EP Perspective September 2016

COMMENT: ALIXPARTNERS
INDEPENDENTLY
BRANDED HOTEL
MARKET OVERVIEW
In the global branded hotel world we have seen a
raft of corporate activity as the biggest groups seek
to get ever larger. Graeme Smith, Managing
Director of Corporate Finance at AlixPartners,
explains how the independent sector is responding
With loyalty programmes continuing to
grow in importance to retain customers,
the global brands appear to be
determined to own a brand portfolio that
caters for all its customers’ needs from
low-cost to luxury. Ownership of the
customer is a key battle ground as the global
brands compete with online travel agents
(OTAs) such as Expedia and booking.com to
secure the initial booking transaction.
Meanwhile, as the large global players
race each other to become ever larger and
focus their attentions on the OTAs, the
independent sector has been developing
and diversifying. Brands have been growing
by targeting specific parts of the market,
in some cases seemingly inventing a market,
such as ‘affordable luxury’ or ‘poshtels’, and
being laser focussed on creating their
customer proposition for this market.
These developments have been supported
by the increasing trend for consumers to
take a keen interest in their choice of hotel
regardless of whether they are travelling
with work or booking their own holiday. This
desire to take more control has then been
aided by the democratisation of rating data
through the likes of TripAdvisor. Now, once
you decide where you want to stay, you can
see which hotels are rated highest rather
than having to rely on the safety of a global
brand. Finally, while the global brands
are competing head-on with the OTAs to
capture booking activity, the independents
have been able to utilise the OTA platforms
to reach a global audience.
It is an exciting time for the independent
sector as demonstrated by the success of the
leading groups and the launch of the latest
challengers. This vibrancy is sure to attract
investors to the sector and drive M&A and
transaction activity in the coming years.
Examples of leading brands
The European independent hotels market is
incredibly diverse with successful businesses
across the different hotel sub-sectors.
Here’s a snapshot of some of the key players:
Limited service
Motel One is a German budget design
hotel chain with over 50 hotels right across
Europe, including five in the UK – London,
Manchester and Newcastle. Each hotel
has a unique design based on features of
the local area. By 2017 Motel One plans to
expand its network to 74 hotels with
18,000 bedrooms.
Affordable luxury
Dutch chain citizenM operates eight hotels
in the Netherlands, UK, France and New
York. The chain advertises itself as giving
‘affordable luxury for the people’. All hotels
are designed with a unique compact style
with large beds and windows and ‘mood
pads’ to control amenities from one device.
Full service
The Swedish Scandic Hotels chain operates
over 200 hotels with over 40,000 bedrooms
in northern Europe. Scandic Hotels are
advertised as blending contemporary design
with modern technology – the chain was
the first in the world to introduce online
checkout for all its hotels.
Luxury
Firmdale Hotels is a collection of eight
luxury boutique hotels in London and one in
New York. All hotels are heavily design-led,
with award-winning interior designer and
co-owner Kit Kemp having styled each
room uniquely to reflect a fresh English
modern style.
6 | Perspective | September 2016