Hotel brands must define their little sandbox

By Yeoh Siew Hoon

From airlines to hotels to investors, every sector seems to be expressing the hope that the worst may be over and that travel may be on the recovery path, along with the global economy.

The Association of Asia Pacific Airlines (AAPA), after releasing its April results which showed a 5.8 per cent drop in international passengers that month to 11.1 million, said “there are some tentative signs that we may at least be through the worst”.

Andrew Herdman, AAPA Director General, said, “The April figures, although poor, are not quite as bad as the declines we experienced in the first three months of the year.

“Despite the slump in exports, some Asian economies are holding up reasonably well, with mainland China seeing a strong rebound in domestic travel after a weak performance in 2008.”

For the first four months of this year, AAPA international passenger numbers were 9.6 per cent lower than in the same period last year, while international air cargo traffic was down 24 per cent.

In a press release, TravelCLICK, a leading player in hotel ecommerce and business intelligence, asked, “Could the worst be over? … latest reports show a lower rate of decline in April, indicating the economic slowdown may be close to levelling off”.

At the Hotel Investment Conference Asia Pacific (HICAP) Southeast Asia Update held in Singapore in May, chief executive of Jones Lang LaSalle Hotels, Arthur Haast, shared what he said was good news.

The first quarter of 2009, although 90 per cent down in investment volume to level off at US$2 billion, was marginally more than in the fourth quarter of 2008. “Could this signal the turning point?” he asked.

He said while investments had tanked in America and Europe, Asia was the most active region, showing growth year on year, between 2008 and 2009.

What’s changed is that 100 per cent of the investment volume in Asia is now from within Asia. “It’s Asia investing in Asia, with no flows at all from Europe and US. That’s a dramatic change,” said Mr Haast, adding that Asia had become the driver of global capital flow.

Keynote speaker Philip Bowring, columnist for the International Herald Tribune, after sharing economic data which he commented could be interpreted any way we chose, asked, “Are we bumping along at the bottom or are we in a bear market that began in 1997?”

Guessing “how long, how deep and how long will it last” – the title of his keynote address – was a “mutt’s game” at the best of times, he said. Now it was even worse.

What was more important was how we viewed the situation. “Optimism will seize the day. Sentiment can be a key influence, and it can be self-fulfilling.”

Citing the H1N1 flu scare, for example, he said, “If we are going to lose our heads over some flu, the prospects of recovery will be deeper and longer than is necessary.”

Hotel leaders gathered for the conference spoke of fundamental changes that would take place in the industry as a result of the economic slowdown.

KP Ho, executive chairman of Banyan Tree Holdings, said this was a good time to reposition and to examine the fundamentals of business models, “to see how competitive you are, how efficient your business processes are and to strengthen yourself for the day when recovery comes”.

One key fundamental remained however. “You have to be dominant in your niche, define your little sandbox.”

Ho also identified China as another driver of change, one that will impact on hotel management styles, among other things.

Robert Hecker, managing director of Horwath HTL, sees another turning point – that of consumers going online to search for the best deals, and staying online.

“We are seeing more consumers going online because they know that’s the easiest way to check the best deals and having done that, they will stay online. They will get used to it and hoteliers will have to get used to a different way of selling and buying”

Hecker identified the Internet as an opportunity. “We are seeing a second wave of people going online due to the economy. It happened after September 11, 2001 in the US.

“Selling on the Internet has a lower cost but it also levels the playing field between brands and non-brands, but there’s an opportunity to sell more rooms that way.

“The challenge for brands is to hold their brand value when people are saying, I am looking for a room, not the brand.”

Hotel leaders agreed that a confluence of factors was driving the online environment – such as online adoption, low cost carriers, growth in domestic travel, changing demographics.

“It’s definitely the way of the future,” said Michael Issenberg, chairman and COO of Accor Asia Pacific, citing the recent Accor Super Sale as an example of a tactic that proved the power of the Web in moving hotel rooms.

Patrick Imbardelli, CEO of Pan Pacific Hotels Group, said hotels, being perishable commodities, lent themselves ideally to the online environment and that his group was investing heavily in the channel.

Banyan Tree’s Ho said technology and the Internet has helped to shorten the food chain. Mobile, he said, “allows me to get even closer to the customer”.

Asked therefore what was the value of a brand in such difficult times, he said, “A good brand thrives in good times but in bad times, it’s the difference between life and death.”