Hotel operations can be more complex to take on than operations in other asset classes. In this TV show Ryan Prince of Realstar group discusses competencies needed for different asset classes.
Hotel operations are the most difficult
There's different characteristics, so if you look at student housing, it tends to be more stable than hotels. You don't have to deal with night to night filling, so I think there's lots of attractive characteristics of these alternatives, but similar to hotels, they're operating businesses by and large, and so there's a lot of skills that the owner needs to have in order to understand how to run those things, deal with employees, deal with day to day occupancy issues.
I generally think hospitality is the hardest asset class to run and operate, so my, in my experience, if you understand hotels, moving down the spectrum if you like, is an easier thing to do than moving the other way. I think the people who actually find the biggest difficulty is, are those people who are in student, and think moving to hotel is a logical step and that's a much harder step to make.
For more great shows on hotel operations, check out more videos from the other Hospitality 250 experts.
We operate 11 properties along with 900 apartments. Typically blocks of 50 to 150, units. We take the entire property. The guest who arrives goes into a 24 hour reception; uniformed staff running the same kind of back office software as a hotel, but with no food and beverage, and you get a key to a studio, or a one bed apartment with a kitchen in it and a living space.
We're an affiliation, so at the end of the day it's a membership-based environment for an independent hotel that needs to be competitive in an international market. So if you're an exclusive independent hotel in New York, uh, you might have a New York presence, but how do you get out to 32 global markets and be competitive? So we allow that demand that we deliver the sales to the front door, yet allowing them also to be independent, giving them the tools and the ability to compete with the big brands or other hotels in the area. So, we represent about 500 hotels worldwide, it's about 300 in the EU region, about 100 on each side, uh, but really that sales demand, so it's to hook into distribution, but it's getting the delivery of the reservations if you're not with a big brand, is usually the real challenge that they have, especially on an international level.
I think one of the first things I decided to do was to get out of Australia. You know, it's a wonderful country I lived in Sydney, grew up in Sydney, but it's quite small, in terms of what you can do in the space, so if you, if you wanna be, in the hotel sector and have international experience you obviously have to leave Australia, so, that was one of my sort of the first decision, er, was to move to London where I got a position with Hilton. And a lot of it's down to timing as well, so it's, you know, right place, right time. And being involved in the transaction side of our business, so being around M & A transactions, lots of disposals, that's something that I've made a conscious decision to stay close to. And also then choosing to go over to Dubai, where I would be able to access Africa, Asia, and the Middle East, I think that's sort of broadened my career prospects and, and is part of what I think has made me get the role with Trump, was the international experience and also the experience working for a brand, and an owner, I think whenever you can have the experience of working on both sides of the fence, then that’s a great value, so really try to make sure I have experience from all aspects within the industry. Or as many as possible, anyway.
I just saw this morning on the television here in Berlin, a whole transmission on, a new concept of, working only with icons, so we don't have a language any more, but we work only with icons, which would help to have all the language issues worldwide eliminated in one go. But this is very much the new generation, I mean everything is, with pictures, everything is visual, everything is, short and fast, you know, I mean what we see in the span of attention is not too high, not too long, so you need to interest in them and involve them in a very short period of time. I think visuals help a lot there. And I also support the creativity of the young generation, there's a lot of creativity and imagination, and if you try to, to limit that down to words, it’s not in line with how they function. So that's what we see, and and it means that in our curricular at our school and our university programs, we work very much with simulations, and er, interactive courses etc, so to really involve them directly and give them the chance to, to, work on their creativity. And we see that happening, and because, I mean, our students yesterday, that one against it was Cornell, it was really based on a sort of really creative imagination of how the world could be if you look into the developments of an Airbnb and all other kind of of Uber's etc that is going on. If you look into, into this development, they find a sort of very easy going answer, it's not complicated. And I think this is one of the skills of the new generation.
In terms of operating models, many of them start out as owner operators and indeed well, you know, we've been hearing about these concepts today. Many of these brands that have come through, you know, fundamentally they have got investment and they are owner operators, they're in charge of their brand name, they, they run the operations and they also own the real estate, you know. And frankly that from an investment perspective, it works because it allows you that ability to be in complete control of the operating model, and you have that flexibility. And I think as you start moving through and then looking to expand that model whether it's into a management contract or a franchise or something else, ultimately those types of models, you want to be, you want to be sharing a concept which is established.
So I think normally what you see is you'll see this type of concept, and we've heard about it today, you know, a lot of these are owner-operators; as they've grown they've grown within an owner-operator model, but then they are looking for that next level of growth, potentially via franchise or management contract.
That's what I do. Our business is all about operating risk, so, you know, we'll take owner operations, management contracts, franchises, you know, manchises, and that's what we do; we look at those operating cash flows and, and we understand the difference in them and how they can work. But fundamentally, at this stage in the market, which is still a relatively young part of the sector, a lot of the propositions that are coming out, they are still owner operators. And, and I can understand that, it makes sense for the investors, and it makes sense for the operators because they've got that flexibility.
I’m very sceptical about brand loyalty is the first thing that I’d say and we’ve talked about that in today’s panel session, that ultimately I think brand loyalty in the hotel sector is limited. Will customers always be seeking best value? Well I think naturally that's going to be a part of their decision making process but I think the interesting thing is that there is a widely held perception that the online channel, the OTA channel is cheaper than dealing direct with the hotelier when actually, basically offering the same prices. So the challenge for the operators is really, you know, it’s not really that the OTA’s have got a price advantage it’s just that they’ve got a marketing capability and advantage that's been driving traffic to the OTA sites relating to the hotels. So I think yes, we’re sceptical about branding but overall there’s still a strong opportunity for the hoteliers to respond because the price differential is not that great.
Marketing is slightly different in that we have a lot more, business to business marketing, so we work very closely with the big corporations, we work very closely with these firms, but also we work a lot with relocation companies who are one of the main generators of business for us. But apart from that, of course, you know, people book us like a hotel, over the internet, on our web-site, or using an OTA, so there's a bit of both.
The European market has different characteristics to the market in the US as John C Wagner of Cycas Hospitality explains in this TV show.
European market: Cycas developments
Space is a bigger consideration of course in the UK and Europe than it is in the States, no doubt about that, but the demand is there, the demand from the customers for this long stay product is absolutely there and so, it's our challenge as an industry and indeed our company in Cycas, it's our challenge to try and figure out - how can you, how can you develop, how can you build a product that makes economic sense? One of the the things that we've done, and we're quite successful in the couple of properties we're doing this way, is combining a traditional hotel, and then putting a serviced apartment or an all suite hotel component as part of the hotel - for example, our Stratford hotel has a Holiday Inn at the bottom, and a Staybridge suite's on top, we're under construction now in Manchester, where it's a Crown Plaza at the bottom and a Staybridge on top, we've got a number of other developments across Europe and in the UK, where there're two hotels in one, the mix of that allows, the the land to get a bigger bang for the buck to get more rooms on the site than might otherwise be possible, and of course you've got the operating efficiencies, of you're got more rooms so you can spread staff - housekeeping, maintenance, engineering, accounting, - all those things can be combined behind the scenes, so where you still have distinct brands for the guests out front, but behind the scenes, you've really only got one big hotel versus two small ones. So the efficiencies work.
Hospitality TV will continue to feature shows about the European market and the hospitality market in other regions. Why not take a look at who else has been featured in the Hospitality250.
So there's a couple of ways for why, or how, people who own holiday homes market their property, right, so HomeAway is a marketing platform for owners. We kind of see ourselves as a partner platform, so if you're a home-owner and you own a holiday home and you want to rent it out, but you're not really sure how to get to the market, how to get the demand outside of maybe listing it in a classified ad or, you know, putting it on Gumtree or something like that. HomeAway is, you know, a place where we have a lot of demand from different travellers, all over the world, and you're able to showcase your property internationally. A lot of home owners, like, they create their own websites, they might go through a property manager. If you create your own website it's very difficult to get demand because it's quite expensive, so you can buy PPC or you can try SEO, but just from an advertising perspective it's very difficult. And then to use a property manager, you know, you're paying 20, 25 percent off of commissions, off of bookings. So depending on what you want to do, you'd use HomeAway as a medium for marketing your property to travellers.