Development strategy

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This thread offers an explanation as to how hotel chains
have grown and developed, especially in the last decade,
and offers some projections from Otus on the European hotel
industry in 2011. The development process in hotel chains
is explored and some conclusions offered for the future.
The structure is in five sections as follows:
• Conceptual background
• Context
• The evolving structure of the hotel industry
– Global overview
– Economic structures
– The structure of the hotel industry in Europe
– Demand growth and share of new hotel rooms
– Capital availability and hotel migration
– The European hotel industry 2011
• The development process in hotel chains
• Conclusion

Conceptual background
This first section reviews some of the underpinning concepts of
planning and of development strategy. Every business plans for
the future and hospitality organizations are no exception. If firms
plan carefully and objectively, they can, at least to some extent,
prepare for the possible impacts of key factors such as changes to
target markets, sales, volumes and trends. Armitstead (2000) suggests
that the planning process starts with articulating a mission
and vision, before setting objectives, developing and implementing
a strategy, as shown in Figure 4.1.
Figure 4.1

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7-7-2009 05:18

The planning process

As seen in Figure 4.1, planning is often seen as a linear, but flexible
process, in which mission, vision and strategy are regularly
refined and re-evaluated according to unexpected changes in circumstances.
Similarly, a good brand development strategy will
consider internal and external factors including:
Internal
• Objectives of organization and its shareholders and stakeholders
• Current brands, products or services supplied by the
organization
• Internal strengths and weaknesses
• Pricing policy and price sensitivity of market
External
• Competitive brands and their strategies
• Strategies for competitive advantage
• Customer base and characteristics
• External influences and trends, including political, environmental,
economic or legislative.
Most chain hotel providers brand their products in order to distinguish
them from others and to communicate and market the product
to a selected target market. Armitstead (2000) points out that the
benefits of branding are in attracting funding and drawing potential
employees, as well as creating barriers to competition and
making marketing easier.

Context
The conventional wisdom about hotel development is grounded
in single venues. The process is designed to reduce risk for capital
providers by giving assurance that once developed the venue
will be able to attract sufficient demand with a cost structure that
will produce the target returns.
At the time of writing this analysis (February 2003) the performance
of hotels, particularly in major cities is as weak as it has been
since the early 1990s when similar twin depressants prevailed – the
first Gulf War and economic recession in multiple countries.
Thereafter, hotel chains in the USA grew room stock by 50% adding
almost one million rooms. During the same period in the UK, hotel
chains grew by almost 60%. It is opportune, in the midst of the
current market downturn, to consider the medium- to long-term
prospects for the hotel industry in Europe and also to consider how
far the development process is keeping up with the progress.

Table 4.1
The structure of the global hotel industry 2002

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7-7-2009 05:22

The evolving structure of the hotel industry

Global overview

The only barely credible estimate of the total hotel room stock in
the world is provided by the World Tourism Organization 1, which
estimates 15 million rooms. Otus & Co. calculate that 4.7 million
rooms are affiliated to hotel chains in an uneven pattern as shown
in Table 4.1.

Economic structures

The global imbalance in the structure of the hotel industry is a
function of the imbalance in the structure of economies. Otus
classifies economies into five types: experience, market service,
citizenship service, industrial and subsistence. The classification
is based on a range of measures including GDP (gross domestic
product) per citizen from agriculture, GDP per citizen from industry
and GDP per citizen from services; the percentage of GDP
from agriculture, the percentage of GDP from manufacturing,
and the percentage of GDP from services; the percentage of male
employment in agriculture, manufacturing and services; the percentage
of female employment in agriculture, manufacturing and
services. The structures of the European economies at the end of
2001 are shown in Table 4.2.

Table 4.2
European economic structures 2001

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7-7-2009 05:26

In 2003, there are only three experience economies in the world:
USA, Canada and UK, which rate highest in each of these measures
while subsistence economies rate lowest.
In subsistence economies, the bulk of economic activity is in agricultural
and extractive industries and only a minute proportion
of the indigenous population are a market for hotels. This is the
reason why the small hotel industry in developing countries
relies on foreign visitors for its demand. In the industrial economies,
consumer spending is higher than in subsistence economies and
it is concentrated on consumer durables, which with other basic
manufactured goods form key elements of the economic output.
Leisure activities in industrial economies are more heavily
focused in the home and consumer spending on hotels is relatively
limited. Factory production, in which higher productivity
is achieved through larger size and fewer workers, generates
limited demand for hotels and that comes mainly from sales and
marketing executives. When industrial economies reach a high
degree of efficiency, the GDP is produced by fewer citizens
and manufacturing is progressively transferred to lower cost
economies. The emerging economic problems include rising unemployment
and a workforce trained in redundant skills. In mature
industrial economies a material proportion of the citizens own a
range of white goods and brown goods, furnishings, apparel, cars
and houses that were acquired during the phase of industrial
expansion when the availability of consumer credit also grew.
The availability of credit makes the replacement of goods relatively
automatic, but a factor in the slowing growth of mature
industrial economies is the diminishing marginal returns from
the ownership of consumer goods. Once they have been acquired
the rate of growth in demand declines to the level of replacement
of redundant items.
The solution to the declining contribution of manufacturing to
GDP, the rising unemployment and the redundant skills is found
in the emergence and growth of the service sector. In the first
instance, citizenship services, which are controlled predominantly
by the state, expand. Services such as health grows from curative
to preventative health, tertiary education expands and social services
develop into areas such as senior citizen communities. On
their own the growth of citizenship services is insufficient to reduce
unemployment and simultaneously to grow GDP. They also
provide little more business demand for hotels than the manufacturing
industry. At this same stage of economic development
market services are typically small, fragmented, but growing
businesses.
It is only when an economy develops larger and more concentrated
market services that it is able to reduce unemployment
materially and to grow GDP, because the limits to the growth
potential of market services are not yet known. Ownership of consumer
goods such as cars produces gratification each time they are
used. In contrast, when a market service such as a holiday, a hotel
stay or a meal in a restaurant has been experienced all that remains
to provide gratification is the memory. The only way to experience
further gratification is to buy again. This inherent growth is reinforced
by the conspicuous feature of service consumption and in
the case of hospitality, travel and transport the association of consumption
with enjoyment. Thus, the growth potential in market
services is determined more by factors such as lifestyle and time
availability than by diminishing marginal returns.
As the market service economy develops so do the critical relationships
at work, which change from the worker/machine relations
of the manufacturing and extractive industries to worker/
worker and worker/customer relationships in service industries.
Work becomes more mental than manual, more social and
cleaner. Gender equality becomes the norm and the number of
dual career families increases. The distinction between work and
leisure becomes less dichotomized and leisure activities outside
of the home become a prime growth market. The number of
meals eaten outside of the home, the number and frequency of
holidays taken, the frequency of visits to gaming venues, sports
venues, cinemas and theatres all begin a stepped growth in the
market service economy and produce changes in lifestyle.
Service firms are also different from manufacturing firms. They
are far more diverse in their functions and they are far more geographically
dispersed. As a result they provide the highest level
of business travellers to hotels drawn from across the full range of
executive functions.
The most developed stage of an economy is the experience
economy in which market services become the prime contributor
to GDP and to employment. Market service firms in industries
such as financial services, communications and media grow to
become among the largest and most consolidated in an economy.
The hotel industry in experience economies is not only more concentrated,
but also larger due to the higher frequency of both
business and leisure demand. The industry has national representation
throughout all market levels and all configurations of
hotel facilities. It is not only the hotel industry that grows, but
also all of hospitality, travel and transport, which collectively
become a significant contributor to GDP. Spending on hospitality
moves from being a periodic luxury to being a central feature of
life style and standard of living. Apartments in New York and
London with minimum or occasionally no kitchen facilities are in
demand, since the occupants eat most of their meals in restaurants.
Such a practice would be inconceivable at any other stage
of economic development.

The structure of the hotel industry in Europe
The pattern of concentration in the hotel industry reflects the
structure of the economies. Experience economies have the highest
hotel concentration, while subsistence economies have the
lowest. The contrast in the structure of the hotel industry in the
economies in Europe can be seen in Table 4.3.

Table 4.3
European hotel supply 2002

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7-7-2009 05:32

The UK scores higher in the structural measures than any other
European economy, it is an experience economy and at 52% has
the highest level of hotel concentration in the region. Denmark,
France, Netherlands and Sweden come closest in structure to the
UK economy. They are market service economies and collectively
have 34% hotel concentration. The economies of Austria, Belgium,
Finland, Germany, Ireland, Italy, Luxemburg and Spain score
lower on the structural measures. They are citizenship service
economies and collectively have 21% hotel concentration. Greece
and Portugal have the lowest structural scores in the European
Union, are industrial economies and have only 10% hotel concentration.
The proposed 10% new EU member states are mainly
from Eastern Europe, are industrial economies, have a smaller
hotel industry and a concentration of 15%. The other non-EU
states, with the exceptions of Norway and Switzerland, which are
market service economies, are industrial and subsistence economies
with the smallest hotel industry in Europe. The concentration of
the non-EU states is only 9%.
The very low levels of hotel concentration in Greece and Italy is
the result of the lack of interest by most chains in the seasonal
beach holiday markets that dominate these countries and the low
levels of domestic business demand for hotels. These economies
are also characterized by a low ratio of citizens to total hotel
rooms due to the preponderance of small, part-time, quasidomestic
and seasonal hotels that also are a feature of these
countries.
The history of the pan-Atlantic hotel industry over the past
30 years has been dominated by the emergence and growth of hotel
chains, yet the chains still have a long way to go to develop a
national presence across all of the European countries. It has been
easier for them to grow in their home country and only multi-brand
chains such as Accor, Hilton, Marriott International and Six Continents
have developed a mass presence in more than one country.
In Europe there are 370 hotel brands accounting for 1.1 million
hotel rooms. Only one brand, Accor’s Ibis has more than 50 000
rooms, giving it a little more than 1% market share, while there
are 180 brands that together share less than 2% of the rooms and
have an average of only 460 rooms per brand. There are too many
brands with too few rooms so that most hotel brands in Europe
are too small to develop an effective brand infrastructure. Only
the largest multi-brand chains have the size to make a loyalty
programme effective. The marketing and sales structure, the
investment in distribution IT and yield management systems are
limited by the cash flow generated by the hotels and media spend
is out of the question for most of the brands. Consequently,
the cost to the smaller brands to capture demand is too high and
the returns generated are invariably too low to excite the capital
markets.
The position is no better when it comes to brand length. There
are only 17 brands with more than 100 hotels in Europe and none
with more than 1000 hotels while there are 182 brands, each with
less than 10 hotels. The short brands are unable to provide national
or even regional coverage and are thus handicapped in their ability
to compete in the wholesale markets. The problems for short
chains are similar to those for unaffiliated hotels. The vicious circle
is that, to compensate for the lack of brand infrastructure,
unaffiliated hotels and those in short chains are too frequently
over-specified for the market level at which they compete. The
resulting higher investment invariably makes the target returns
even harder to achieve.

Illustration 4.2
Growing hospitality recognition

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7-7-2009 05:32

Demand growth and share of new hotel rooms
The continental European economies are at a crucial stage because
their structural developments are likely to shift the classifications
of several of the economies over the next decade or so. The precise
timing of such shifts cannot be pinpointed precisely, but Otus
projects that the structural developments in the economies will
produce a stepped growth in hotel demand across Europe by the
end of 2011 and that this will be accompanied by a marked growth
in hotel concentration.
Over the next decade it is expected that at least some of the
market service economies in the EU: Denmark, France, Netherlands
and Sweden will progress to become full-blown experience
economies. This will boost their domestic growth in hotel demand
and in hotel concentration. The view is that the citizenship service
economies – Austria, Belgium, Finland, Germany, Ireland,
Italy, Luxemburg and Spain – will progress and several will
become market service economies. Further, the secular change in
hotel demand in these countries over the medium to long term
will be accompanied by significant growth in the size and concentration
of their hotel industries. The anticipation is that the
Greek and Portuguese economies will also develop, but that the
reliance on foreign holidaymakers will remain paramount and
they will continue to have relatively low levels of hotel concentration.
The 10 states due to join the EU in 2004 will probably produce
accelerating economic growth as a result over the period
and their hotel industry will grow and concentrate from their currently
low levels. The progress in the remaining industrial and
subsistence economies will be positive, but the hotel industry will
remain small and concentration will remain relatively low.
In parallel to the structural analysis of demand growth in the
European economies, the World Travel and Tourism Council 2,
which provides the most comprehensive and systematic mediumto
long-term forecasts for world tourism growth, projects that by
2012 business travel in the EU will grow by 96% and leisure travel
by 93% from current levels.
The first two issues about the medium- to long-term projection
of hotel supply in Europe are how many new rooms will be
developed and how many of the new rooms will be affiliated to
chains. If the demand growth inherent in the structural developments
in the European economies and in the WTTC projections is
achieved then within the next 10 years around 675 000 new hotel
rooms, a compound average growth rate (CAGR) of 1.5%, will
need to be added to stock if there is to be any hope of supply
keeping up with demand. Of this total Otus anticipates that more
than 500 000 will be added in the current member states of the EU.
In the USA there is an anticipated slower rate of growth adding
circa 475 000 new rooms, a CAGR of 1.2% over the period, even
though it is already an experience economy and has already
achieved much of the domestic growth in demand and in hotel
concentration. The Otus estimate assumes that the USA will continue
to bulldoze obsolete hotels and that in the medium to long
term the main growth in demand in the USA hotel market will
be derived from foreign visitors. The UK is closer to the USA in
terms of its economic structure than it is currently to the continental
economies; however, Otus project a CAGR in room supply
of less than 1% due to the reluctance to demolish obsolete hotels.
This reluctance is not only a significant factor in the slower
growth in new room stock, but also a drag on the rate of further
growth in hotel concentration, since most obsolete hotels are
unaffiliated and of little or no interest to the chains.
The second issue in the medium- to long-term projection of
hotel supply in Europe relates to the share of new rooms that will
be affiliated to hotel chains. The two main drivers of the expansion
of hotel brands across the whole market spectrum are
demand and capital access. Fortunately, the industry is at a stage
when the medium- to long-term growth of both is accelerating.
Holiday Inn Express, the mid-market limited feature brand, was
introduced in 1993 and has developed 1300 hotels, that is, one
hotel opened every 3 days for 10 years. All but around 100 of
these hotels are in North America. The explanation has little to do
with the paucity of demand for the brand in other parts of the
world, but it has a lot to do with the availability of capital in North
America for hotel investment and the ease with which franchisees
and other hotel owners have access to it.
Travel Inn, an economy lodging brand in the UK, developed at
a rate of a hotel every 10 days for several years during the 1990s.
Whitbread, which owns the brand, funded most of the hotels
while no more than a handful of the hotels are franchised and
none are held on management contracts. Unlike the situation in
North America the capital markets in the UK and the continent
insufficiently understand and are insufficiently committed to the
hotel business to provide more capital and Whitbread with its own
resources has been unable to keep up its earlier pace of development
of the brand.
For the past decade in the USA and UK circa 95% of capital
invested in new rooms has been in hotels affiliated to chains.
Currently in continental Europe no more than 45% of the capital
invested in new hotel rooms per year finds its way to affiliated
hotels and this has inflicted a higher risk on the capital provision
to hotels in this region compared with the USA and the UK. As a
result continental Europe has too many small new hotels built in
the wrong places with idiosyncratic facilities owned and managed
by amateurs.
The first initiative in the effort to solve this problem is for capital
providers to reduce the investment in new unaffiliated hotel
rooms. This is the single most important development that is necessary
to improve the structure and performance of the hotel
industry and to reduce the risk attached to hotel capital.
The time it will take for continental Europe to reach the current
situation in the USA and the UK depends on the commitment of
lenders and other capital providers to make the change, but the
decision-making structure in continental banks is a constraint on
the speed with which the change can be made. Our current working
assumption is that, within 10 years, 67% of capital provided
for new hotel rooms will be chain affiliated, up from 45% at present.
On this basis circa 450 000 of the new rooms will be affiliated
to chains over the period and that circa 220 000 new unaffiliated
rooms also will have found capital. This implies only a 6% growth
in unaffiliated rooms compared to a projected 40% growth in
chain rooms.

Illustration 4.3

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7-7-2009 05:35

Express by Holiday Inn

Capital availability and hotel migration
The next issues in estimating the medium- to long-term growth in
the European hotel industry are how much capital will be provided
to acquire existing unaffiliated hotels and how much capital will
be provided for independent hoteliers to acquire single hotel
assets from hotel chains. In Europe, at an average development
cost of circa €100 000 per room, the total capital needed for the
projected new rooms over the next 10 years will be in the region
of €70 billion. The provision of this capital is not assured.
However, the most efficient way to meet the demand growth is
through hotel chains rather than unaffiliated hotels and this is
also the lowest risk basis on which the capital can be provided.
On our estimates the 220 000 new unaffiliated rooms will require
capital of around €20 billion. Although this is a significant
reduction in the rate of growth it is still a material amount of
capital and Otus expects more than 85% of it to be concentrated
on the citizenship service, industrial and subsistence economies
where unaffiliated rooms will grow by 7% over the period. Otus
anticipates that the experience and market service economies
will be quicker to reduce the capital available to build new unaffiliated
hotels and Otus projects that such capital will grow by
only 4% over the period amounting to around €3 billion. The
lower the capital invested in unaffiliated hotels the better the performance
of the industry and the higher the returns to capital
providers.
The question of the capital available for unaffiliated hoteliers to
acquire single hotel assets, either from other unaffiliated hoteliers
or to buy redundant hotels from chains is problematic. Bankers in
Europe have sustained the unaffiliated segment by providing
capital for such acquisitions. The UK experience is notable. Most
of the hotels that change hands are old, with fewer than 50 rooms,
are mid-market or lower, full feature or basic hotels in tertiary or
quaternary locations. Many in country and coastal resorts have
heavily seasonal demand while those in other areas face strong
competition from the chains. By definition, these hotels have no
brand infrastructure, invariably they are owned and managed by
amateurs and they experience the highest levels of bankruptcy
and liquidation in the industry by far. The more this practice continues
the longer the hotel industry will be under-demolished
and the higher the risk attached to hotel debt. The problem will
be resolved only by cutting-off of capital. The solution is in the
hands of the banks.
The second issue in estimating the changes over the period is
the extent to which there will be a migration from existing unaffiliated
hotels to chains. The limits on this process include the low
propensity of unaffiliated hotel owners to award management
contracts or franchises on their hotels to hotel chains and the low
rate of single hotel acquisitions by the chains. It is anticipated there
will be a relaxation in the current entrenched positions on these
issues and it has been estimated that these processes will migrate
almost 100 000 rooms, less than 3% of the current unaffiliated
stock, to the chains over the period.

The European hotel industry 2011
Otus’s net projections Europe-wide are that hotel chains, through
growing share of new build rooms and, migration of existing
rooms from unaffiliated to chains and after accounting for the
disposal of redundant hotels to the unaffiliated market, will grow
room stock by 50% to 1.62 million and that unaffiliated rooms will
grow by 4% to 3.76 million rooms. The outcome of the projected
developments is that by 2011 hotel concentration in the region
will grow from 23% to 30%.
In the current EU countries Otus expects the processes to grow
chain room stock by 44% to 1.38 million while in the rest of
Europe there is an anticipation of hotel chain exposure doubling
to 240 000 rooms as Table 4.4 records.
Table 4.4
European hotel supply 2011

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7-7-2009 05:41

For the longer-term Otus projects a doubling of global room
stock by 2030 to 30 million rooms, a compound annual growth of
2.5%, not enough to keep pace with the long-term projections for
growth in world travel demand. By that date it is projected that,
of the 30 million rooms, 15 million will be affiliated, which entails
that over this period the total number of unaffiliated rooms will
grow by nearly half while the number of rooms affiliated to hotel
brands will grow more than three times. Consistent with this
trend the forecast is that within ten years the first hotel chains
with one million rooms will emerge.

The development process in hotel chains
From the perspective of hotel development the first difference
between chains and unaffiliated hotels is in the starting point.
There is no standard starting point, but for unaffiliated hotels the
development process typically starts with a site, which means that
the city, the country and the economy in which the venue is located
is determined. The formation of the concept stage of development
then seeks to establish the most effective market level, hotel configuration,
room configuration and size for the proposed hotel.
In contrast, hotel brands start with concept formation typically
by identifying the market level and the configuration of facilities
for the brand. The chain’s approach to hotel configuration has been
to improve the financial structures of hotels mainly by increasing
the proportion of turnover derived from rooms, which in turn
produces higher margins and higher returns. In upmarket hotels
such as those in the Hilton, Intercontinental and Sheraton brands
this has been achieved by locating hotels in the larger cities and
increasing the number of rooms per hotel. At the mid-market
level this has been achieved through the creation of limited feature
brands such as Holiday Inn Express and Courtyard by Marriott.
At the economy lodging and budget levels the improvements have
been achieved by developing brands such as Travelodge and
Formula 1 as room-only hotel brands.
Investment in non-room facilities in full feature hotels has been
reduced progressively by limiting the number of restaurants and
simplifying the logistics of restaurants. The main impact has been
the reduction of non-resident demand for such hotel restaurants
and the reduction in restaurant usage by hotel customers at lunch
and dinner. The exception has been in the conference market,
which is a captive meal market for full feature hotels and is logistically
easier for the hotel to manage, since delegates invariably
arrive to eat at the same time and have a set menu. The resultant
higher percentage of hotel turnover derived from rooms has
produced higher hotel EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization) margins and higher returns.
The innovations with most impact in the configuration of hotels
have not come from the development of single hotels, but from
the conception of hotel brands. Brands are conceived to meet the
twin goals of attracting both demand and capital and thus to
grow the length of the brand. The longer the hotel brand the more
the corporate infrastructure is designed to capture demand for
the portfolio rather than for individual hotels. The longer brands
deal in wholesale markets, which are beyond the reach of unaffiliated
hotels. In contrast, the conventional wisdom about hotel
development has assumed demand capture to be more reliant on
the inherent features of the hotel. The recent fashion for boutique
hotels is the most notable example. Invariably, they are small
hotels trading at the deluxe and upmarket levels in major and primary
cities, with a high investment cost to create their style and
no brand infrastructure.
When hotel brand specifications are established a rollout programme
is planned within which hotel size is a function of location.
For hotel brands a higher priority is attached to the rollout programme
than to fretting over the unique facilities or design that
might be developed on any given site. The countries, economies
and cities that are target markets for the brand are then identified
and the rollout programme progresses by finding sites and capital.
However, for any hotel brand the brand length potential is
inversely related to market level. Deluxe brands need the fewest
hotels and budget hotels need the most to generate brand power.
For the rollout of hotel brands the conventional wisdom on the
development process is too slow and too expensive. Hotel chains
are more than the sum of their venues and have the right to insist
on economies of scale in the development process, which involves
reducing the time and the cost required for development. In
brands this is achieved in their approach to concept formation.
The rollout simply adapts the brand specifications to the conditions
of each site. The faster the rollout programme the more the
economies in planning and construction.
An implication of the accelerating rollout of hotel brands is not
only that hotels in any brand bear a family resemblance to each
other, but also that the performance of hotels within a brand is
not uniform. For instance, Post House Hotels, the mid-market full
feature brand with 77 hotels in the UK, was sold to Six Continents
in 2001 for £810 million. Twenty per cent of its rooms were in
London, 23% in the primary provincial cities, 54% in the secondary
and tertiary towns and cities, 3% in quaternary locations and
the average size of a Post House was 158 rooms. The RevPAR
range across the portfolio in 2000 was £62.63 to £16.55 and
EBITDA per room ranged from £18 951 to £3 125. The value of
each hotel was not uniform. On the basis of 8 x EBITDA(Earnings
Before Interest, Taxes, Depreciation and Amortization) the hotels
ranged in value from £155 000 per room to £25 000. Typically, the
construction cost for a mid-market full feature hotel in the UK
could be circa £60 000 per room, which indicates the potential gap
attached to the value of existing hotels and the replacement cost
of equivalent hotels. The diversity in performance and in values
is not untypical in mid-market and upmarket chains.
Many brands, particularly those at deluxe, upmarket and midmarket
levels grow by acquisition as well as new build. Holiday
Inn, owned by Six Continents and the brand to which Post House
Hotels were converted is an example. In a formal auction process
for a hotel chain the limits on time and information available to
potential buyers before their bids have to be submitted is controlled
and in the case of hostile bids only publicly available data
can be examined before the company is acquired.
The logic of hotel development practice is based on venues.
When the focus is raised to the corporate level the development
process has to be adapted. The conventional approach to development
assumes little or no knowledge or understanding of the
hotel market by the client, but as hotel brands have developed so
the extent and the reliance on feasibility studies has reduced and
the roll-out programme has routinized the rest of the development
process. Banks and other institutions progressively are using
independent feasibility studies as a validation of the decision to
lend or invest in hotel projects. This process parallels the growth
in the proportion of the capital available to chain hotels. The more
that the development process delivers hotels and chains that produce
returns on capital that meet the demands of investors as
well as the demand of customers then the higher will be the level
of concentration in the hotel industry. It is a critical step in the
progress of the industry.

Conclusion
The strong prospects for the European hotel industry in the
medium to long term will propel hotel concentration to more effective
levels. This requires thinking about the industry to be elevated
from the level of the hotels to the level of the brands and this in turn
requires the hotel development process to adapt to the rhythm of
the brand rather than to be constrained by the possibilities of individual
venues. Of course, there are many other challenges for the
chains, such as, the access to capital, the distribution of demand
through the Internet and the development of corporate executives
with an effective understanding of the hotel business. The growth
prospects are the fundamental driver that demands solutions to
the challenges and the prize is a more concentrated, more successful
and more professional hotel industry.

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