Georges Panayotis: Will the hotel industry be the unicorn of tomorrow?

Is the hotel sector one of the strategic challenges of investment? This question deserves asking at a time when the financial situation aggravated by regular rebounds for deals that have been announced or that are already underway.

Billions of euros and dollars are being taken up in the battle between hotel groups and institutional investors. While hotel groups fight to lead the pack by expanding their geographic perimeter and range of hotel products, institutional investors are sniffing out financial transactions or acting as a Trojan Horse for the new economic powers to rapidly take over global market shares.

In just a few years and even a few months, the hospitality Monopoly has changed dimension. Stockpiles of cash and credit lines are now being tapped into for deals that are clearly intended to reshape the industry. The strategy and financial means required will be decisive in positioning themselves in the hotel world. Some aim for High Street and luxury real estate that have potential for valorization; others are located along major transport axes that have growing volumes of national and international clientele.

Clearly the tools for the new economy will allow more and more control over a hotel supply that is increasingly vast and diversified, by externalizing management to franchisees and specialized companies and by concentrating on distribution, marketing and loyalty development. Size no longer presents an obstacle, nor does it present a risk for losing control. It has become a necessity for accumulating brand visibility under a common umbrella, by sharing investments and negotiating the necessary use of online distributors. The drop in costs incurred by critical size and the massive introduction of new technologies, including the automation of different operations that require much personnel, can only improve the productivity and profitability of operations.

It is easier to understand the new wave of restructuring that is being led by those that judge the profit potential according to the same criteria as they judge their investments in start-ups. The unicorn, by nature, is evaluated based on future results after the business has taken off combined with the right support. The global vision only strengthens the sector's appeal as the global size is also the best way to defy cycles that have become regional and often develop counter to one another while changing continent. Lucky are those that are able to ride the wave of North American growth and reduce the impact of European moroseness, and to benefit from lasting Asian growth and foil the turnaround of South American economies.

This is one more justification for launching global megabrands even if, at the time, there may have been skepticism about bringing together different projects under the ibis banner and the demise of Motel 6 may have sparked some concern. But the future looks bright for this strategy, which is also being adopted by other groups. In order to reach this goal, it is necessary to be able to keep pace, be constantly alert, be able to rely on considerable resources. But in this game, not all players are equal; they do not all benefit from the same support from their community, their governments, their bankers and shareholders. Some financiers preferred to focus on the short term and drop out midway. And yet, with each sale, these companies continued to increase in value, a sign that the potential for growth had not been exhausted. If they are once again the target of mergers and acquisitions it is because their future is promising.

While growth perspectives for the sector remain globally very favorable with respect to other global economic activities, the months to come will reveal the respective strengths of the players to identify the leader of the pack. Today, they have found a more industrial vision and have turned toward customer demand.

Source: Hospitality On

GEORGES PANAYOTIS, PRESIDENT & CEO - MKG GROUP

Georges Panayotis is President of MKG Consulting. Born in a family of hoteliers for three generations, Georges Panayotis, 51, left Greece at the age of 18 to pursue his studies in Political Sciences and to obtain his Master in Management at the French University of Paris Dauphine. He then joined the Novotel chain, which will become the Accor Group, to manage the International Marketing Division. After developing specific marketing tools for the hotel industry, he left the group in 1986 to start his own company, MKG Conseil, now MKG Group. In twenty years, the group has become the European leader in studies and consulting for the Hospitality industry. The company employs over 100 people in four departments: marketing studies, database, quality control and trade press, with two publications HTR Magazine and Hotel Restaurant Weekly. The company helped the development of over 2,000 hotels in France and in Europe, with offices in Paris, Cyprus, London and Athens. Georges Panyotis is the founder of the Worldwide Hospitality Awards and the Hotel Makers Forum, and the author of several publications on Marketing and Operations in the hotel business, He is a regular consultant for several television channels, among which Bloomberg Television, and radio networks.

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