Consolidation in the international hotel market has become widespread over the past 10 or 15 years. It would probably take an entire article to list all of the mergers and acquisitions from the recent past, but some of the major ones include: –
- Marriott – Starwood
- Accor – Fairmont/Raffles/Swissotel
- Accor – Mantra (Australia)
- Accor – Movenpick
- Accor – SBE
- IHG – Six Senses
- IHG – Regent
- IHG – Kimpton
- Hyatt – Two Roads
- Hyatt – Miraval
- Wyndham – La Quinta
- Minor – NH Hotels
- Jin Jiang – Radisson
Although new takeover targets are becoming harder to find, analysts suggest that the appetite of these major companies for further acquisition is far from sated, despite 2 years of a covid pandemic which crushed the hotel & hospitality industry all over the world. Then of course, there are serious discussions about mega-mergers between these already very large companies.
Taking a step back, and to understand the scale of this consolidation already, just take a look at who controls the major international hotel brands.
Worldwide, Accor now controls 43 hotel brands, Marriott more than 30, Wyndham 22, Hilton 19+, Hyatt 22+, IHG 17+ and this summary is probably already out of date…
30 years ago, two thirds of hotels were independent, but according to STR, it is now less than 40% and this includes the myriad of small hotels, motels and mum & dad guest houses in many parts of the world. In addition, it is said the five biggest companies now control more that 30% of the global hotel industry.
So, what is the point of all these mergers, takeovers and acquisitions and who really gains from this consolidation?
Well, in this assessment, it is becoming clear that not all stakeholders are equal, with consequences for shareholders, property owners, consumers & staff most certainly having very different outcomes.
According to most economists, the main beneficiary of this consolidation will most likely be shareholders and private equity investors in these hotel companies. They are asset light, so able to turn a quick profit and return on their capital invested. The increased share price and inevitable cost cutting thereafter, delivering solid returns.
For property owners, the picture is a little less clear. In some markets & properties, owners may also benefit from the cost cutting and perhaps some increased efficiencies. However, as time moves on, inevitably the global companies will want to increase fees and charges to property owners as they try to feed their own shareholders desire for more, and with less competition and more market power from these global companies, the owners’ position may be substantially weakened.
For customers and guests there is ultimately very little upside in the medium to long term. The many different brands give the illusion of choice and competition, but this consolidation has actually resulted in less competition and those once competing brands will now be colluding through corporate yield policies to drive up prices.
Labour cost cutting will feature prominently, resulting in poorer service. With less competition there is no benefit to the consumer moving to the hotel down the road, as this may also be operated by the same company with the same philosophy, or alternatively another global brand which is probably just as bad…
For staff, the impact will be immediate and ongoing. With the Covid pandemic as a catalyst, we have already seen the start of the inevitable clustering of positions in regions with multiple hotels/brands.
Regional head office roles such as senior marketing, sales, operations & finance positions, have been cut, as offices are centralised, and staff reduced.
General Managers are being slowly eliminated and could soon become a thing of the past, with Operations Managers, Resident Managers or Hotel Managers reporting to a Regional Director or Regional General Manager. These roles will have the same day to day responsibilities as that of a GM, but of course with much less pay, perks and authority to make business decisions.
Next will be senior sales, finance, culinary and operations positions, following the same pattern of clustering & reduced manning.
Centralised decision making, purchasing, policies, procedures (the list goes on…) will all ensure a steady ‘de-skilling’ of the workforce, as knowledge & experience give way to more unskilled staff with lower wages (some would say this has already happened, but it is set to continue apace).
There will be less opportunity to develop your career with the removal of a host of middle and senior management positions. This in an industry which already has some of the lowest paid workers in the economy.
The question is, is anyone taking any notice? Judging by the lack of interest taken by governments, tourist authorities and the media to date, the answer is no… This leads into a much wider discussion about neoliberalism and the failure of ‘trickle-down’ economics, the growth of inequality and all manner of political matters not for this forum.
Let’s hope that some sanity prevails, and our industry is able to chart a path that is much more positive than this appraisal suggests. Ours has historically been an industry of passionate people and constant innovation, so perhaps there is some future where the best of our leaders can forge a path that delivers a better outcome, or perhaps the extreme capitalists will prevail and replace everyone with robots…
About the Author
Tim Johns is a former Hotelier and Managing Partner with Elite Search – a leading hospitality recruitment firm. For more information about Tim and Elite Search visit http://www.elitesearch.com.au and The Elite Hotelier http://www.elitehotelier.net