This week results season reached the deep core of the branded hotel sector, with Marriott and Hilton giving us a look at their ankles and some answers to those favourite questions: ‘when is it going to be 2019 again’ and ‘what are you going to do about this pesky inflation?’
We’ll begin with the latter. For Marriott, costs were being kept low and ADRs were increasing. Basic economics. CEO Tony Capuano said: “We’re committed to delivering guest experiences while keeping costs down”.
One of those experiences was having a room in various states of cleanliness. Housekeeping, he said: “continues to evolve” with daily room cleaning optional at the bottom of the chain scale, but very much mandatory at luxury level. F&B was “largely back” in markets which have recovered, but don’t book expecting a relaxing few hours with your favourite all-you-can-eat buffet just yet. You may still have to spend out on lunch rather than enjoying the long digest until dinner.
The message was similar across the branded landscape. The flags were happy to talk of lower costs and better margins and the owners know that it won’t last forever. The pandemic has been marked by relentless Winston Churchill quotes, so it won’t hurt to chuck in another: “If we open a quarrel between past and present, we shall find that we have lost the future” and there was much debate on the various earnings calls about what that future might be, past spats over fees aside.
At Marriott, the market was all still about leisure and what Capuano described as a “significant tailwind” in leisure demand, caused by the not-quite-back-yet international market, but also the current flexibility of how people work.
In the short term, this meant that the use of OTAs to book Marriott rooms was up by 200 basis points, to 14% in 2021, while direct was also up: to 76.3%, over 300 basis points. So who was the loser? The GDS.
Back to what the leisure market was up to and the light was shining on the customer’s desire to, well, linger for longer with Marriott. The group saw a strong increase in residential branding fees, which it didn’t expect to subside and there’s no greater compliment for a brand than people wanting to live with you.
As to the threat from Airbnb, which has been all about lingering for longer, Capuano remained untroubled. Marriott customers want a “full compliment of services” against what Airbnb offers, he said. And the group has Homes and Villas just in case.
Airbnb itself dialled up the WE ARE THE REVOLUTION rhetoric, with CEO Brian Chesky describing the group as “amidst the biggest change to travel since the advent of commercial flying”. That’s great, Brian, but what are you going to say next quarter?
Chesky said that long-term stays of 28 nights or more remained its fastest growing category by trip length and accounted for 22% of gross nights booked in Q4, up 16% from Q4 2019.
The season has shown that the inclination of the consumer was to spend more, not less, time with the brands, be that in branded residential or other offerings where one could eat at a table and not into one’s laptop.
Last week saw Pandox reported that it acquired an Adagio in Edinburgh which, CEO Liia Nõu said have the group “exposure to the extended stay segment, a segment of our portfolio that we hope to be able to grow over time”.
Exposure that Wyndham, no stranger to lingering, was planning to build on with the launch of its first extended-stay brand for the economy segment later this year, something which may send something of a chill over the peer-to-peer lodging segment and its tendency to lead on value.
This week saw another new entrant to the longer linger segment, with Cheval Collection launching a new urban lifestyle serviced apartment brand, MY Locanda, putting its money where its mouth was and agreeing a joint venture for the first site, which is due to open in Glasgow in 2024. The company signed the agreement with Chris Stewart Group and will operate the property.
Cheval Collection’s COO John Philipson, said: “MY Locanda is a perfect complement to Cheval’s existing brand offering, giving us the scope to deliver an exciting new concept that responds to and anticipates changing traveller behaviour. Each new property is designed to reflect the mood and personality of its surroundings and will be enhanced by up-to-date technology and superior service.”
The serviced apartment sector has seen growth in interest from investors during the pandemic, when many properties were able to remain open during the pandemic. The growth of peer-to-peer lodgings has driven interest from guests, drawn to the convenience of the whole-apartment model and the chance to feel embedded in a community.
And this takes us, seamlessly, back to inflation. In these long linger models there is less pressure on housekeeping, kitchens guests can use mean less pressure on F&B and not changing occupancy every 24 hours means less pressure on the data input hell that is reception.
The hotel sector had feared that the reduction in business travel would mean a loss in revenue and the rise of Airbnb would mean the leisure guest going elsewhere. Instead, people could find themselves spending longer with their favourite brands, enjoying the services they want – rather than those foisted on them or none at all – and all for lower operating costs and a drop in the stress and cost of having to fill beds afresh every night.
As Churchill said: “We are all worms. But I believe that I am a glow-worm.” Truly, a comment for every occasion.
Image: MY Locanda