The strategic power of full-service hotel management

After a challenging few years for the sector, it’s estimated that more than 10% of the UK’s hospitality businesses have permanently closed since March 2020, according to the Hospitality Market Monitor. Whilst the pandemic took its toll on hospitality with forced closures, rising energy bills, a lack of consumer confidence and increasing inflation rates, rail strikes and staffing shortages have also played their part. This has continued into 2023, with hospitality accounting for 10% of all UK companies going into administration in the first six months of the year. In such difficult times, it’s important for hotels to grow their portfolio in a savvy way, not just targeting growth at any cost, but opening new locations or adding labour costs without doing the data analysis required to ensure profitability. Businesses need to make strategic decisions, and any decision needs to be right for the business itself, its partners, team members, and guests. A growth strategy should also encapsulate adding value, spotting the opportunity, and understanding where you are as a hospitality business, and where you need to get to. Hotels can grow their portfolios through various means, such as franchising, management agreements, leasing properties or direct ownership. The level of resources and investment required is different for each. The availability of full-service management companies – like Valor Hospitality – has driven a competitive landscape, with such businesses able to add value by forming partnerships that offer a ‘one-stop shop’ solution, which adds value and facilitates growth. These companies can get under the skin of hotel brands, offering support to leadership teams and running the-day-to-day operations of the business. Hotel brands and management companies can find opportunities for growth by working together in a holistic way to build portfolios. Management businesses have the on-the-ground knowledge to understand where market demand is coming from, and how that can be used strategically. For instance, if a lot of demand in an area is coming from business travellers, or if there are new attractions being built, they can identify the need for new properties. Equally, this market knowledge can be used to form new partnerships. If the data is showing demand for sustainable properties due to guest feedback, this can be fed back and used to form partnerships, such as the need for a net zero property. One example is the recent partnership between Valor, IHG Hotels and Resorts, and Zeal Hotels to create a net zero hotel. This was driven by Valor’s sustainable goals and the appetite for eco-friendly hotel stays from guests. When forming partnerships, it is important to ensure both sides align on their overall business goals and can equally add value. Sustainability is another factor that must be considered for strategic growth. Hotels need to have sustainability at the forefront of their priorities, focusing on a fully operational, social impact supply chain. In today’s challenging environment, hotels can grow more strategically by becoming savvier at opportunity spotting, leveraging market data and partnerships to establish a presence in new locations, rather than trying to grow at any cost. Sustainability should also be at the heart of any growth strategy, with opportunities up for grabs in stranded assets and creating a sustainable supply chain. When a formula is created, utilising all of these elements, hotels can grow their portfolios strategically to ensure profitability.