This week on In Focus we heard Andrew Harrington talking about the potential for more flexible, hybrid leases. Last month we heard from Pandox CEO Anders Nissen about how the move away from global to local brands would help encourage the big brands to be more flexible.
The recent results season was littered with comments from CEOs about how flexible they were being, how they were picking up the ‘phone to owners all the time and working together like one big family. Marriott CEO Arne Sorenson told analysts that, looking at changes to brand standards bought in during the pandemic: “Some of the above property costs that have been cut we think will stick and stay for a while. We’ve probably reduced breakeven occupancy by three to five points depending on the brand”.
And on the other side of the Marriott sandwich, Host Hotels & Resorts CFO Sourav Ghosh said: “Marriott has actually restructured and reduced above property shared services, for sales and marketing, revenue management and IT and are right now working towards reductions of their programme Shared Services fees for the following year.”
He added: “For this year, Hyatt has also reduced the fixed component of their above property IT costs by 15% and chain marketing fees by as much as 50%. And moving forward, they're really committed to making their fees more variable, so that the cost is actually tied to exactly what you were talking about the value proposition to the owner.”
Isn’t it lovely when they all get along? But how long can it last? Writing in Hospitality Insights, the co-founders of owners’ group Reform Lodging called on the leading global operators to consider eliminating or reducing complimentary breakfast requirements - but beyond the pandemic.
In an open letter, the trio called for the following changes
- For budget and economy hotel brands, provide an option for owners to completely opt-out of any complimentary breakfast requirements. Owners who choose to provide some complimentary items such as coffee and pastries should be allowed to choose the vendor of their choice.
- For mid-scale hotel brands, provide an option for owners to completely opt-out of any complimentary breakfast requirements if financial performance thresholds are not being met. For owners that choose to continue offering complimentary items, relax mandated vendor requirements and allow owners the ability to procure food and supplies from the vendors of their choice.
- For upper-midscale hotel brands, provide owners the option to offer a significantly reduced complimentary breakfast offering such as grab-and-go bags indefinitely, if financial performance thresholds are not being met using RevPar levels as a benchmark. In many secondary and tertiary markets, upper mid-scale hotel brands, do not meet the system-wide averages and have performance figures that are more in line with midscale or lesser tiered hotels. Expand procurement options and relax mandated vendor requirements for owners who continue offering complimentary breakfast options to allow for continued savings.
- Similar to full-service hotels, other brand segments should be able to charge a certain amount for breakfast and pass down the cost to the guest tiered by level of breakfast service, like continental (cold) $2 per person, continental (hot) $3 per person, full hot buffet $5 per person, etc.
- Develop partnerships with national QSR and restaurant chains, as well as local non-chain small business restaurants where hotel guests receive a percentage discount off of their bills if they dine with those particular outlets.
This, they felt, would also help to support the restaurant sector, which, whatever your affiliations, has it worse than hotels. We await any response with interest.
Also this week, Sorenson was talking to the latest Morgan Stanley gathering. Looking ahead, he said that, as the business moved away from the pandemic, it expected to keep some technology traits, commenting: “We’re not a tech company…but we’ve got a loyalty programme and a dotcom site and an app where we are probably one of the top 10 globally in terms of the dollars of volume we do through our site.
“There are aspects of this reliance on technology, which will remain good for us in the years ahead. I think digital check-in will be something that gets accelerated because of the pandemic that we’ve been through.”
Music, one would think, to the owners’ ears, as technology has shouted about how it can keep costs down and now, finally, can prove it. But it’s likely to be met with slightly elevated blood pressure on the part of investors. More technology, more brand standards, more costs? The brands are not known for their amazing skills when it comes to implementing technology. A step forward? Or same old frenemies?