Traditional hotel brand standards look set to be substantially upturned, as hotel groups cope with massive changes to the operating landscape.
Traditional standards are being relaxed, as the big brand groups look to support struggling operators and landlords. And flexibility will be key as they look to quick conversions in 2021 to grow their portfolios.
Returning guests are expected to be focusing on cleanliness above all else. And, with billions of loyalty points being sold to third parties, there are likely to be compromises around future brand marketing messaging.
Speaking at the Hospitality Tomorrow conference, Pandox CEO Anders Nissen declared: “Will there be any brand standards in the future? I don’t think so.” And panel colleague Frank Croston of Hamilton Hotel Partners agreed: “Brands will not be enforcing brand standards.”
Faced with a range of immediate operational concerns around health and cleanliness, certain types of in-room furniture are being removed. Other established protocols around cleaning, hygiene and f&b provision have also had to be substantially rewritten.
The big brands have already clearly flagged that they will be offering short term relaxation of standards, as they rethink what’s relevant to guests. Paul Edgecliffe-Johnson, CFO at IHG, commented during the May results presentation: “We’re working closely with our franchisees and owners to support them in keeping their hotels open by relaxing brand standards, pausing renovation work and offering fee reliefs and increased payment flexibility.”
Hilton CEO Chris Nassetta commented during his Q1 results: “We’ve suspended massive amounts of our brand standards, operating standards, capital programmes and a whole bunch of other things – giving operators huge flexibility in how they operate.”
Quizzed by analysts, Nassetta added: “The trick is, as we transition from the intermediate to the longer term, what are the things that you basically put back into the standards? And what do you leave out and/or change?”
“Intermediate term I think will be a significant opportunity for testing, when you’re still on a relatively low demand environment, where customers are still quite sort of accepting of things that are different. And then I think what we learn in that intermediate time frame, we will sort of institute as our longer-range standards. I think there’ll be a whole bunch of things that we’ll do that will be more efficient long term.”
The other brand compromise that both Hilton and Marriott have made, is in selling millions of loyalty points to their credit card and payment providers. Hilton banked USD1bn by selling Hilton Honors points to American Express. Marriott sold USD250m of Bonvoy points to Amex, and pulled in a further USD570m from credit card partner JP Morgan Chase.
James Bland, director at BVA-BDRC commented: “There is certainly some risk in yielding control of such large volumes of points, but clearly the risk of not getting a billion dollars in the bank account was deemed to be greater. We may never know the ins and outs of the contractual agreements (or, indeed, the amount of points sold) but we can probably guess that the credit card companies, who would not have been under the same pressing need to conclude these deals as their partners, will have achieved a very good deal to have been tempted to part with such large amounts of cash.”
“What the brands will have to do now, is manage owner expectations. With such significant cash now known to be with the brands, how much are the owners now going to expect them to contribute to new initiatives, brand standards, cleanliness protocols and suchlike?
At Marriott, CFO Leeny Oberg painted the deal as simply a prepayment: “It’s really again overwhelmingly a reflection of monies that we receive earlier that then will get essentially paid back by them paying us less than they otherwise would have over the next several years.”
HA Perspective [by Chris Bown]: So farewell many brand standards. Guests no longer care about the colour of the sheets, the towels or the fabric on the side chair – they’re going to be more interested in how effectively they’ve been cleaned. Hygiene is the new taupe.
In many ways, this is accelerating the direction of travel. Major hotel groups have been reformulating their brands, softening the traditional ones to draw in more local connections, at the same time as launching those with an upfront local personality, such as Accor’s Greet, and Hilton’s Canopy. Curiously, the brands are now shouting out loud about how abandoning the traditional approach to brand standards will improve efficiency, and returns.
Sadly, this move also blows smoke into the eyes of Airbnb, whose hosts have been promising that local connection – and some variety – for the last few years. And the obsession with health and safety also plays into the hands of the brands, so long as they can promise a disciplined cleaning regime that actually delivers.
Additional comment [by Andrew Sangster]: It is not so much the bonfire of brand standards as the replacement of brand standards with a new set. If anything, brand standards matter more than ever before.
What is being postponed are non-essential brand standards. To understand what is going, a quick refresher on psychologist Abraham Maslow’s hierarchy of needs will point you in the right direction.
If the standard is about safety or basic physiological needs then it is most likely going to be ramped up. Cleaning, for example, is now right at the top of the list for customer priorities along with security about health through screening and similar practices.
On the other hand, being able to select from a menu of pillows is going to be less of a priority right now.
This will not last. We are entering an interim period, post-lockdown pre-vaccine, during which there is the race to the bottom of Maslow’s pyramid. In a few years, as Chris Nassetta among others has pointed out this week, there will be a return to where we were at the beginning of this year.
Customers will once again want “self-actualisation”. The boutiques will be back. Factoring this correctly into business plans is going to be where fortunes are made.