Rooms With A View

8Hotels Collection

The biggest hotel chain in the world has more than 3,500 properties. 8Hotels Collection has fewer than 20. But as Chief Executive Paul Fischmann says, everyone has to start somewhere. He himself started in the travel business at the backpacker and boarding-house level until he took over his first ‘proper’ hotel in 2002…

“By the end of 2004, I was operating three hotels, all in Sydney, with different names and different feel and appeal. At that point I decided to put an umbrella brand over all three, essentially a marketing umbrella. By now I had decided I really enjoyed this hotel business.” He wanted to build a hotel company and so from 2005 onwards he kept adding properties; currently there are 18 with a 19th in development.

8Hotels as a brand has a rather unique outlook. “For us it’s not so important to continue to roll out multiple properties under the one brand. We are a hotel management company which has evolved by being very flexible with brand so we take opportunities – whether it’s a new building, an existing property or a refurbishment – and consider what would be the best way to represent the property to the market via brand, then make our decision accordingly. We are more than happy to continue owning and operating hotels with different brands.”

So how does he market his ‘chain’ to – in particular – corporate travellers and specifiers? The strategy is to build and strengthen the 8Hotels brand whilst also marketing the individual hotel names. This differs from the tack taken by the multinationals, for whom it is either less important to market the umbrella brand or, in some cases, vital not to because it adds to the poor traveller’s confusion.

Hotels are not typically regarded as a favourite destination for investment – especially from banks and especially since the GFC. “We are creative in the ways we structure our deals. But it is not easy to finance hotels. I have always said it’s a pity we are not in a retail shopfront business because we would be able to expand a lot quicker.” explains Paul. Hotel development is problematic, “because we are dealing with pieces of prime real estate, sought after not only by hotel operators but by residential or commercial developers, so getting our hands on [suitable] properties to expand is not easy.”

As a result, hotel development in Australia is not as prolific as it should be, says Paul. There are fundamental reasons for this, some of them cultural. “I think a lot of the development community in Australia has been, at least historically, somewhat anti-hotel compared to other property asset classes. I have never quite understood it, but it seems developers are more comfortable with other forms of real estate.

“The banks have the same sort of attitude.” They remain basically risk-averse, “although it is changing. Even the big four [banks] are showing they are becoming more comfortable with hotel funding – but we still have a long way to go.” Financiers seem to think hotels are a greater risk, but Paul says, “In my opinion there is no better real estate business than hotels because there is income and cash-flow literally from day one.”

8Hotels has a conscious desire to expand across the globe and already has properties in Bali (the 500-dollar-plus Chandra Luxury Villas, about five kilometres north of Kuta) and Paris (the much less minty 150-euro Paris 8 Apartments in the central Deuxieme Arondissement). “Our plan is to look at markets where Australians travel to, and we have other Asian destinations in mind. We would also like to be in London and in Los Angeles or New York.” Paul wants to leverage the domestic Australian business into overseas growth, although he stresses that all such expansion – at home or abroad – is “very much opportunity-based.” If a hotel comes on the market, it gets snapped up quickly if it looks good. “Obviously we do see more opportunities here than overseas because we are based in Australia. But we do want to expand abroad.” By acquisition or construction? “Building new properties abroad is not likely for us. Acquisition is also tricky, so our real preference is some form of management or lease agreement.”

There is no real intention to make the foreign hotels seem like an Aussie ‘home away from home,’ though. “Aspects of the operation would need to make our Australian guests feel very comfortable, of course, but we consider ourselves to be a multicultural, cross-border type of company so it’s about providing the basics, just like anywhere else in the world.” Paul points out that having a localised office here for bookings gives the operation an immediately trustworthy ‘comfort factor,’ but he certainly does not want the foreign properties to develop into a kind of Kangaroo Alley.

Paul anticipates that the rate of expansion – in terms of the number of properties in the portfolio – will accelerate. “I would assume we would be able to exponentially grow in the next ten years. But it does all come down to opportunity and we are only prepared to take on properties that suit the collection.” He assures there is the financial muscle available to take advantage of such opportunities, “subject to the metrics of any deal. But our problem at the moment is the sourcing of opportunity, rather than the sourcing of funding.”

There is still a lot of potential in Australia and Paul says part of tapping into it is to improve the existing product offer in terms of both the bricks and mortar and the human capital.

Hotels worldwide are swapping properties at such a rate that the beleaguered traveller cannot always cope – increasingly that ‘nice little place we stayed at last time’ has either disappeared, changed its name or moved up or down a few stars, victim to the huge amount of ‘churn’ in the industry. Will it be the same with 8Hotels? It’s a business, Paul stresses, and therefore he should never say never when it comes to selling a property, but the company’s prime motive is operating hotels rather than simply buying and selling property. “Our focus is on continuing to build a great hotel business and a trusted brand. Currently we would only consider moving out of a property if that created a greater opportunity to move into a better hotel product. It’s not about making a quick buck and exiting.”

So what of the hotels themselves? The present range is intended to be “an inclusive rather than exclusive hotel group. A number of operators are now talking about that concept but not living it. There are boutique hotel companies that are aiming at the mid or even budget markets to try to seem inclusive but are presenting to a demographic that is quite exclusive. We are trying to open our doors to everyone who is looking for something a little bit different.”

Paul is reluctant to talk about stars and classifications, although gives the Denman Hotel in Thredbo (near Mt Kosciuszko) 4.5 stars and the much cheaper Albany Hotel in Melbourne’s South Yarra 3.5 stars. The only luxury standard Paul is interested in is “our service.” All of the company’s offerings feature high levels of comfort and cleanliness, he says, and each property has “an interesting design aesthetic and a seven-star location.” Each property is uniquely fitted out (Paul says corporate travellers are coming round to the ’boutique’ concept as opposed to the standardised offers of the big chains), and rates appear to be refreshingly transparent, online and upfront without complicated form-filling.

8Hotels uses a dynamic pricing model depending on demand, which is actually quite different to ‘discounting’ and better for the customer. “Hotels lowering rates to buy occupancy is a bad move, and it is rife in Australia, particularly in Sydney, which is very disappointing as it’s the flagship city of the country and the key corporate market. Some of the larger hotel brands will drop rates to unconscionable levels, which does nothing except hurt the market – it certainly does not drive demand.” If you get a better rate from a website other than 8Hotels’ own booking engine, he says, it will only be because of poor revenue management.

8Hotels recently introduced a ‘white-label management’ division which came about because, “I and the company like all types of accommodation and as we built the 8Hotels collection we realised there were other management opportunities where we could deploy a great hotel management infrastructure, which a lot of independent hotels out there could also benefit from.” The result is a flexible structure – there is no set financial model, each case is weighed on its own merits and challenges – for third-party hotel management and also for the owners of independent properties to be able to ‘plug in’ to the advantages of back-of-house synergies.

This new service enables the 8Hotels team to move into areas (geographical or standards) where they may not wish to be directly represented but can still do a good job of running a property. It’s a growth area – hopefully, says Paul, enabling the company to continue to grow even when there are no suitable opportunities for acquisition or construction.

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

December 19, 2018, 5:34 PM AEDT