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Which strategies should be implemented to activate hotel development?

At the 19th edition of the Global Lodging Forum, new strategies for hotel development were the subject of a roundtable with the development directors from the groups IHG, B&B Hôtels, NH Hotel Group, Choice Hotels International and Accor.

Claudio Capaccioli, Group Senior VP of Development, NH Hotel Group:

In our five-year strategy we set a goal to open 82 hotels. We will focus on developing NH Hotel Group over the next three years. We currently have close to 400 hotels worldwide, which is already a significant number if we take into consideration the fact that we do not do franchising yet. We are now bale to take interest in other kinds of partnerships such as franchising, which we are beginning to do. We have just signed a joint-venture with HNA to develop the brands NH on the Asian market, where we should be present by the second semester 2015 with eight hotels, in an initial stage. HNA will develop our brands in China, without ciompeting with its own luxury brand since they are mositioned on the mid-upscale segments. In order to develop on the Chinese market it is necessary to develop partnerships. This was not a difficult choice for NH Hotel Group since HNA is our shareholder.

At NH, 22% of the portfolio is owned, 54% leased, and 24% under management contracts. We are beginning to receive requests for franchises and this is something we are exploring, particularly if we wish to grow rapidly.

Phlippe Bijaoui, VP Development Europe, IHG

Growth is necessary for all hotel groups, whether it is in terms of Revenue per available room (RevPAR) or development of the hotel portfolio to increase revenues. It is our obligation to grow for both financial and strategic reasons, but must not do it "at all coasts" and ensure it benefits both franchisees and investors, while reaching a certain level of brand awareness in each country.

The strength of a network in countries where a group isestablished lies in brand awareness on the market and the distribution system that can be implemented. The bigger the number of hotels, the stronger the brand's awareness, then the more marketing strength, better distribution and better loyalty program it has.

As far as franchise is concerned, our partners are very demanding today. They want more support from franchisers, better results, a more efficient distribution system and a high level of transparency.

It is preferable to concentrate brand development on certain markets and to have brands that respond to certain segments. At IHG for example, we do not have plans to send Even to Europe, but we do plan to establish Kimpton there.

Laurent Bonnefous, Development Director, B&B Hotels

At B&B, we have always had a strong penchant for growth. The plan we established a few years ago includes minimum 10% growth per year, or between 3,000 and 4,000 rooms. We must be present the primary European countries and today we are opening up to new destinations, such as Brazil. Our development is primarily through suibsidiaries and some countries are open to franchise.

Development through franchise mostly targeted small hotels at its launch. It is rare for a 150-room hotel in Paris to to come to you if the brand is not tried and true. At B&B, it took 3 to 4 yers to implement this model. Today it works very well and today we hope to open 10 to 15 hotels through franchises each year in France. We have also done this in Germany. The idea is not to have all of our activity dedicated to franchise but to offer different areas of activity including franchise.

B&B is a single brand hotel group, but when we are asked for a different product, our strategy is to join forces with another operator and offer a combination product. C'This is what we did in  Marseille, by partnering with Courtyard by Marriott.

Dino Guiliano, Senior Vice President, International Choice Hotels

At Choice, our focus is on international growth, in addition to our primary market the United States. We have around 6,400 units internationally, including 5300 oun our domestic market and close to 500 in Europe.

The development model is not changing for us; it continues to be through franchise. We do not have management contracts and we are not investing in real estate. We are investing to create value for aour franchisees, in particular by developing new technologies (mobiles, PMS...).

For international growth it is necessary to be opportunistic and you can never say never. Our current model, especially in Europe, nonetheless consists of concentrating on what we are and the advantages that this can produce on the market, while remaining flexible.

Choice has a portfolio of 11 brands internationally, onlly four of which are present on the European market and that is right for us for the mome. We operate differently on markets where we have different brands.

Christian Karaoglanian, Executive officer of development, Accor

A group listed on the stock exchange has an obligation to develop at a forecast rate. Today distribution methods make it necessary to be stronger and stronger, whether it is a matter of brands, distribution system or loyalty program, and that happens through size of chains. This development must nonetheless contribute and be carried out according to a certain strategy and not by simply snapping up all the opportunities.

Originally, the Accor group mostly tended to own its hotels, with a few franchisees to accompany brand development. We then shifted toward leasing, and then towards even lighter systems, depending on the overall evolution. At the time it was easier to work through subsidiaries, then we branched out to emerging countries where it was more natural to develop through management and franchise contracts. Today we continue to do owned hotels, and no longer wish to rent them because it is possible to have loan rates at a lower cost than rentals, and management is very important to us (60% to 70% of our pipeline of 150,000 rooms). Acquisitions and partnerships (Mama Shelter, Huazhu) are also a means for us to strengthen our position in several countries.

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