Chief Executive Officer, Best Western International
David will be speaking on the Global CEO Panel - Adapting to Survive & Thrive: Hear from the CEOs Leading the Change, 10.40 – 11.30 on Tuesday 5th March during the International Hotel Investment Forum (IHIF) which takes place 4-6th March at the InterContinental Hotel, Berlin www.ihif.com
1. How would you describe the hotel investment market in 2019?
The industry has enjoyed a long upcycle recently. I don’t recall a time where we experienced more than one hundred months of positive RevPAR growth. By all indications, we are most likely at the peak of the cycle. Given this, new construction projects are facing numerous headwinds as land and construction costs are at an all-time high. In addition, banks are more reluctant to lend for new projects unless they are associated with a well-established brand and there is a high equity to loan ratio.
As the share prices of hotel REITS have declined, it will be more difficult for them to continue to be active buyers. Conversely, private equity firms have significant amounts of cash on-hand, so they will likely continue to be strong buyers.
2.What is Best Western’s position and strategy for the year to come?
We will remain focused on increasing our scale to maintain and gain competitive advantages. Similar to companies like Tide and BMW, we need to protect our market share by launching new products to appeal to today’s traveler and developer. Just think about how many more models of cars BMW has in the market today vs. 10 years ago. Not only are they trying to protect their market share, but they are trying to take market share from their competitors. Similarly, if today’s Best Western wants to be successful, we need to think about protecting and growing our market share by offering exciting and contemporary products to broaden our appeal. We also need to explore opportunities to grow in the upscale and luxury segments in order to offer a full portfolio of options.
Best Western will continue to invest in our platforms – technology, sales and marketing, operations, and our loyalty program. We have built a solid foundation by bringing together a global portfolio of high quality hotels and investing over $2 billion in these properties over the past few years. This solid foundation of quality hotels has positioned us for growth for years to come.
3. What are the biggest challenges faced by hoteliers/investors in the current hotel investment market?
The biggest challenge facing hoteliers is escalating costs and the lack of quality talent. Independent hotel owners have an additional challenge of being highly dependent on OTAs. They do not benefit from revenue production from brands or attractive commercial terms with OTAs. In the downturn, independent hotels will be particularly vulnerable.
For investors, new construction will be difficult because of high costs and financing challenges as lending institutions become even more selective and cautious. Therefore, there will be an increase in conversion opportunities for the purpose of repositioning existing assets.
To respond to this challenge, Best Western launched two new boutique hotel brands last year – Sadie Hotel and Aiden Hotel. Sadie Hotel competes in the upscale segments and Aiden Hotel competes in the upper midscale segment. These conversion brands offer developers an opportunity to reposition their properties to improve their performance and enhance their asset value.
4. What existing hotel brands do you think are most interesting to watch?
The hostel and home-sharing segments are thriving and they will seemingly continue to increase in popularity. Therefore we have kept close watch on hostel-like brands such as Motto by Hilton and home-sharing brand Tribute Portfolio Homes by Marriott. These brands have pioneered new operating models in these segments and we believe there are further opportunities to be disruptors for these segments.
5. Who or what is the biggest inspiration guiding your career?
Amazon Founder, Chairman and Chief Executive Officer Jeff Bezos famously coined the phrase “It’s always Day 1,” so the excitement and can-do attitude of a start-up company can be preserved for the long-term vitality of the company. Bezos says, "Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1."
The points Bezos make provide an insightful roadmap for large organizations like ours. Day 1 brings excitement and a sense of urgency. For those working at a start-up, the threat of going out of business early in the life of the business is real, therefore the Day 1 mentality helps to maintain a focus on advancing what is important and urgent.
The four points Bezos makes for how organizations can keep the vitality of Day 1 are outstanding: remaining “customer obsessed,” maintaining a skeptical view of proxies (not letting the process become the “thing”), adopting rather than fighting external trends, and high-velocity decision-making.
6. What are you most looking forward to at IHIF?
I always look forward to the opportunity to rekindle acquaintances, network, and hear valuable insights from industry leaders.
7. You are taking part in the Global CEO Panel – ‘Adapting to Survive & Thrive’ which will discuss many elements including adapting to changing economic conditions, travel trends, operational requirements, labour markets etc. One significant area to be discussed is the value of brands for the future – what are your views on the role of hotel brands and their relevance to the next generation of travellers?
As I discussed in an earlier response, given where we are at in the cycle, independent hotels will face increased challenges given their lack of support from a well-established brand. Powerful brands through their high brand awareness and preference can drive revenue delivery through brand channels, retain and attract new guests through innovative sales and marketing strategies, loyalty programs, powerful distribution infrastructure and modern digital platforms. Additionally, brands will continue to play an integral role in negotiating preferred commission structures with OTAs, ultimately driving more profitability to the properties.
8. Earlier this month, Best Western Hotels & Resorts announced it had acquired renowned global hotel brand WorldHotels. What was the strategic purpose of this acquisition for Best Western and do you envisage further M&A activity for Best Western?
For Best Western, the key benefits are synergy, efficiency, a comprehensive portfolio, enhancing the image of the brand, positioning Best Western and opening up opportunities for the brand. For WorldHotels, with the acquisition, we will be focused on unleashing the potential of the brand and their hotels. We will leverage our platform to drive more revenue to WorldHotels – they can tap into our economies of scale and save money, and they also have vast potential to grow and achieve an even greater presence around the world. With regard to future M&A activity, our top priority right now is to assimilate WorldHotels and generate benefits for both WorldHotels and Best Western. We will always consider other opportunities as they arise.
06 February 2019
9-10- October 2019
29-31 October 2019
20–21 November 2019
Location to be confirmed in due course
25-26 April 2019