Chris Tate

Written by: Chris Tate

Chris Tate

Partner

Challenges facing the hotel sector

  • August 2018
  • 8 minutes

With so much focus on GDPR it is easy to forget that the hotel sector faces a number of other significant challenges. With the growth of alternative accommodation and rapid changes in in-room technology, hotel management will do well not to take their eye off the ball. I have picked a few key challenges to explore. 

Alternative accommodation

Hotels used to be the default choice for travellers, the difficulty was picking which hotel. Hotels no longer just compete with each other. The rise of serviced apartments and Airbnb has had a huge impact. Although serviced apartments have been around for many years, the last decade has seen an explosion in their number. 

Serviced apartments tend to be larger and cheaper (for equivalent stays) and are therefore very attractive alternatives, especially for longer or business stays where a kitchen is a bonus. They often also offer amenities which are similar to hotels, such as housekeeping. 

The impact of Airbnb has been well documented, but it’s mainly affected the lower cost end of the market. The levels of service and quality of accommodation can vary massively – this is to be expected as they are not generally professional hoteliers. However, the concept has really spoken to the consumer with many looking for a more authentic and ‘local’ approach to their stay. It is also easier for larger groups to travel together and that has been a gap in the market for some time, even with the rise in serviced apartments and villa holiday operators, catering for large groups is still an area that’s not been effectively plugged.

 

For the traditional hotel, change is a necessity but making the right change is as much a part of the challenge as the need itself. 

 

Some hotels are sacrificing hotel rooms to convert into apartments - so that they can offer more flexible alternatives to a standard room set-up.

Hotels are competing on many fronts; flexibility of bookings, location (difficult to do once the hotel is already there), quality of services and other amenities offered to justify the higher rates. 

Technology in the hotel room

The perception in the wider hospitality industry is that hotels are technological dinosaurs; a consumer facing sector that has remained largely unchanged in the 21st Century. While restaurants come up with innovative new concepts and retail adapts to changing spending habits, hotels continue to offer a service indistinguishable from the past.

Amidst this perception however, there is an opportunity for hotels to offer a genuinely differentiated experience around technology. That said, hotels have had their fingers burnt in the past – many hotels invested in bedside iPod docks as the MP3 player grew in popularity, only for Apple to ditch the 30 pin dock connecter a few years later. With hotel refresh cycles often over 10 years, it’s no surprise that technology in rooms rarely keeps up with digital advances.

Innovation in recent years has come about through widespread WiFi in rooms (to the extent that it is now considered mandatory for most guests), and away from the lobby. There has been a seismic industry shift away from traditional travel agents to online booking services.

Early adopters in the industry are installing Amazon Echo devices so that you can control room functions with your voice, and upgraded locks allow customers to use their phones to unlock their doors. However, it remains to be seen whether these added touches really drive increases in occupancy / room rate of if they are expensive follies that will age badly.

The challenge for the industry then is to balance the cost of investment (and the risk of obsolesce) with meeting the expectations of increasingly digitally connected consumers.

Food and beverage

Food and beverage revenue can account for 10 to 20 per cent of hotel revenues. Traditional hotel restaurants have struggled in recent years as guests tastes have changed and the new breed of ‘foodies’ are constantly on the hunt for new and different experiences.

 

Over the years, I've seen a rise in the number of hotels seeking professional restauranteur partners to manage their restaurants. There are both advantages and disadvantages in doing this.

 

Outside restauranteurs will often have their own branding and marketing that is designed to appeal to both guests and outside clientele. This clearly enables restaurants to improve the  number of covers but they will also run their kitchen and staffing their own way. If the hotel tries to be too involved in this it can cause problems and often hotels want a seven day offering, whereas most higher end restauranteurs will work on a five day opening.

There are then the challenges around branding. If the restaurant has its own branding, is it compatible with the overall branding of the hotel? Does the ethos of the restaurant fit with the hotel brand, and do guests get a seamless experience? If the hotel manages the restaurant itself it has great control over the entire guest experience.

If the restauranteur is also providing the in-room and breakfast offering, any substandard service or quality issues can seriously damage the overall hotel experience. After all, the skill set needed to run a successful restaurant differs from traditional hotel food and beverage offerings.

For hotels, the focus should be on making the right partnership with a complimentary brand and ensuring that the experience and relationship is managed effectively.

National minimum wage

Paying national minimum wage seems like a relatively simple thing to do. So why is it that so many employers still get it wrong?

There are many potential pitfalls when applying national minimum wage, and when you look down the list it is easy to spot why hotel companies get caught out.

Firstly, what counts as 'working time'? It is not just the actual work that counts. Standby time, on-call time, travelling in working hours, mandatory pre-shift team meetings, induction, training etc. These all count and need to be carefully considered. If staff are required to clock in 10 minutes before their shift, they must be paid for it.

What about overnight shift work where employees are entitled to breaks for sleep? If they are still on duty, then they should be paid.

What about deductions for staff accommodation and how does that impact national minimum wage compliance? This is quite a common issue in some hotels - especially those in remote locations.

Employee uniforms? If the hotel requires staff to wear their own clothes but enforce a dress code (e.g black shirt and trousers for waiters) then this will impact the national minimum wage calculation.

It seems mean to even consider this but staff tips do not count towards national minimum wage.

 

Finally – don’t forget staff birthdays. Not just because it is a nice thing to do, but because national minimum wage changes when you reach 18, 21 and 25.

 

I have mentioned the above pitfalls as they are most relevant to the hotel sector, however the list goes on. In most cases, breaches in the national minimum wage are not deliberate but rather a breakdown of internal controls.

These were just a few of the many challenges facing the hotel sector. The one thing they have in common is that hotels cannot rest on their laurels - they need to evolve, develop and change with the times.

Please feel free to leave your thoughts in the comment section below, if you have any questions on this please do get in touch

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