By Dennis Nessler
While many have suggested that the lodging industry will forever change how it does business in the wake of the ongoing Coronavirus pandemic, a handful of leading brand executives maintain that’s not necessarily the case.
During this week’s NYU Virtual CEOs Check-in Panel, the executives also acknowledged that brand consolidation is likely to occur in the coming months and years resulting in a somewhat smaller brand landscape.
Keith Barr, CEO, IHG, has been advocating more of a wait-and-see approach. “Let’s not overreact for the long term with what’s happening today by saying ‘we should radically re-engineer the brand portfolio, or re-engineer the customer experience or redesign hotels.’ Let’s do what we need do in the short term to give customers a sense of safety and security for traveling,” he said.
Barr responded to the question of whether there are too many brands and further stressed he doesn’t see major long-term changes. “I don’t think there are too many brands, but I think they are going to have to evolve a bit in the short term without question. I think it will look more like it did four months ago in a couple of years time than look radically different,” he said.
Chris Nassetta, president and CEO, Hilton, agreed for the most part. “I think the world will certainly be different when we wake up in two or three years, but I think it will look a heck of a lot more like what it did 120 days ago than it does today. I think when you’re in the depth of a crisis or crises it’s easier to say the whole world is going to be different forever. The reality is things will return to a sense of normalcy,” he said.
Sebastien Bazin, chairman and CEO, Accor, also believes any changes will likely be relatively short-lived. “We know that everybody is going to be traveling differently at least for the next 12-18 months. What we don’t know is whether our clients are going to be consuming differently. It appears to be the case, but three years from today I probably doubt it,” he noted.
Nassetta did acknowledge the industry would likely undergo some changes as a result of the economic fallout from the pandemic, particularly in terms of the brand landscape. “I do think some things will be different. I think by definition you will probably have fewer brands in the sense that not every brand is going to make it to the other side. I do think you’ll have some consolidation,” he said.
Mark Hoplamazian, president and CEO, Hyatt Hotels Corp., was in agreement specifically citing some of the financial challenges. “The duration and profile of the recovery is still so uncertain that I think it’s challenging, especially for small organizations, that don’t have balance sheets that allow them to raise capital going into this. I do think there will be some that don’t make it to other side of this. It might be they don’t have the right model, but maybe at least as much in play is going to be the liquidity perspective. Whether they end up consolidating or otherwise dissipating is another question, but yes I think there will be some opportunities [for acquisitions],” he noted.
Finally, Nassetta noted this does represent a good opportunity for brand companies to re-evaluate what they’re offering consumers. “I think it’s a fabulous time to really be introspective. As we think about these brands, what do they mean? What does your customer really want? Is everything that we were doing something that is necessary because most of it has a cost associated with it?” he said.