The lodging industry, as all others, has undergone tremendous change and this change has become exponential. the same can be said for the food industry, the hospital industry, in short for the hospitality industry as a whole. At LHC we dare to think that the hospitality industry includes banks, insurances, airlines and more, as they have one thing in common, apart from their core business, they serve customers. Some industries fail or will fail because they still see their clients as non-entities, as patients, as a means to achieve their own goals instead of seeing their business as a mean to achieve customer satisfaction. This is one reason why we see more and more large companies approach us in order to develop programmes aimed at helping them gain back the customer.

But let’s not digress, let’s go back to these changing models.

So what do we see?

Traditional segmentation has been abandoned and individual solutions are found to meet the needs of narrow segments, this can be seen in the multitude of brands that pop-up all around us. Being traditionally linked to the hotel industry, this is where we observe this the best. The big groups create new brands almost every year and they roll these out as fast as they can in as many destinations that can support such a brand.

We see the same in the food industry, where new brands, new concepts pop up all the time. What drives these changes? First and foremost is the need to tell a different story, to make sure the customer can make the difference between all these concepts and choose one that suits him. But it is also driven by the fact that customers are easily bored ad that all around them they see change occurring at a fast pace: So why would you eat the same food of stay in the same hotel when the mood, the occasion, the company or your budget is different.

Coming back to hotels, we see also that owners seek, and find different models. Shall they go for a hotel, a shopping mall or for apartment blocks. But why not go for a mix of all? We’ve been assisting several owners on projects of late and we see that more and more projects are no longer seen as independent items like a hotel, or a restaurant or a mall or offices. Even more so than before, all these projects merge in one big project. We’ve seen this in Paris, Madrid, London, Geneva…

Which leaves the small owner or investor somewhat in the cold. But then they can consider Airb&B, or serviced apartments or shared space solutions, etc… Combining private housing with communal working spaces and shared dining solutions…

To all these models, we also see changes in the different models that are offered to owners in regards to the management of these business units by operators. Those changes are slower to happen, especially as hospitality groups have merged, associated and purchased each other over the last couple of years.

But we also see smaller operators pop up. Starter companies developing management solutions for youth hostels, for services apartments or for shared space solutions.

The models they use are similar to the ones that the big groups use : management contracts or franchised contracts.

Because of their smaller size and the novelty of their models or solutions, they do not venture into lease contracts as they do not want to take too many risks.

The franchise model for these new operators is not (yet) a viable options. Although they may have to go there sometimes for reasons of expansion or in order to secure a contract, they clearly prefer the management model whereby they can secure quality and prove to existing as especially future owners that they are able to manage these properties.

New owners are savvier that before, because they have access to more information than before, because they are better educated and because there are many operators on the market.

We’ve seen changes on the classical management models along the lines of :

  • Hybrid models like “manchised” that combine management contract for an initial period to then move to franchise when owners feel confident that they can take over. The management contract period is generally equal to the assumed ramp-up period
  • Models whereby an operator will perform the opening phase and move to franchise on the opening date. This allows owners cheaper access to existing knowledge and expertise in handling openings (or indeed rebrandings).
  • Buildings that hold different brands under different management models : luxury brand under management contract and the cheaper brand in a franchise agreement.
  • Or indeed open contracts, where there is only a remuneration based on what services the owner will require : sales, management, human ressources, etc… We’ve observed some of these and they have some limitations especially in the commitment one can expect to the business if not retained 100%, but then various incentive schemes are possible such as variable remuneration based on revenue, or cost optimizations etc.

The biggest difficulty is and will remain the distribution side of things. Although the big organisations are a safe choice and the fact that you’re working through their reservation platform can be a reassuring one, these also come with a cost. But the cost of the contract is one thing, but the negotiating power of these organisations must be taken into account, i.e. compare cost of the contract vs the cost of reservation and the volumes that are delivered.

One must also dare to ask the question about the representation. Do we need to be represented by a third party?

We’ve been involved in a project where we advised the owner against going with a brand because the location was, still is, selling itself and that high and low season were so well defined that we were convinced any operator could not change this paradigm. Although the owner decided to go for a brand anyway, they only manage to fill high season and were unable to change the level of bookings for the low season.

We’re also involved in a large city hotel where owner wants to move away from a brand and turn to a small operator. In this case we challenged this choice as city centre location, with large competition, is typically a situation where representation can benefit the owner. Owner is looking at the cost of the contract, at the base fee and the incentive fee, but needs convincing to also look at reservation cost, at targeted clientele, i.e. can operator target those customers identified as being the hotels’ target? In this case owner is also looking at the concept as being the ultimate goal where we see the concept as a way to achieve owners’ return. Match the concept to the identified target customer and ensure maximal return to the owner. Obviously the choice of operator will come with a choice of management model. So in a changing world, changes to hospitality management models isn’t as fast as the models or brands around us. There is comfort in certainty.

Photo P.Verbeke 4×6

Pierre Verbeke Senior Consultant at Lausanne Hospitality Consulting SA

With a passion for hotel operations, Pierre, as Senior Consultant, will add his know-how in hotel openings and project management to the experience of the team.

Pierre has an extensive career in hotel operations, pre-openings and rebrandings. He is first and foremost an operational person having managed several hotels in Belgium and having set up many pre-opening teams in different countries.

He also has gained a wealth of experience opening hotels for a large Hotel Operator in various European, North African and Eastern Europe countries. He is particularly at ease with project management and knows how to deliver the highest quality of service within the agreed timeframe.

Pierre has experience with leased, managed and franchise properties and understands the various demands from owners, investors, operators within the different projects.

Pierre is an alumnus of Ecole hôtelière de Lausanne. He speaks Dutch, French, German and English, with some notions of Spanish.

Pierre likes to spend time with his two children and his wife, he also appreciates good food, good wine and the outdoors. But above all, Pierre likes to travel and discover new people and new situations.