Straight from the Operator Forum 2024

10 min reading time

Published on 28/05/24 - Updated on 30/05/24

Operator Forum

Welcome to Hospitality Day! Follow live the Operator Forum 2024 conferences, led by experts, exploring European trends in hospitality, the integration of AI, CSR and profitability strategies. In the afternoon, join us for the Young Talent Awards ceremony (episode 1, season 3), followed by MKG Consulting's Brain Trusts workshops, and finally, revisit the history of Accor with its co-founder Paul Dubrule.

Introduction by Vanguelis Panayotis, CEO of MKG Consulting & Hospitality ON :

After the post-Covid activity rebound, we must not deny ourselves the pleasure. We should try to continue pushing average prices, but we wonder if there is a ceiling we will eventually hit. Let's enjoy this moment and not look for problems where there are none, as they usually come soon enough on their own!

The real question is: will we continue to see +30% average price increases over the next two years? We need to see which direction we are heading. Generally, if we are reasonable, we must have at least some doubt about this. We will try to answer this question. The human brain likes extremes, either excessive optimism or excessive pessimism. Reality lies somewhere in between, but we see that interest rates are still at a certain level, and are only slightly decreasing. Operations are struggling between the expectations of sellers and buyers, leading to a bit of a wait-and-see attitude.

For 30 years, RevPAR growth has been driven by average price. We are questioning the occupancy rate and demand, which are important underlying factors. Without this demand, there is no increase in average prices.

In France, we are fortunate to have events like the commemoration of the D-Day landings and the Olympic Games, which are positive signals. We are in a landing phase. There are different types of landings, of course, but we should expect some minor turbulence as we touch down. This doesn't mean we should be overly euphoric, but we need to be reasonable.

We are entering a very interesting period in terms of investment. We will likely enter a new cycle on societal and technological issues, including the disruption caused by AI. Changes have accelerated significantly: consumption patterns, leisure, and work relationships have evolved rapidly. We are entering an exciting time, as thrilling as the moments experienced by the pioneers of our industry.

We will see what tomorrow brings and whether we need a life jacket or not!

MKG Insight: What's up, what's next? Adrien Lanotte, senior analyst MKG Consulting :

It's interesting to look at what has changed recently and where we are heading. AI is a transformative change that we need to consider. We are in a world that has changed, and there is no going back. There are numerous market powers at play.

Global Overview:

  • We are a globally growing industry.
  • The world's number one in terms of hotel chains is no longer the USA but China.

Today:

  • At the European level, the market is quite heterogeneous.
  • In terms of chain rooms, Germany has just surpassed France.
  • The number one in Europe is Spain.
  • European hotel market: Different countries in Europe have varying levels of maturity, requiring different strategies.

Hotel Landscape:

In terms of performance and development opportunities, one of the drivers is having investors position themselves. For the mid-range segment: Paris, London, Barcelona, and the Balearic Islands stand out.

We are in a market with changing dynamics and investment prospects. Compared to 2023 and before Covid, Germany took time to recover, but Berlin forms a pocket of performance. The Mediterranean coast also stands out. There are a variety of strategies.

Major Operators:

Major operators are well-positioned. Looking back over two decades at the top ten hotel groups worldwide: the past decade has seen significant upheaval. Some of today's top ten didn't exist 20 years ago. The acquisition of Starwood by Marriott was a triggering event. There is a range of actors with a global reach.

Americans have continued to grow significantly in the US, China, and Europe. For European champions, growth has been driven by China and the rest of the world. The growth of Chinese champions has been fueled by their domestic market: over 100,000 rooms per year for Jin Jiang and Huazhu alone.

Americans are expanding globally but are strongest in their domestic market.

Growth of Online Sales:

In Europe, online distribution increased by 33% post-Covid. France is the country with the highest growth in online sales. Platforms like Booking and Airbnb represent more than $250 billion in valuation.

Ranking of Hotel Groups by EBITDA:

  • Marriott and Hilton dominate.
  • Accor, IHG, and Hyatt follow.
  • Two champions, four challengers, four growing followers, and groups just at break-even.
  • In terms of EBITDA generated per room, the champions are Hyatt, Marriott, and Hilton. Overall, this has increased between pre-Covid and 2023, with bottom-line gains.

Cash Generation:

The cash generation dynamic is clear and shared by all: it's the return of distribution. Some mergers didn't work but were seen as transformation opportunities, particularly for American motels. Transformation operations are a growth lever for investors and operators.

IPOs:

There is an aspiration for the return of IPOs, like OYO or Motel One, to create value in the hotel industry.

Alternative Strategies:

There is an attraction to alternative market segments like tourist residences or coliving. Hotel operators show growing interest in voluntary networks, such as Hilton with SLH. This is a way to extend the offer for loyalty program members and generate a small portfolio of convertible hotels in the pipeline.

Loyalty:

Loyalty has become an important criterion, generating value creation logic by aggregating members. There is a need to redevelop the customer base with strong loyalty programs. However, to retain customers, the experience must follow, but labor costs have increased significantly, for example in Greece.

Hotel Growth in France:

Top-line growth in the French hotel industry is 21.7% in 2023/2019. Southern Europe has a great capacity to generate bottom-line growth: Spain and Italy have done even better. Conversely, Northern Europe has suffered from a scissor effect.

Operational Performance:

Operational performance needs improvement. AI is an important lever.

Fiscal Impact:

VAT has been increased in Germany, and the tourist tax in Amsterdam. In Germany, a VAT reduction during the subprime crisis led to a significant gain in purchasing power and a strong growth cycle. The reverse can reduce consumer purchasing power or be absorbed by operators.

Purchasing Power:

The purchasing power of European hotel consumers has declined due to price increases over the past two years. It will be difficult to maintain significant price increases.

Duration of Crises:

  • After 9/11, there were 32 months of RevPAR decline.
  • After the subprime crisis, 18 months.
  • Cycles are shortening, which is good news as it is less disruptive.

Leading Countries in Europe Post-Covid:

  • France and the UK.
  • Market Logic: The decline in occupancy rate continues amid a slight increase in average price. The Olympics remain a positive factor, but the expected gains are mainly on the average price, not necessarily on volume. London 2012: +33% RevPAR over 1 month and +80% over the Olympic sequence itself.

Europe:

In Germany, the impact of the Euro Football Championship will be a 1.5% annual RevPAR increase. We have negative factors like rising purchasing power, and positive factors like events and underlying dynamics. We are preparing for a smooth landing.

Artificial intelligence: how can we make the most of this rapidly evolving tool? Gilles Moyse, Chairman of reciTAL and doctoral student in artificial intelligence:

What is AI?

AI was conceptualized nearly 100 years ago by Alan Turing with the invention of the computer. He questioned whether there is an algorithm, a determined sequence of actions, to prove theorems. According to him, it's impossible, and to demonstrate this, he invented the Turing machine, which is the basis of digital technology today. In the Anglo-Saxon world, thinking is considered equivalent to calculating.

Early Uses of AI:

AI's first uses were for military purposes: an example is the decryption of the Enigma code and the Manhattan Project.

After the war, AI developed. From its inception until the mid-1980s, companies invested massively. They imagined machines to help with everything. The problem was that the goal of putting everything into rules didn't work, leading to what is called the AI winter. However, research continued with very different approaches. From the mid-1980s, "bottom-up" approaches were adopted: unable to detail everything, examples were shown to machines to learn from. This resulted in an enormous amount of data allowing algorithms to learn.

AI in 2022:

In 2022, OpenAI released ChatGPT, which was immediately adopted with 100 million users. These are neural networks trained on models, "statistical parrots."

Unlike us, they need to read a lot of content: it takes 30,000 GPUs to run ChatGPT. It's not efficient, but it works. These AIs don't have plans: they just need to predict words.

AI in the World:

Today, AI generates revenue primarily through advertising and recommendation (600 billion). Recommendation engines use consumer data to suggest products, like Amazon. Today, AI is massively about recommendation engines.

AI Impact in the Workplace:

  • Permanent Assistant: It's now included in the work package of the tertiary sector. Over 90% of students use ChatGPT at least once a week and expect access at the office.
  • Interactive Machines: Machines understand what we say and can respond. The way we interact with them will change drastically. Eventually, we will talk to machines to make them do things.

How to ensure ChatGPT talks about us?

We need to make sure a chatbot knows us. It's important to test and ask what ChatGPT thinks of us.

AI is not magic: it's statistical models fed with a lot of data. They can save us considerable time. It's important to see what chatbots think of us.

CSR is obvious but often complex to understand. Maxime Blondeau, analyst:

"It has become vital to collectively improve our awareness of the territory." It's a matter of life and death.

The question is: "How?" when you're an individual, a company, or a community.

Cosmography:

Cosmography questions our way of representing the territory. It can mobilize life and earth sciences, human sciences, or art. It can bring out operational as well as strategic topics for organizations, and material as well as spiritual questions for individuals. It's eminently linked to the ecological question.

We require a better understanding of the territory we are on. Cosmography can also call upon human sciences.

Transformation of Representation:

We are experiencing a vital transformation in terms of world representation, opening the door to cosmographic revolutions. There are many gaps in our representation of the living.

My recommendation for approaching the territory is to integrate a geographic, biological, and technological approach.

Evolution of Territory Representation:

99% of the world's population today is sedentary, whereas it was the opposite in the past. Back then, we explored the world with our eyes on the horizon.

Before, the world dominated us; now, we dominate the world, with a much more vertical vision: extraction and exploitation of the territory.

Neolithic Revolution Changes:

  • Appropriation led to sedentarization.
  • Production transformed into agriculture, mining, and livestock farming.
  • Accumulation led to a multiplication of objects.

We had this vision that we could exploit the territory infinitely. This conception is gradually changing.

In 1909, humanity reached the North Pole, then the South Pole in 1911. There are no longer any unknown places. We are on a finite planet, and globalization can begin. The first photo of Earth in 1972 marked the emergence of global consciousness.

With this global consciousness, we discover that the perception of the living must change.

Acceleration of Globalization:

The East India Company and explorer James Cook greatly contributed to this globalization, with the idea that "The world is yours!" But we see a reaction to this movement. We realize that change is necessary.

Imperative Evolution of Territorial Awareness:

  • Develop a systemic thought (geographic, biological, technological).
  • Adopt dynamic thinking (flows, duration, interactions).

This will lead to global awareness and local responsibility. Everything around us is in motion.

Paying Attention to the Territory:

  • Reception involves information through sensory experiences and knowledge.
  • Perception translates into representation through narratives and beliefs.
  • Conception involves programming through tools and technology.

This leads to territorial awareness. The territory is not a thing or an object, nor a tool or a stock.

To address CSR or ecological issues, we need to reconcile lucidity and trust. We can change! Indeed, there is a lot of eco-anxiety. We must not stop believing in humanity because we are capable of everything, even the best. 

MKG Consulting

MKG Consulting

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