The future for economy branded hotels is looking remarkably strong, with outstanding opportunities across most of western Europe. Delegates to the sixth annual Hotel Investment Forum heard that even though some countries, such as France and Portugal are probably reaching saturation, many others, including Poland and Spain are ripe for growth. And while the outlook for eastern Europe may be uncertain, Russia is viewed with optimism.
The opportunity for EasyDorm or Yotel! to prove there is an differentiated offering at this level was one of the issues explored at the Forum, held in Berlin during March.
It was debated by four panellists brought together during a break out session chaired by Nigel Bland, Director with the Corporate Finance team at Deloitte & Touche.
The panellists – Puneet Chhatwal of Rezidor SAS Hospitality, Laurent Bonnefous of Accor, Shane Harris, of Six Continents Hotels and Piers Talalla of CIBC World Markets – discussed economy lodging, considered to be the fastest growing sector of the hotel market.
The panel discussion was one of many plenary and break out sessions during the three-day event, which was attended by more than 1,000 delegates. The Forum embraced art as the overall theme, so while some sessions were designed to ‘paint a picture’ of key industry issues, others brought several ‘old masters’ to the platform to explore the art of success within the hotel industry.
Shane Harris felt this particular sector is favoured by Europe’s current economy, which is driven by small, medium-sized enterprises, leaning towards a service base rather than manufacturing and moving from an unbranded to a branded environment.
Only building constraints within various countries could limit growth, the panel acknowledged, although Puneet Chhatwal believed the re-branding of existing operations could be a way through.
They agreed that branding is the key to building domestic market awareness and popularity, and a successful network in the home country should be developed before pan-European expansion was attempted.
Most economy-lodging brands are primarily focused on domestic demand and tend to be customised to suit the home country. Some of this is led by legislation and some by habits of eating or personal hygiene. It was felt that hotel brands must be developed locally and reach an adequate scale before being introduced into other geographies. Only then could changes be made to be basic proposition to suit customer demands in different European countries.
These changes probably came more naturally to brands with European roots than American-born brands, which need significant customisation if they are to appeal to the different European markets.
The faster option
Growth through owner-operator development is a better option than franchising, although there could be a case for opportunistic growth in non-strategic locations.
While the three hotel operators plumped for organic growth as the best way forward, Piers Talalla suggested that acquisition is the faster option to reach more customers, and does not rely on too much attention to the home market.
The fact that 70% of adults have never stayed in a hotel also offers hoteliers a golden opportunity to re-think their strategies for the economy market. By following the example of Ryanair, whose radical approach to targeting the lower end of the consumer market has shaken some assumptions about flying, hoteliers could probably reach new customers by dipping below their current lowest price point.
Delegates who joined the economy lodging panel session may now be looking out for talented young ‘artists’ who can exploit the growth opportunities in the economy lodging sector and create a fresh landscape for the 21st century school of economy hotel-keeping.
Nigel Bland
nbland@deloitte.co.uk
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