The pandemic will accelerate changes to the business models in the hotel sector, but they must be driven by owners, Pandox CEO Anders Nissen told attendees of the group’s Hotel Market Day 2020.
Nissen said: “Quite big change will come and the owners need to drive the change. The problem has been that the brands dominate and don’t invest anything themselves. Covid-19 could change that and mean more of a balance between risk and reward. Specialisation is gone, you need to have a model where you are active in the full value chain and if you are then you can pick up opportunities.
“The brand are smart and they must realise that they also need to change and go with the flow of the new trends - maybe there will be less brands, a bit more focused and more domestic.
“Good things often come with bad things. The development of hotel companies will accelerate because of this, you will see new players coming up and for Pandox this will give us the chance to really grow.”
Looking to the specifics, Nissen said: “We will probably see that regional or local brands will be stronger, it will open the door for independent hotels, and with that will come a modernisation of management contracts and a new version of franchises and changes to lease agreements.
“Management contracts have historically been drivers for global brands. If you see a situation with fewer international travellers the brands will have less power. If you combine that with the fact that most of the big brands have chosen an asset-light strategy which means they have chosen to focus on branding and less on operations, then that means they are probably not the perfect partner for many passive owners.
“I believe that some owners will say ‘of course we want to have a management contract but maybe we want to go with these third-generation players’. These are new companies which are not global, they are local and know every corner of the city, we see them in the US and UK and they are a strong partners for big property companies who have only a few hotels and don’t have the expertise to run hotels.
“If you look from the brand’s side they will go towards franchising, but to be successful there they need to modernise the franchise agreement, with better distribution, a different profile for the loyalty programme, more sustainability and CSR.
“The lease side also needs to be modernised, with less fixed leases. Owners really need to understand the hotel business better, and the operator needs to come up with substantial minimum levels and good guarantees.”
As for changes to travel trends? Nissen said: “People want to travel but want to travel shorter, safer and simpler. Sustainability might also drive people to take shorter trips. More domestic is not necessarily bad for the industry. Countries that already have strong domestic consumption, like Germany, the UK and partly France, will see more trips, shorter trips, which might drive demand higher for the industry. We need international for the rate on top, but the biggest sector of the industry is domestic. I find that very attractive for the industry.”
Insight: If only every company would have a version of Pandox’s Hotel Market Day, where every day you give the CEO the chance to really open up and talk about strategy, about the market and the trends they are seeing and all with a live band a chap talking about brains. It has all the classic makings of a good day out.
And for Nissen the chance to expand on popular themes, largely the sharing of risk and responsibility, with the clear message that owners need to step up and demand change. Let it not be forgotten that they’re the ones with the cash, after all. Will it happen? There have already been leases renegotiated in Pandox’s territory and the Tale of Travelodge in the UK is one of metamorphosing models.
While the brands were called on to step up, there was also a warning of sorts as the power of shopping local meant that many hotel owners could stop shopping global. Airbnb is no doubt all ears.