Is this a relationship that is one premised upon the positives or negatives, is it a friend or foe type set of circumstances. I think ultimately what will be successful are those who can at least embrace it as a partnership opportunity, be mindful of where the OTAs can truly add incremental value. Many talk about the OTAs adding, if they can add incremental room nights, that’s definitely extra revenue you might not otherwise have achieved and that's serves a purpose. I think the reality at the moment is, yes you’re getting some of that but you’re also facing a challenge from quite a large amount of business not necessarily being incremental. So, I think it’s working on the ways that you can ensure that what you get is incremental and at the same time as we touched on before, ensuring that when we do gain access to that customer who may have arrived via the OTA channel, you try and make the most of the opportunity to cement your relationship as a hotelier with that customer going forwards to maybe cut out the OTA going forwards.
In this digital age there is tension between online travel agents and brands, as Carl Michel of Generator Hostels discusses in this TV show.
Digital age conflicts
There's always a tension between an OTA and a direct machine, one of the challenges is simply, you've got to, you've gotta co-exist - we're frenemies, basically, to the OTAs, they are a necessary evil, what we hope to see, is by driving more content onto our web-site, and more unique offers onto our website, that we'll gradually gain more brand fans, brand loyalists, but we're still a relatively small brand, we only have ten locations, so we have to recognise the OTAs do play an important role in getting our brand distributed and out there to the market.
Hospitality TV will continue to feature shows about OTAs and what the digital age means for hospitality. Why not take a look at who else has been featured in the Hospitality250.
Deal-making is a hurdle for growing business. In this TV show Tom Walsh of Staycity discusses a strong development pipeline.
Deal-making in alternative markets
It is a very limited marketplace. I mean our our objectives, were 900 units today, by the end of next year we'll have 2000 keys. There are deals that we did over the last few years that are under construction at the moment, many of them, a couple of them opening this year, and four or five properties opening next year. It's hard to find the properties that's, you know, that's, that's you know, par for the course, you really are competing with other users, whether it's office use or residential use, or hotel use, you're generally competing for, you know, scarce real estate in city centre locations. We're, we're seeking city centre locations, so you're, you know, you are by definition really, uh, competing with other users. Our growth plans will see us having about 5000 keys by 18 or 19. We're quite comfortable we'll be able to find sufficient properties for that we've, as I said, 2000 open by the end of next year, and a pipeline of 1300 on top of that. And, a good strong unsigned pipeline, so you know, we're able to ferret them out, you know, bit by bit, deal by deal.
Browse more videos by the Hospitality 250 experts and find more insight into deal-making and other hospitality topics.
Generally speaking residential yields are much lower than hotel yields, the happen to offer lower risk profile, there's more customers, there's higher occupancy, and generally speaking residential also tends to correlate with house price inflation, which is different than the hotel business so resi values tend to go with house price values, and so as an investor you look at both the cash flow and the value side of things. Whereas in the hotel it tends to be that the cash flow is directly correlated all the time with the value. And so, yields tend to be lower, but capital appreciation can be higher, in resi than in hotel.
Africa is more than a great opportunity, it's the biggest market to come. Just to keep in mind, a few numbers; first, 1.5 billion inhabitants by 2050, it will be bigger than uh, China or bigger than India. In the continent of Africa fits more or less all the whole world; uh China fit in Africa, India, Europe, US, and Brazil, just to give you the size of Africa. And today, if you take the market, only 5%- 5.3% of the sub-Sahara Africa, just to give you uh, the, the- the mass market that we are developing, uh, branded hotels, 5%, versus 44 in, in Europe, and 70 in the US. Then, to show you the massive opportunity we have, all together, bigger than chain original player like Mangalis Hotel Group, or small independent hotels, to support the growth of Africa.
Speaking from Wyndham, I'm excited because we continue to be one of the fastest growing companies in the world, and we're the biggest, so I think we're going to deliver on our promise to ensure that there's a hotel in every place that our consumers' want to stay.
It's really exciting, we've acquired the Dolce brand, uh Dolce is the planning, the meeting planners brand of choice, so it's 27 hotels globally, and 7 in our part of the world, it gives us the opportunity to both add a important brand to our stable of brands, but also, to have a a management infrastructure in Europe, so now we can actually manage other- other brands within Germany and- and the markets here.
You know, the real challenge for us in Europe isn't so much which market, but finding opportunities. We'd love to be in Paris and London, and you know, in Rome – the key markets – but the biggest challenge is finding hotels to buy that meet our return requirements. So we tend to look for high returns, 15-20% return on our money, and although I'd love to be in those markets, what's available really dictates what we buy. So the first hotel we bought was in Monaco, the one we're looking at now is in, you know, we're looking at things in Amsterdam, so it's very much driven by what's available, rather than where we'd like to be.
For Club Med a new development is a pristine, extraordinary piece of land that's basics. It needs to be fifteen hectare, because we need to offer an extremely good product to our guests. Three hundred and fifty rooms, that's our target. Upscale resort, er, that's four and five star resorts. That's our positioning. With quite a strong sport and public facilities inside the resort, because we like people to be together, that's our strategy, and the places where we are looking for developing these resort is ski in the US, we are currently working on a project in Le Massif, Canada, but in the rest of the US of, in the US, is something that we're looking at right now. Caribbean, we're looking at a few projects there. Brazil also. We are looking in the French Alps at developing further Club Med resorts, target as being one resort per year, we're looking at East Africa also, because we believe a Safari Club Med would be a very interesting product. Middle East, and then Asia, obviously China, we have three resort there and we're continuously developing, we'll open two to three resort per year in the coming years, and our prospection places in Asia, where we already have resort are Thailand, Vietnam, Philippines, Cambodia, Indonesia - all these countries are dream countries for Chinese, Asian guests and where we also had the capability to bring European guests. That's the best situation, where in the same place, you can bring, during the year, at some periods Chinese, at some period Asian, and at some period Europeans. That's the way to increase your occupancy, your ADR and to, at the end of the day, make money for the owner, because we're asset light, we are the owners with us, and make money for Club Med and the resort operator tour operator. That's the best way to be a successful company.
The staff level is a lot lower than, than in hotels, we all know that in F&B and in conferences, you have very high staff levels, so as we don't have this it's, it's reducing, our staff level. But also in terms of the normal hotel guest, it's when they check in and when they check out that the most work is created for the, for the hotel. And not just at the reception, but also for housekeeping, for the concierge, even for accounting, and so by having longer stays we can really reduce the amount of work that we have, per guest.
It is a typical challenge for us, of course, having bigger units. and in fairness the units size have come down, in recent years. However, please remember we have all the space that we're not using for restaurants and conferences that we can now allocate for rooms for example, as well as we might use part of that space to rent out to retail. So all this generates additional revenue.
I think another key advantage of serviced apartments is in terms of exit strategy, a hotel, you can always just sell as a hotel, in one block whereas serviced apartments, depending on the legislation in the country you are in, you might have the opportunity to sell the apartments individually as private residences And so therefore you have an option basically to if the residential market is booming, you might say "hey, you know, I'm actually selling these as residential" rather than, than, as a trading business.
Customer demand will drive which concepts take off and which get left behind. In this TV show Tim Helliwell discusses how consumers are looking for something different.
Customer demand for alternative accommodation
Well, I think these really are arguably the future in terms of where the sector is going. The established brands and the established offerings will always be there and there will always be a market for them, but as we've heard today, you know, people are equally looking for something different, whether that's the brand offering and everything that goes with it, or indeed, in terms of the concept that's been offering. So, whilst, as I said on my panel, that you know I, I'm focussed on hotel finance, I'm actually focussed on aparthotel finance, hostel finance, anything which has got a hospitality angle to it, because frankly that's what consumers are looking for, and that's exactly why I'm here.
Hospitality TV will continue to feature shows about customer demand and alternative accommodation. Why not take a look at who else has been featured in the Hospitality250.