he felt people needed â€śa lot more weaponryâ€ť in the war with OTAs.
The next session saw the presentation of the IHIF Lifetime Achievement Award 2017 to Arne Sorenson, President and Chief Executive Officer, Marriott International, followed by an interview with Tanya Beckett, business journalist and broadcaster. After receiving his award, Beckett asked Sorenson about the recent acquisition of Starwood by Marriott. Sorenson said the deal was â€śa starting point for something we have to build. We need to create something better, not just bigger, than what there was beforeâ€ť. The key driver for the acquisition was a need to create an â€śeco-system of loyal customers with whom we can develop great relationships which would allow us to protect and grow our business.â€ť Sorenson understands that â€śpeople want experience today, more than things, and are constantly looking for better valueâ€ť. Marriott have 90,000 hotel rooms opening in 2017 and currently run a $250bn property portfolio across 30 brands. Asked about the biggest threat to the industry, Sorenson said this was â€śthe global wave of populismâ€ť and he feels Hilary Clinton lost the US election, rather than Donald Trump winning it. Sorenson has a â€śstrong sense that immigration and refugees is not an area we have consensus onâ€ť and he is nervous of the trend that â€śtoo many countries in the world, including my own, are turning too far inwardâ€ť. He feels strongly that it needs to be communicated that people are welcome to the USA and notes that 10% of GDP is driven by travel.
The following session was The Next 20 Years: A Collective Look at the Hospitality Investment Landscape moderated by Cameron Cartmell with Jim Abrahamson, Chairman and CEO, Interstate Hotels & Resorts, Cody Bradshaw, Senior Vice President and Head of European Hotels, Starwood Capital Group, Tim Helliwell, Head of Hotels, Barclays Bank and Hubert Viriot, CEO, Yotel. Bradshaw commented: â€śBrands need to go overhead light as well as asset light. Cost synergies are subsidising many of these deals, but there's no trickle down in cost savings to owners. My prediction is that Google is going to be a real disruptor in this space. In the next 20 years something has got to give- Â the brand fees are not that different to the OTA feesâ€ť. Bradshaw also noted that although much has been made of millennials as shapers of the industry, they have â€śsignificantly less disposal income than previous generations due to high levels of student debtâ€ť.
At the end of the first day was a networking reception at the Hotel InterContinental with delicious steaks.
The second day of the International Hotel Investment Forum (IHIF) started with a warm welcome from Kerry Gumas, President and Chief Executive Officer, Questex LLC who then made a generous donation of $30,000 to Ecole HĂ´teliĂ¨re de Lausanne. The cheque was presented to Remi Walbaum, Chief Innovation and Valorisation Officer at Ecole HĂ´teliĂ¨re de Lausanne.
Gumas then introduced SĂ©bastien Bazin, Chairman and CEO, AccorHotels, to the stage to talk about what the next hotel group models are in his opinion. Bazin opened his presentation stating â€śAccorHotels has never, ever been strongerâ€ť and also announced that the business would be adopting an asset light structure. He was quick to say that Airbnb, Booking.com, Expedia, etc are the companies this the hotel industry need to watch. â€śthey are very good and what they are doing is legitimate.â€ť He said â€śevery time they grow, they take something away from me. They also bring me something, they bring me traffic.â€ť.
He said that historically AccorHotels has been very asset heavy and very labour intensive. He is proud of the 240,000 employees across 95 countries and their commitment to the brand. However he pointed out that none of the successful digital players are asset heavy or labour intensive and the goal for AccorHotels is to have the same level of interaction with their guests as the digital brands do, typically 3 or 4 times a day. He said â€śwhatever we do, we need to be customer-centric; stop looking at yourselves and look at your clients. Stop imposing your brand, your promise, your intent. Listen to what they want and reactâ€ť.
He said that hotels were still a viable business but unlikely will grow more than 10% per annum. That is in comparison to the 10/15/20/40% rates of growth that Expedia, Booking.com, Uber and the other digital brands are experiencing. He feels â€śwe need to tap in to what they do, we need to adaptâ€ť. He pointed out that â€śAccorHotels have never been stronger in development they have one new hotel opening every 36 hours, around the world.â€ť
The next session focused on the Evolution of the OTAs and David Scowsill, President & CEO, World Travel & Tourism Council interviewed Dara Khosrowshahi, CEO, The Expedia Group. Scowsill asked Khosrowshahi about the level of commission currently charged by Expedia and the other OTAs. Khosrowshahi said Expedia has been â€śbringing commissions down over a long period of time and we now need to pass these savings on to customers, shareholders and partnersâ€ť. He highlighted the trend of de-bundling and gave airlines as an example of how they now charge for each element; seat, food, luggage, etc and said that this is the way the hotel operators should choose to steer their businesses. He felt the internet was mainly responsible for tearing apart pricing into its components and creating the popular bundle pricing models we are seeing today.
Asked about Google and their moves into the tourism space he said â€śGoogle is a marketing platform and a very important strategic partner for usâ€ť but decline to comment any further. He did state that â€śthe market is consolidating, the amount of technology you need to invest is this business is getting higher and higherâ€ť. He thinks that alternative lodging is going to be a very important â€“ reference the 2015 purchase of HomeAway by Expedia for $3.9m â€“ and a powerful factor for the future of our business. He feels we are at the start of a new wave of travel growth and the alternative lodging sector is â€ścurrently where eBay was 5 years agoâ€ť but through combining technology with distribution, this could be a real opportunity for brands and owners.
He feels Airbnb is â€śboth a threat and an opportunity, anytime new supply is introduced new supply, itâ€™s a threat to pricing and the opportunity is that it will introduce new travellers.â€ť
Scowsill said that â€śChina will dominate the future of the travel industry for all of usâ€ť and Khosrowshahi agreed saying Expedia were â€śfocusing on the outbound Chinese travel market.â€ť When asked about President Trump Khosrowshahi said â€śthe fact that the ban is not based on fact is what worries me the mostâ€ť. Khosrowshahi concluded by saying â€śtravel is a force for good and brings people together.â€ť
The next session was Re-thinking Strategies for Maximum Opportunities hosted by Mark Finney, Head of Hotels & Resorts in conversation with John Brennan, CEO, Amaris Hospitality, Jean-Philippe Chomette, Founder and Chief Executive Officer, Algonquin, Andreas LĂ¶cher, Head of Division Investment Management Hotel, Union Investment Real Estate and Camil Yazbeck, Partner, Investment Director â€“ Hospitality, Patron Capital Advisers LLP. Yazbeck said: â€śwe look at hotels where there is opportunity for a growth model, like the Generator Hostel model. We liked the model, bought it, and improved itâ€ť. He said they only hold assets generally for 3-5 years and do all the asset management in-house.
When asked about asset management on their assets, Chomette answered â€śitâ€™s the performance and health of the asset that dictates how much asset management is required.â€ť
Finney asked the panel about OTAs and their attitudes towards them. Brennan said they were the â€śfrenemyâ€ť and said â€śwe need to optimise the performance of the brands and assets in the context of OTAsâ€ť. Chomette made the point that â€śOTAs are part of life now and we have learned how to live with them.â€ť He also said that people seem to have forgotten that before OTAs there were tour operators who were taking 15-20% commission.
Raj Chandnani, Vice President, Strategy, WATG, Wimberly Interiors gave the next lightning talk on the subject of design and staying ahead of the curve in a fast-moving world. He said â€śmemories are formed from individual momentsâ€ť and it was vital to understand:
Who is the customer?
Why are they coming?
What are they willing to pay for?
Where are they coming from?
Chandnani mentioned the first â€śInstagram hotelâ€ť in Sydney, Australia as a new model of experiential accommodation and warned that â€ścookie cutter design solutions are no longer acceptable.â€ť He said consumers wanted â€śbespoke design that truly differentiateâ€ť and that â€śdesign elements need to be intuitiveâ€ť. His final thought was that the industry needs to â€śreconnect hospitality with humanity.â€ť
The next session was the presentation of the IHIF Young Leader Award to Eva Bachmann, Director of Acquisitions and Strategy at MEININGER Hotels. David Neff, Chairman of The International Society of Hospitality Consultants (ISHC) presented award. In her acceptance speech, Eva said she was â€śprivileged to be recognised for my contributions to an industry which I am truly passionate aboutâ€ť.
The final plenary session of Day 2 was the CEO Debate: Striving in a Changing Market. Moderated by Russell Kett, Chairman, HVS London Office in discussion with Puneet Chhatwal, CEO, Deutsche Hospitality, David Kong, President & CEO, Best Western Hotels & Resorts, Stefan Leser, Group Chief Executive Officer, Jumeriah Group, Simon Naudi, CEO, Corinthia Hotels and Pierre-FrĂ©dĂ©ric Roulot, CEo, Louvre Hotels Group, CEO Jin Jiang Europe. Kett asked about the effect of Brexit and the volitility across Europe on their respective businesses. Kong replied that â€śit is important to focus on the brand building of your business in times like this; focus on what you can control and influenceâ€ť. Leser said that their development plans for the future included â€śinvesting heavily in our products to keep the assets currentâ€ť and Jumeirah would be developing further in China. Naudiâ€™s goals for this year for Corinthia involve â€ścontinuing to put a focus on quality, not forgetting we are hoteliers and we need to give good service to our customers.â€ť Roulot will be investing in the growing market across Asia whilst working on the loyalty of the customer to the brand.
Kong wants to establish the best loyalty programme in the industry for Best Western as this is â€śour best defence against the OTAsâ€ť as he feels that â€śin 20 years, hotel loyalty programmes will be as relevant as they are today.â€ť
Naudi said that Corinthia have joined the Global Hotel Alliance comprising around 600 hotels. This was a good solution for Corinthia as â€śwe share technology and cross reference but maintain our own identityâ€ť.
Another question was how the brands really differentiate? Naudi said that because they were â€śowners, investors and developers they look at the industry differentlyâ€ť and carefully consider the type of talent they attract who can think on all three levels. Roulot was cautious that â€śsometimes when you are big, you destroy the value of a businessâ€ť and Chhatwal encouraged us to â€śstay true to your DNAâ€ť
Looking at how best to innovate Naudi said they were currently recruiting for a newly created role of Director of Innovation at Corinthia and also mentioned the success of moving the florist at their London hotel, traditionally located in the basement, to the foyer. Leser said the environment in Dubai was generally conducive to innovation but said he faced the challenge of how to remove the hierarchy traditional found in hotel companies that would lead to empowerment of staff, thus enabling innovation. Kong echoed this when he asked how to â€śevolve the culture of a company in order that it embraces innovation. â€śMany companies have great ideas but the culture needs to enable the innovationâ€ť.
The final question Kett asked his panel was on the subject of F&B in hotels and how to drive revenue through it. The responses from the panel were mixed; Kong said it was â€śvery difficult, particularly in the US, due to the high level of good competitionâ€ť whereas Chhatwal said â€śI see F&B as the biggest upside for usâ€ť and Roulot concluded by saying that â€śa restaurant is an opportunity to differentiate the hotel.â€ť
A wide variety of breakout sessions ran across the afternoon concluding with a Gala Networking Reception at the Hotel InterContinental Berlin.
The next International Hotel Investment Forum will take place at the Hotel InterContinental Berlin - Germany, 05.03. - 07.03.2018.