Will The Small Survive?

By Dennis Nessler | June 4, 2020

As we work through this COVID-19 crisis and towards an inevitable recovery it’s hard to know just what to expect, but one thing I think we can count on is the landscape of the hotel industry is going to look far different in the near future than it did in early March.

Of course, whether or not we will like the way it looks is anyone’s guess. The harsh reality is there are going to be hotel companies that simply won’t survive this, be it brand companies, management firms or individual property owners.

The burning question for the lodging industry is will the small survive? After all, one of the most prominent trends we’ve seen over the last several years in the industry is the movement toward scale through acquisitions and mergers.

Mega companies like Marriott and Aimbridge are the most notable examples but there are plenty of others. Many industry followers contend you simply can’t compete effectively in today’s world of hospitality without scale and that likely will only be more so going forward.

Consider the comments of Sebastien Bazin, Chairman and CEO of Accor—a Paris-based global hotel company with some 39 brands—during this week’s NYU Virtual CEOs Check-in Panel regarding what he called “the mom and pops or non-global, scalable industry players.”

Bazin stated, “Let’s face it, you’re probably going to have 10, 15, 20 percent of those brands existing around us that either already disappeared or will disappear in the next 12 to 18 months. I’m not glad about it, I’m just saying that scale matters more than ever.”

Make no mistake, there are plenty of us that wouldn’t object to a few brands disappearing but that’s not the point here. Unfortunately, the brands that are in peril likely wouldn’t be the myriad of different ‘lifestyle’ flags within the large public companies. It would more likely be the smaller brand companies with just a handful of flags that ultimately are unable to sustain operations.

But while Bazin was directly referencing the brand landscape, the same is surely going to hold true for other segments of the industry. The AHLA has worked hard to advocate for the industry, particularly as it relates to the small business owners. In fact, yesterday saw the U.S. House and Senate pass the Payroll Protection Flexibility Act, which among other things will extend the covered period for using PPP loans through the end of 2020.

This certainly may help for some, but Payroll Protection Programs and stimulus checks will only go so far. What is really needed is for the American public to start getting on planes and traveling again, but we all know that’s a ways off.

It has been said that necessity is the mother of design and we’ve already seen plenty of examples of businesses from restaurants to retailers figuring out better ways of doing things simply because they had no choice. And while those solutions may be designed to help navigate a temporary problem they may also end up making sense as long-term solutions.

It’s going to be incumbent on everyone in the lodging industry to get creative now and you never know the end result may just be a better industry for all of us.