ACCOMMODATION HONG KONG’S OVOLO TAKES A SHINE TO BRISBANE QHA REVIEW | 38 Ovolo Group has followed up last year’s purchase of the New Inchcolm Hotel & Suites (now Ovolo Inchcolm Brisbane) with its acquisition of the Emporium Hotel in Fortitude Valley. The Hong Kong-based boutique hotel chain’s $16.5M purchase will be settled in April, bringing its portfolio of Australian hotels to five including Ovolo Woolloomooloo and Ovolo 1888 Darling Harbour in Sydney, and Ovolo Laneways in Melbourne. Ovolo’s founder Girish Jhunjhnuwala said he was excited by the opportunity to take the property to the next level with Ovolo’s signature luxury design interiors and “all-inclusive” hospitality concept. “The Emporium Hotel in Brisbane was an obvious choice for the brand given its incredible success to date, its boutique nature and appealing location in the Fortitude Valley retail and dining precinct,” he said. The Emporium Hotel was touted as Brisbane’s first luxury boutique accommodation venue when it was opened by Anthony John Group in 2007. It includes a rooftop pool, gym and sauna, cocktail bar and patisserie as well as conference and events space. Founder and managing director Tony John said the sale would allow the group to concentrate its energies on a new project in South Bank. “We’ve decided the time is right to sell our Fortitude Valley property, allowing the team to focus on the 2018 opening of our luxury boutique Southpoint Emporium Hotel,” Tony said. Ovolo was founded in 2002 and operates five boutique properties in Hong Kong.
Judy Hill ACCOMMODATION UPDATE MAINTAIN PERFORMANCE IN COMPETITIVE MARKETS With a record supply pipeline in many Australian destinations, the diversity of new bedroom product and contribution to the overall tourism product is excellent. Having lacked investment for many years, incumbent operators have never had it so good with increasing demand, stagnant supply, and an optimum performance environment. The pace of average annual new supply is now outstripping the pace of demand growth in many markets. This can squeeze operational performance, often resulting in a lack of real RevPar (revenue per available room) growth. Year-on-year average room rate declines or growth significantly below CPI levels are a true testament to increased competition. The following strategies may assist hotel operators to consider their position to maintain RevPAR growth : Revenue management strategy – if a defined strategy with a 13-month planning outlook is not in place, it is needed. The loss of opportunity through a lack of understanding of the effectiveness of a combination of long-term revenue management planning coupled with a daily pricing strategy cannot be understated. Accessing the right data and tools to effect this strategy efficiently is paramount. Distribution strategy – distributing, or not distributing inventory to the most appropriate channels at the optimum time can significantly reduce the overall cost of distribution. Understanding demand markets and business drivers are key to making the right distribution decisions. A lack of understanding leads to overreliance on online travel agents (OTAs) and in particular, low margin channels. OTAs vs franchising – More recently, the argument has centred on the benefits of franchising given continued loss of booking conversion to OTAs by franchising distribution platforms. Accessing the expertise of franchising at the right price to off-set OTA commission is the new franchising model. Question the traditional fixed-fee franchising model. Top-line vanity vs bottom-line sanity – achieving the most appropriate mix and focusing on Gross Operating Profit per Available Room (GOPPAR) is the new mantra. A net RevPAR mindset drives distribution decision making toward a more profitable outcome. Actually achieving more direct bookings – conversion of consumers is the key focus. A close examination of the website offering and in particular the effectiveness of the booking engine compared to OTAs is warranted. For many years, the hotel booking engine market has lacked innovation and is a key driver of the continued pace of growth of OTAs. Take action with variable costs – with a decline in performance, quick action to rebalance the cost base is critical. These are often tough decisions, perhaps with human consequences; however, these decisions will only serve to provide for a sustainable business. Reposition or renovate – with significant new bedroom stock in local markets, a rethink on competitive positioning and whether the current price positioning remains relevant is required. Renovation or repositioning may not involve a bedroom centric strategy. Being smart with how hotels are presented with a presentation strategy are effective repositioning tools. Use data and tools – the hotel software environment is fragmented and complex, producing significant quantities of useless data. Streamlining and integrating various software systems whilst producing relevant management reporting can save endless hours of lost productivity. Engage experts – with the gig-economy growing apace, relevant experts are available at ever more competitive rates. The low-risk, time and direct cost saving potential from contractually engaging with an expert and learning from their knowledge has the capacity to drive significant efficiencies. One percent at a time – there is rarely a silver bullet. Pursuing multiple minor strategies concurrently can gradually claw back operating margin. Some strategies can achieve results in particularly short periods of time, particularly effective revenue management and distribution strategy. Downward pressure on average room rates in particular markets that are either experiencing high levels of new supply, falling demand or a combination of both is not a permanent characteristic of the market, simply the current stage of the investment and development cycle. Weathering this stage and being prepared for further downward pressure allows significant enterprise value to be generated should an eventual exit from the business be sought. Maintaining the business profitably during this stage of the cycle is an artform that requires experience of such market characteristics. QHA REVIEW | 39