Ahead of AHIC 2020, Filippo Sona, Global Hospitality, Drees & Sommer, says hotel design, operations and marketing are crying out for a radical transformation, which must be driven from within the hotel industry.
AHIC 2020’s theme, ‘Transform Tomorrow’ resonates greatly with all of us at Drees & Sommer. With the start of a new decade, we are focused on ensuring every project we work on is delivered to succeed not only now, but in the years ahead. We have to question every brief, challenge every design and revise every plan to ensure projects are being delivered as efficiently, innovatively and cost-effectively as possible. We have to open our minds to new ways of working, as we anticipate the consumer demand of the future.
All transformation is market driven, but when it comes to the Middle East hotel sector, there is one common thread; from 2020, owners and operators alike need to hit refresh on the previous decade and start doing things differently.
In most areas, the hospitality industry in this region has reached an accepted level of maturity, meaning there are now three key areas to be addressed. At Drees & Sommer, we believe transformation needs to take place firstly in the way the hotel industry approaches design, build and branding; secondly, with regard to how it operates hotels on a day-to-day basis; and thirdly, in terms of how it promotes assets in a global context.
Almost all of the global brands are now present in the Middle East and the largest hotel companies dominate the market, from Marriott and InterContinental Hotels Group to Accor and Wyndham. These companies operate some great brands, but it’s also fair to say that the majority of these brands have not changed much over the years. This is partly why they have been so successful, but it’s also true that what worked 10 years ago may not work 10, 20, 30 years into the future. Consumer needs and wants have changed dramatically and it’s the job of the developer and the operator to anticipate how these desires will manifest in the future. This must be balanced against the fact that ROIs have also shifted, meaning floor plates and room sizes also need to be adapted in order to create profitable businesses. Space planning is an area that requires transformation, with the physical design of the asset inextricably linked to its revenue-generating potential.
On this note, how we build is also starting to change. Two new models are available for consideration: ‘design-build’, whereby the delivery of design and construction are managed by a single entity; and ‘modular’, involving the building of hotels via prefabricated sections, built remotely and then delivered to the construction site.
We are currently working on one project in the region that follows the ‘design-build’ model and there are several clear advantages. The design process is efficient and fully integrated with the overall project, meaning adjustments can be made very quickly and the developer has a much tighter grip on the outcome of the project, from financials to aesthetics. Everything is managed in-house, by one partner, so you can move faster and react faster. Previously, the design-build method has been seen as something only suitable at the budget/midscale section of the market, there are now examples of it working well in the five-star segment, too.
Both the design-build and modular approaches have the potential to save developers significant costs as well as speed up the construction process, meaning they should be at the forefront for investors right now.
In mature markets like Dubai, with different clusters and well consolidated tourism areas, we need to start to run hotels differently. In the most high-volume areas, assets are getting tired. The product lifecycle is approximately 10 years and many hotels are in need of refurbishment and repositioning. This is a brilliant opportunity to transform them into businesses that will drive the returns owners are seeking.
It’s about far more than updating the design, however. The business model simply has to change. Look at F&B for example; concepts are outdated, and most restaurants are huge cost centres for hotels. The size and profile of the workforce needs to be adjusted. We need to start running hotels with the same number of staff as in Europe and the US. Imagine the savings possible on payroll, not to mention the improved efficiency that often comes from smaller, well-trained and better-managed teams. Also on the topic of people, it’s high time the industry made a concerted effort to recruit and train local talent. It’s happening in Saudi Arabia and Oman – you check into a hotel and you interact with locals. They bring the local flavour to your stay. We have to stop paying lip service to this in other markets and ensure our operations are properly set-up to train and integrate local talent. Hotels will be able to provide a different level and quality of service, not to mention the saving on staff accommodation that will come from not solely relying on an expatriate workforce.
Operators also need to look at the structure of their workforce, from creating central departments for functions such as HR and finance to outsourcing departments like housekeeping and laundry to companies that specialise in these disciplines. At the moment, the high running costs of departments like this are negatively impacting balance sheets, and hotels need to think beyond what has traditionally been done and make radical changes to reverse the trend.
Marketing for many hotels to date has been more of a sales pitch, based on location or special offers. It needs to become much broader than this going forward. Hotels have a responsibility to promote their destination, not just their individual asset. There needs to be more understanding of the consumer journey and the booking process, so that marketing can correctly tap into this and upsell appropriately.
There are fantastic events programmes in many Middle Eastern markets that are grossly undersold by the hotels surrounding them. The one glaring example right now is Expo 2020 Dubai. How many hotels have you seen marketing this and offering packages associated with Expo? A business opportunity is staring us in the face – let’s grab it with both hands.