Travel & Tourism is a fast growing industry and one widely recognized as valuable to both the global and national economies because of its contribution to employment and wealth creation. This wealth creation is not just directly related to Travel & Tourism, but also to sectors on which the industry is dependent and it has proved to be a life changer for many communities around the world.

The rapid growth in Travel & Tourism demand worldwide has encouraged many investors to venture into this lucrative economic sector and many "newcomers" either plan to invest, or have already started investing in hotels. Many of these investors have created, or plan to create their own brand, believing that by doing so they will avoid the monopoly of the well-established big names in the hotel industry.

Whether you are, or know, a current or future investor in this capital-intensive economic sector, I would like to try to contribute to your future economic success with some advice acquired over my 42 years in the hospitality industry. I hope that some of it will be useful and relevant!

A. Strategy

1. Expanding within the home market and neighboring countries:

Considering the spread of many international operators' "chain portfolios", it is clear thatmostof them have strongly identifiable home markets. This home base relationship could make the brand the leading operator in its immediate surrounding territories.

Once sufficient coverage of the home market is established, I believe it makes economic sense and would be relatively lower risk, to extend into other areas and markets regionally then internationally.

This needs to be done at an appropriate pace, involving a substantial number of new hotels, resulting in high brand awareness and market penetration.

From a rational point of view, the potential for such growth would logically come from the neighboring countries to which the home market economy and background are inter-linked and where domestic and regional travel is substantial.

We have live examples in the UAE of a company who did just that and which is now quite successful with a large number of hotels in its domestic base. It successfully expanded regionally with a brand name to be reckoned with, and I am sure it will soon start to look at expanding internationally.

Another company in the same area started expanding globally, from New York, to Rio, and to London, before having any credible solid domestic or regional base. This stretched its financial and support resources to the limit and it now manages a meager number of hotel developments with a huge organization overseeing no more than a dozen hotels, while the first company, I believe, now has well over 80 hotels.

2. Expanding to mega cities, capital cities, and strategically important destinations:

For a brand to be recognized as truly global, it has to be represented in a large number of mega, major and capital cities. The guiding philosophy should be first to strongly focus on the cities in international markets, where the brand name could be enhanced. Only when the brand is established as potent player in these cities, would expanding to secondary cities and towns be considered appropriate.

B. Branding and the preferred brand strategy (all points are critical to sell and expand the brand):

Only total quality should be acceptable and the company should thrive to achieve that target. The brand will become more important as competition increases and the world becomes one global economy. Hotel owners and independent operators are looking for "Brand Shelter" which means:

1. A recognized quality brand name

Throughout history, the main internationally recognized hotel companies such as Hilton, Sheraton, Marriott, Ritz Carlton, Four Seasons, etc. started business in their home turf with fully owned, leased, or joint ventures with majority or minority stake hotels, i.e. by heavily investing in capital cities and mega cities within the home country and in prime locations.

2. A powerful reservation system

The company must have a leading reservation, Toll-Free system, to reach global businesses and it must provide instantaneous and convenient services to:

  • Individual customers
  • Travel agents via GDS terminals (Global Distribution System) including direct link to Amadeus, Galileo, Sabre, Book hotel, etc.
  • Airline systems

The reservation system must have, as a minimum, the following features:

  • Two-way communication systems to update information with the push of a button.
  • Provide immediate guest profile information which can be used to a deliver top-level customized service. (This is a 'must feature' for high-end luxury hotels and should be very detailed).
  • Phone reception in the language of the originating call.
  • Seamless connectivity allowing a customer to obtain clearly written/verbal information without the use of language known only to reservation agents.
  • Typically, the system should deliver at least 25% of the gross room revenue for the company.

3. International marketing network

International networks (area and regional sales offices) are of the utmost importance. As they are located in capital cities and strategic locations, they are critical not only for selling, but also to provide leads for expansion and to promote the brand.

The future of the travel industry lies in its ability to attract and serve customers on a global basis.

4. Top human resources function

Location, location, location, is the commonly-known ingredient for the success of a hotel, but we believe that SERVICE and PRODUCT are equally, or even more important.

The success of a company is mainly due to the commitment and dedication of its associates and it must provide suitable work ethics and an environment which fosters the highest levels of professionalism.

5. Professional technical and IT services

These services are very important to ensure the highest product quality and functionality.

6. Financial and other administration and operating departments structure and organization

Establish a level of conduct for all associates which is detailed, professional, and ethical, both in appearance and in reality.

Establish procedures and policies concerning finance, marketing, legal, food & beverage, room divisions, human resources and any other operating departments.

Agree the minimum required structure in the hotels to provide the level of service expected by the public and mirror the image of the company as a high-end luxury product in its category.

7. Marketing & Sales know how and programs

Sound reputation in this function is indispensable and fundamentally important to hotel owners.

8. Providing professional pre-opening services

A smooth pre-opening and attention to detail during this period followed by a smooth opening will ensure a successful operation for years to come. The opposite will have a detrimental effect for many years and may lead to disastrous consequences that will certainly create tension with the owners, resulting in a deterioration of relations and loss of confidence.

9. Other communications

Communication to the wider public must include:

  • A professional top-of-the-line website detailing the strength of the brand, contact details, sophisticated graphic displays, and online booking capabilities, highlighting promotions and packages available, etc.
  • A monthly Newsletter detailing the latest openings and other relevant news about the company.
  • Participation in industry events such as: ITB in Berlin, ATM in Dubai, WTM in London, and Asian events.

10. A fair agreement to suit the needs of both parties (Owner and Operator)

This is the cornerstone in the relationship between the owner and operator; typically these agreements are long-term commitments for 20 years or more and must be:

  • Transparent
  • Deliverable
  • Equitable and fair to both parties
  • Involve no hidden fees
  • Take the local culture and work environment into account
  • Clearly define responsibilities and accountabilities
  • Include a fair and a well-defined exit strategy for both parties

If you found this topic relevant and interesting, you may wish to read this case study >>>

Author: Ibrahim Koura, Associate, EMEA | Ibrahim provides consultancy services based on 40 years' experience with ITT Sheraton, Rezidor, Almullah Group and others in financial, asset and general management, and business development. Read Ibrahim's full profile >>>

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