How to grow sustainably or at least make money doing it.
Week 14 - A lot of companies are trying to make long lasting decisions, yet driving inspiration from "cool trends" and not data.
TLDR: To Long Didn’t Read
Saudi Arabia is the future of hospitality, except not really since nobody knows if it will last. Marriot is trying to attract a new workforce with a cool new brand called “be” as in be yourself. Stock markets are going up again, except only due to a few players. All businesses alike are trying to be sustainable, yet likely due to financial reasons and not necessarily the best way. All the while Europeans have cut their energy consumption by 16% this year! There is the ultimate cost-gain analysis conducted by leading economists of the world on how to grow sustainably for the whole world and now there is a 1-page summary of it.
1. Main Hospitality News
Core news related to the industry
Saudi Arabia seems to take the lead in hospitality growth in the upcoming decade. Countless projects worth billions of dollars are growing like mushrooms and seem to never stop. Makes one think if they should relocate and jump on the Saudi train as soon as possible. Saudi Arabia is indeed trying to diversify from its oil dependence on things like tourism and is however going through turbulent times with its GDP still being 42% oil based. Whether it will succeed is a question for an entire book, until then feel free to read this short summary.
Marriot decided to launch a new brand (I know right, who knew!?). With it a campaign of PR releases has rippled itself across almost every hospitality news source there is known to humankind. Mostly trying to attract the modern-day workforces (us millennials and gen zs) with slogans like “Be will empower associates to fulfil their career goals”. Hence, if you want to be empowered, this is your chance to BE! To be more exact your satisfaction score at Marriot will be a C+, as is with most of the employees who answered the comparably survey. Sounds good to me.
Choice hotels have reported on the ESG data this year (one of the first among the big players to do so). They however have excluded data from their 7388 franchised hotels, while reporting only on their direct management properties (9 in total). Good start, at this rate transparency in ESG reporting, is here in no time.
2. Externalities
Econimics, finance, geopolitics. All have an impact on the hospitality sector. This part summarizes those.
Stock markets seem to be doing well, regardless of all the past news. In fact, S&P 500 is up 7% since the beginning of the year. Nonetheless, if you look at an average stock it is only up 1%. A rally that is not bringing a lot of the companies with it. This might be alarming, however, during corona times precisely the same thing happened where tech companies were the only reason S&P 500 did not collapse. Financial stock is dropping, while companies that have previously fallen out of the entire Index are coming back (like GE)—a potentially good piece of news for the service sector.
Trust in German banks is below that of other Western countries. A spike in consumer complaints has risen towards their bank services and is becoming a bit of an issue in the current financial turmoil. Whether this represents the actual financial state of the German banking industry is an entirely different thing. Z score is a way used to rank countries banking systems by volatility. Germany is 14th in Europe and 66th in the world (between Portugal and Angola). Not the best, but also not the worst.
Fun fact, Putin is soon to leave his country and about to visit South Africa. A country that recognizes the international criminal court. Hence, they should technically arrest him and send him right back to Holland.
Eco-friendliness in the hospitality world is a no-brainer, your guests take shorter showers, and you have fewer utility costs. This is however not the case with other industries. Toyota has just now announced a much bigger push into electric cars this week, mostly due to management change who see it differently. Why so late you say, is it not obvious that EVs are eco-friendly, therefore one should make more EVs? Apparently not, since Toyota’s strategy up until recently was hydrogen cars. A car that would literally have H2O (water) as exhaust and would not require massive 1-2 ton batteries, which if scaled towards the entire planet going electric might be a problem. Especially considering that cobalt (a key ingredient in battery production) was recently part of a scandal where child labour and slave-like working conditions are omnipresent. In fact, from the article, it seems that Toyota is doing it for financial reasons and not eco-friendly ones. Therefore folks, “obvious” environmental decisions should often be assessed on their actual net effect before being taken.
Europeans cut their energy consumption by 16% since the war started. Who knew we could be motivated by prices rising? But wait, the economist hast kindly compared average energy reduction and temperature and has shown that actually, the consumption should have decreased by only 4% instead of 16. What remains is still 12% less energy used year on year. We can thank global warming and human psychology for this wonderful change, nonetheless, whether it will last remains speculation.
3. Academia
Scientific papers are being published every day. Including the hospitality sector.
Humans are more loss averse than they are excited about gains. A finding was seen in a multitude of studies across several science fields. But a simple neural study of gamblers’ brains showed that the brain neuro cells light up much more when experiencing a loss than a gain. This can and should be used when projecting guest experience as well.
Imagine 100 noble laureates get together and put a very complicated book on what investment to prioritize as a government to make ensure the most sustainable economic growth for the entire world. Well, here it is! Now imagine these noble laureates realized that nobody will read that book and summarized all of their results in this one-page graph. It actually happened and here it is! An extremely complicated academic work made simple for us all.
4. Readable
Books, podcasts & the big stuff.
In the spirit of this week's news on trying to differentiate we wanted to recommend the “Culture Strategy” by Douglas Holt a great take on how to get out of the “Mousetrap” mentality of a typical marketing agent and actually build a strategy based on lasting cultural bonds. As always a quick summary of the book can be seen here!
5. Tips & Tricks Tools & SaaS
Any new software you can use? Industry tricks you missed? All of that is summarized below once a week.
Are you a revenue manager trying to decide whether your pricing should be based on revenue or profit? A board of revenue manager professionals has tried to answer that question here. Effectively saying it depends. Making it seem like a P&L is up to interpretation. In the end, selling a room below operational costs is simply put a direct revenue loss. One can argue that this could be a more long-term strategy to boost property image and in return bring more guests, nonetheless, expectations of guests who pay way below market average are also associated with that price. What a guest perceives as a 9.5 booking.com score for 40$ ADR is different to 140$ ADR. Additionally, topics like the depreciation of a property are often not even considered in operational costs, can however simply be calculated and included, one just has to do it.
Planning to start a new hospitality business soon? A handy little guide is available here. Diving into a variety of ways how to differentiate in the current market. In a nutshell, pushing any new entrepreneur to go towards the storytelling aspect can hook a guest much more effectively than an innovative colour pallet of your furniture.