Align and Thrive: The Role of Communication in Hotel Profitability | LowKey Podcast (ft. Alex Slors) #29

Speaker A: Hey there. You're tuning in to Loki by Oki, our easygoing sessions for hotel professionals where

Speaker B: we chat about industry trends, issues and solutions.

Speaker A: Ladies and gentlemen, warm welcome to another exciting episode of Loki by Oki. In the past, we talked about a lot of things. Operations, guest experience, revenue management, technology. Today we're talking about the hospitality industry from a different lens, which I find very fascinating. The owner and asset value, asset management side of things. And to have us, uh, help us make sense of all of this. We have a real specialist, uh, joining us today. Alex, we are so happy to have you with us. Thank you for making the time for this.

Speaker B: It's my pleasure to be here, Alex.

Speaker A: For those of you listening who do not know who you are, uh, who has been living, uh, under a stone. No, just kidding. Can you just give the brief introduction? What is, what is your background like and, and why are you a specialist, uh, in this area?

Speaker B: Um, those are your words and not mine. I've worked in hospitality all my life, literally all my life. And I started as a management trainee by, uh, pulling pints and making beds and doing the operational bit. And pretty soon, um, inwards, I found that I had an interest in numbers. Um, but I kept on doing operational things, which later on in life became very, very useful. I'm a Dutch national, so I was in Amsterdam initially working for a company called Trust House Forte, which is the father of the current Rocco Forte and the Forte Company. And at that time that was a huge, huge company. So I ended up as front of house manager in Amsterdam, but always had a close affiliation with the accounts department. And then I was offered a job, um, here in London as assistant financial controller in a large hotel in kensington. And that's 33 years ago. And I never looked back. From there on, um, things went pretty quick. Um, and I ended up as financial controller by the age of 30 in Hong Kong. Came back two years later, and then sort of grow up through the ranks and, and had the fortune to end up doing balance sheet consolidation at head office, then for Meridian, and I grew within Meridian to vice president finance for, sorry, deputy vice president Finance and that then moved into vice president finance at the dorchester collection about 20 years ago. Um, and then I thought, this is it. And then I genuinely was sort of was like, how many month ends do I have left? Is there more? What can I do? And I started my own consulting company, not really knowing what I was going to do. Um, my first sales bridge was an absolute car crash, but mine too. Exactly. And here we are. And from There on, um. One of my really lucky breaks happened because Meridian, the company I was affiliated with that gave me so many chances, went bust. The brand went to Starwood and there was 30 or 40 hotels of real estate left and someone needed to look after them. And I knew everyone. Um, and that was called an asset manager. So I, I had it sort of in my mind. And the beauty of how big of

Speaker A: a Was asset manager a thing back then? Or is that like.

Speaker B: I think it was because Lehman Brothers and Starwood Capital bought the hotels, but it was very much an American thing. Yeah. Because America was like more ahead and they had more, um, the whole mix in between having a different owner, particularly like a corporate investor going into hotels. And I, um, had that opportunity and I knew everyone in the hotels. And what you get then is that initially you sort of find your comfort zone and you're going to look after the things that you looked after before. But I found very earlier on that, like, super important then to find a balance and to find a balance which is the benefit of the hotel as opposed to the owner, the brand, the people that work in the hotel. So that's sort of a little bit of the background. And then the beauty, of course, was that those properties were, one by one, were sold, which allowed me to build my own business. Um, as the other one, the, uh, tier not deteriorate. Diminished. Very good, very good.

Speaker A: And what are the key stakeholders that drive asset value? And asset being the hotel itself, the bricks, the operations?

Speaker B: I think everyone can drive asset value ultimately. But I think the most important thing, I mean, essentially, if you have a managed hotel, you have three parties. If you have a franchise hotel with the white label management, you have four parties. But let's take those two together for start. So you have an owner or an investor, then you have, um, a brand, and then you have the people that work in the hotel. And it should work to such a way that all of those three or four parties actually completely understand each other.

Speaker A: Who's the fourth one otherwise? Is that the white label?

Speaker B: The fourth one would be the white label that you get a franchise plus a white label. That's. That's just to simplify. But even if you take them as, uh. Because you could take those, Those as one. But it needs to be assured that everyone understands what the role of the other party is and that they're not necessarily the enemy, because ultimately it's about the hotel. Yeah. And it's the role of everyone involved to make sure that the hotel does as best as possible. And if that's the case, then all of the three parties should benefit from that. And if one of those three parties is out of kilter, then you get a change situation. The hotel might still do okay, but you can't maximize or optimize it.

Speaker A: Speaking to you, Alex, going into this conversation, it strikes me as asset manager. You have, you have two, maybe two camps of asset managers. Those that are hardcore. I'm the right hand of the owner and I, um, don't give a beep about the operations or the, or that maybe like the long term. And that's one way of driving it. And the other one is like how you just describe it. And I would love to get into more detail where you kind of see yourself as a glue and all of these things need to kind of coexist and drive towards the same North Star. Why do you think you have these? Is that true, first and foremost, that you have different camps when it comes to how an asset manager operates and what are the clear disadvantages and advantages.

Speaker B: And I think there's another group in there, but obviously the job asset manager is not regulated. So anyone can call themselves an asset manager. That's the starting point. Um, uh, personally I've been very fortunate by having worked into operation quite extensively and worked at a head office of a brand and had the opportunity to work with big investors such as Starwood Capital, Lehman Brothers. So you understand all parties and where they come from. And I think that's, that's the important thing. And what you described, because I would like to say that the, the glue function is the person in the middle. But you could. You also have asset managers who come from a hardcore operational role. Okay, right. And so the, the person from an operational role could argue would go into a comfort factor in going sort of a GM role. But a hotel doesn't need two general managers. I think that's very important. If your general manager is not good, then you should fire that person and you should find a general manager that is good. You don't need two GMs. On the other side. What you said is like, like people that come directly from a master's course, etc. And have limited operational experience and really go for the number side. Um, and that could be conceived as. How shall I say it? Um, I'm trying to find a word here. Say that, say the nice word I'm saying, but condescending. Yeah, but both sides could. And I think it's really important that you will never come across as condescending. And if you are, um, in your 20s or your early 30s, and you come straight out of school and you meet a general manager in a hotel and you say, have you considered this? And that general manager has been there for 10 years and he's tried everything to maximize the hotel. That might not perhaps be the right approach to do so. But simultaneously, if you're a senior operations person, to say that to a general manager might also not be the good thing. So it's really how you bring those people together. And you have to understand that the people that actually work in the hotel and actually deliver the services are being kicked by both sides because they're being kicked by a brand to do whatever the brand wants, brand standards, whatever, and they're being kicked by an owner who wants a return on investment. So you have to find common ground where we all work for the same goal. And I think that's the most important thing.

Speaker A: Uh, before we go into that, I was researching the stakeholders. Sometimes you see guests mentioned as a stakeholder.

Speaker B: Yeah.

Speaker A: Why did you not mention guest as a stakeholder amongst these three or four?

Speaker B: That's a very good question. Um, I think the guest is obviously super important as a stakeholder, but if you look at it from a commercial enterprise, it is. It is the job of all the people involved to make sure that the guest actually comes. Yeah. And that the distribution is network and that the guest is happy and returns. Um, I don't, I don't. The guest doesn't have a vested interest, but you need. It's your client. It's your customer. Um, and I don't see that in sort of the opportunity of maximizing. It is the role of the brand, of the people in the hotel, but to a certain extent also of the investor to make sure the guests come, that we facilitate, that the guests come, have the best experience considering the brand that you're in. And I think if you, if you all aligned about that, then the guest should come. Yeah, hopefully so.

Speaker A: And if the guests come, the asset value obviously increases.

Speaker B: Ah.

Speaker A: Because there will be more revenue. More. I mean, it also depends on the profit and the operation skill a bit. Yeah. So, Alex, going back to what you were just talking about, being the glue in the middle, trying to steer everyone to work towards the same direction. Doesn't sound so different than what I try to do as a CEO of a company. Really.

Speaker B: Um, yeah.

Speaker A: How. How do you do that? And why do you think that the word communication is such a central, uh, point here?

Speaker B: Because I think what you see often is that, um, there is not enough understanding of what an other, what an other party wants to achieve from the goal. So for instance, if you're, if you're a general manager in a hotel, how much do you know about the goals of the owner? Now, it doesn't have to be the nitty gritty, but you got to understand the direction that the owner wants to take. Is it a long term investment, is it a short term investment? What needs to be done for that? Right. But simultaneously the owner needs to understand how the structure work. And sometimes you have, you have people that, for them and it's an investment, but they don't understand the amount of details and there's a certain amount of detail that they need to understand. So uh, by bringing that together into making sure that everyone has a clear target, but also that everyone understands that if there is no hotel, there'll be none of us. Yeah. And that goes from the dishwasher to the CEO of the investment company. We're all there about the hotel. We got to work, uh, we got to maximize the hotel in order to do well. And I think that's, that's important. It's not, we want to do well. The hotel is going to do well so that we, as all other parties can do well. And that's why you need to find common ground.

Speaker A: As an asset manager. I'm just trying to see this in front of me. Are you like finding this common ground by being front and center with these people? Are you like on, um, location a lot? Like how do you actually, how do you actually do this?

Speaker B: I like to be on location a, uh, lot. But there have to be weekly meetings, particularly like with the operation and you got to be present and present doesn't have to be like physically, but they have to know who you are. And the way I try to steer it is that if we do asset management, the communication goes through me. Yeah. That means that everyone has one focal point and it's not someone within the owning company or someone with the brand who manages that communication and follows up and takes the responsibility for that communication.

Speaker A: So, uh, when you say communication, like from, are we talking about these three or four stakeholders having a weekly meeting?

Speaker B: Okay. Yeah. And I think, and people got to have the comfort to you, I mean that is just that you have a chat, um, and I have a weekly chat with my hotels. But then once a month, at least once a month, you're on property, you do a review, you meet the people, you see what's going on, you walk the property so that you're involved. It doesn't have to be like the gm. But people know who you are. I mean, you're not someone in a distance who comes in once every two months, starts shouting and then leaves. Because I think then you achieve the opposite. But what you want is just to be achievable. And when the hotel needs something, you liaise with the ownership. When the ownership needs something, you liaise with the hotel. When the brand is doing something where you think that commercially this doesn't work for this particular property. Yeah, you address that situation and see how you can, how you can manage that situation. But you also explain why. And I think that's the important thing. It's like, this is where I want to be, this is what I think. What do you think? And sometimes you're wrong and that's fine too. But you have that communication and there is an open route. And because you meet on a regular basis, you. You actually. Yeah, you get together for the benefit of the hotel.

Speaker A: What's your incentive as an asset manager?

Speaker B: That's a good one. I, uh. Ideally just good fees, because I think to have an incentive, um, for. From the benefit, you could have an incentive fee as well. You could do that. For me, it's more like stable income. And, um, I'm m. Not my biggest incentive to see if you can turn around the hotel and if you can increase the asset value. Because ultimately, in 99% of the cases, it's an owner or an investor that actually pays for an asset manager. But it shouldn't make a difference. You should be completely accessible towards the brand and towards the gm.

Speaker A: In your, uh, experience, it sounds like almost like a project management kind of role. Uh, like, if you think about it like. I'm just thinking what are, like the, what are the biggest mistakes that you've seen that perhaps as managers have done? Um, and we're not looking for hotel names here.

Speaker B: No, no, no, I'm not going to give you a hotel. Well, it's not necessarily asset management. It's more misunderstandings that are the case.

Speaker A: Interesting.

Speaker B: When you negotiate and people genuinely don't know because, I mean, we're a specific industry, we have a specific terminology. If you're an investor and you've been told to buy hotels, you don't necessarily know all this and that's nobody's fault. So I see it more as my role to guide that process and to make them appreciate and understand that. That when you negotiate a hotel management agreement with a big brand, this is what you're going to look for and this is what you can Leave behind. So it's the two roles where you really, you guide people and at the same time you can guide the brand because at some stage you have a high net worth individual who wants something from an ego perspective. And then on the other side you have uh, a private equity fund that wants something really quick with fast returns and sell it within a couple of years.

Speaker A: Alex, knowing everything, you know, if you had the means, would you want to be an owner?

Speaker B: Uh, no. But uh, but that's, that's, but that's because it's me. I'm really happy in what I do. I enjoy what I do, I love what I do. I've recently moved into education to sort of help out there. I see that as my role and no I don't. But people think I'm crazy from time to time, um, because I'm not that entrepreneurial anymore. And I found a niche, what I like and what I really enjoy doing. And that's enough. And the fact that I now do 50% in education and 50% in day to day operation is a brilliant mix because you can actually constantly mix. You can take your students to live operations, but you can also have the live operations benefit from young students, um, who don't ask for too much money.

Speaker A: Yeah, absolutely. Hey, so communication is very important. You have a lot of stakeholders. Could you bring us uh, into like a example from your career where maybe you entered into uh, an asset that was not managed like that, where you, where you were able to come in, kind of put this in place and what was the impact perhaps on EBITDA or eventually asset value? Um, like just high level. We'd love to hear like that. Chronological, how does that work? Chronologically?

Speaker B: I mean chronologically it works that sometimes there's an owner's representative who's been very aggressive and sort of the communication is broken down. Um, and it goes both ways. And it takes long for the hotel to get decisions on small capex issues, small day to day issues, or where an ownership has forced a revenue strategy on a brand. This is an interesting case actually. When an ownership forces a revenue strategy on the brand and the brand is giving in. Now there's two parties at fault there.

Speaker A: Sorry, can you explain that? When the owners. So the owner of the hotel wants

Speaker B: a certain rate strategy. Yeah, M. And the brand is given in and then I think there's two people because I don't think, I think you hire a brand to do a revenue strategy for you and to manage that process for you to the best of their knowledge. And that's why you have a performance test and your STRs, et cetera, et cetera. But I think it's also the, the role of the brand to say, this is our responsibilities. Thank you very much. But so when, when, when something like that occurs and, and the communication has broken down, then it's a matter of getting everyone around the table and, and, and being available, but also looking, because you get a profit and loss account, you get a balance sheet. Now, I can give you any profit and loss account you want for a limited amount of time and make it all look good and rosy, but it has to go somewhere. So for me, it's also very important in that sort of situation that you first take stock and that you first actually say, okay, what's in that balance sheet? What are your assets? What are your liabilities? What have we deferred from a cost perspective? Have we done our accruals properly? Are all those systems in place? But, uh, it's not like pointing fingers. It's like, let's go through this, let's take a list. And you're probably right. That is a project manager sort of approach. And then from there say, okay, what's the action plan? And ultimately the goal has to be to increase ebitda.

Speaker A: But why, why is that? Why is that important?

Speaker B: I'll come to that. Okay. Um, so.

Speaker A: Oops.

Speaker B: So the, the situation that you have is that we're in a bit of a. EBITDA drives hotel valuation. Yeah. It's a multi. In layman's terms, the valuation of a hotel in most cases is a multiple of the EBITDA that you make, but the fees are paid largely on revenue with a small incentive fee. Yeah. And then. So the incentive for the brand is, is also on turnover. Plus, if they make money on the turnover. Yeah. It gives them a lot more freedom to not control the cost or to add payroll into that because they're going to get fees from that anyway. So my ideal situation would be where you have, you have a situation where there is a lot of incentive fees. Yeah. Based on the bottom line. And also that the hotel team is judged on the bottom line because it's beautiful to get lots of sales in, but if they don't pay the bill, why would you bonus people on that? Now, uh, there's one more awkward situation in our industry is that we take a profit and loss account and we put a line in the middle and we start saying that's the responsibility of the management company and that's the responsibility of the ownership. So instead of all working for one target. We have the GOP line and we say the management company is responsible for anything above and the owner is any. That's silly. Now why don't we do. And I appreciate it's all fixed cost and we should go for a different percentage. But then we're all working towards the same goal and if you have that situation and a mutual understanding in between all parties, then you can actually start driving a hotel forward and everyone is working towards that same target and then you get open communications. And I'm not going to say that it's going to be perfect because the market changes. Especially like these days, there's so many variable points. But at least you're all aligned and at least you meet on a regular basis and you have an open form of communication. And I think, I think that's a good starting point.

Speaker A: Uh, I think that's beautiful. And that's true for this example. Exactly true for any business, I would

Speaker B: say, uh, in principle, yes. I mean when you have investors, you just don't have a separate management company and a white label company. And then people in the hotel and the focus, the people in the hotel are often forgotten and that annoys me because they deliver the services to the guests. Yeah, they are there 247 in order to make sure that the brand standards are met, that the hotel is maintained also as a building is maintained well to a standard and they're often sort of a bit on the side. And when I see notes from my students I get really rc excuse my language but RC about that and go like don't forget the people that actually day in, day out deal with the business and with the guests.

Speaker A: Yeah, but I've attend, I attend many whatever like conferences and like sometimes commercial, commercial conferences within brands that we work with. And sometimes they're the guys or girls, women or men that are sitting on the stage and they are the ones that are representing that brand to owners. And I love hearing those interviews and it seems to be such a competitive landscape. Yeah. Oh my gosh. Like the owners have like four or five very, very big brands that are throwing loyalty. I can guarantee you this much direct bookings, blah blah, blah, blah blah. Uh, and, and, and it's these guys job. So I can see how it might be. There might be like an allure if you're, if to. You have to dry get, get, get new owners to choose your brand. So if they then say yeah, we want to have a certain, like if they are very pushy about what they want, you need to have very strong people that are managing those brands to say, well, we, we will happily work with you, but we need to control, uh, certain things about this arrangement. Like, so you have that as a, like a prerequisite. Is that something as an asset manager, did you feel like at some point in your career you had the luxury to say, I'm not going to work with these brands anymore? Because I know it's like, just like a, uh, uh, they are not so strong towards the owners as they need to be. Or did you feel like. No, no. I mean, when that was the problem, or you could turn it around, perhaps?

Speaker B: I think the world has changed a lot. I think. And I sound like an old man now. Uh, but, but 20 years ago, the brands were king. Now there is a lot more, and there's a lot more opportunity. I think it depends also on where you are geographically. Yeah. If you open another hotel here in London or in Paris or in New York, the brand means relatively little. Yeah. Because all the big brands are represented and they all have a huge, uh, amount of hotels, so it doesn't make a difference. Whereas if you open a hotel, I don't know, somewhere in Africa, the brand will go a long way. Also, because there is no trained workforce, um, your distribution network is not as good, so you're going to need a brand. Um, so I think you need to keep that in mind simultaneously. There's one other thing that you need to understand, which is that obviously the development people in the brand are salespeople, right. And as soon as you sign on the bottom line, the operations people come in and you got to actually work with them. So it's a combination, but I think if you do it right. And I recently had a case where an owner said to me, because we, we went for a property from, from six management companies, we decided which one to go. Um, and then we, we went for it. And the owner said to me, goes like, thank you very much. We've done it. I can take it from here. And I went, all right, it's your call. And the brand came back to me. And that's unusual. And say, like, it was, it was not in this country, it was in a different country. And said, like, come you help us out here. And could you, could you continue but on their behalf? No, no, no. Still on the owner's side, but just to create. And, and I, I asked him, why would you want me? You know what I'm going to ask. Right. We've done this before. He goes, exactly. I know what you're going to ask. I know that you're going to give a fair deal, but I also know that the owner will accept things faster in an environment where you're in the room than, um, when it's not case. And I took that as a compliment.

Speaker A: And.

Speaker B: And indeed, within two weeks, we signed an HMA for that hotel. So. So the understanding is there. And I think, I think that helps, particularly in countries where people are unfamiliar and when it's their first hotel, maybe in Central Asia, maybe in. In. In Africa and in places like that.

Speaker A: Uh, just last question before we move to the next part. That's the brand. We also have the white label.

Speaker B: Yeah.

Speaker A: Can you just, very quickly, what, in your view is the real benefit of a white label versus a brand like, similar to what you just explained?

Speaker B: Well, I think the brands have gone very, very big. I think that's like genuinely very, very big. Um, and the advantage of having a white label company, um, is that actually they're often more local, they're more direct, um, and they're more familiar in the environment where you have, where you are. And that helps. So there's a plus. You can get a lot more flexible contracts. Yeah. So they can help when it comes to local purchasing. They can help when it comes to local labor laws. You have a lot more direct. You still have the brand as a franchise, so they deal with the brand side as well. And in spite of the fact that effectively you pay double fees, but that could be minimized. Yeah, you have that direct connection. And if you look at the situation in the UK in the last years, there's a huge amount of white labels coming up and they're turning hotels into quite successful operations in secondary cities. It works.

Speaker A: Interesting. Thank you so much, Alex.

Speaker B: My pleasure.

Speaker A: This wraps up the first part. Uh, you're an amazing professor. You're living your best life as far as I can tell. Uh, congratulations on that. That's very inspiring to see. The next, uh, part is you have the floor. Talk to our listeners about anything that is important to you. Over to you.

Speaker B: Okay. Well, I mean, there's two things I do that I feel are important to me. And we discussed it as asset management, hotel development support, and I thoroughly enjoyed done it for a long time. The extra dimension I have at the moment is I am a program director for a master's course in real estate finance and hotel development at glion, the Swiss university. Um, who have, and not many people know that, a small dependence, um, here in London, in Roehampton, where we have this specialist course. It's Niche. It's small, but it gives me m, Sort of an additional dimension because basically what we, what we're teaching here is what I do in a day to day basis. And the communication in between the two, um, has been superb. And it means that I just come back. We were on a field trip in Slovenia last week, um, with a client of mine or a former client of mine. The relationship is very good. So we had access to, to hotels by a local Slovenian, the largest Slovenian hotel operator, which is a domestic operator, um, which was great for the students, but it was also great for the people that work in the hotel that people from like Swiss University, they're coming to see us and it was just wonderful to see that coming together. And I think that will generate people where there is better understanding of what we talked about before. Um, so yeah, that's my other side. And for the rest, yeah, I'm here if people. I'm always open to communication, I'm always open to new things, um, and see what this industry brings us. And yeah, I just love what I do.

Speaker A: Wonderful. Alex, we need more and more people like you. Hey Alex, thank you so much. This has been a really inspiring episode. Uh, like I said at the beginning, about a different topic than uh, what we normally speak about here, here at oki. So in summary, there are really like four, four stakeholders. If you remove the asset manager, the financial lenders and the guests, etc. There are four key stakeholders, uh, with that drive asset value. Being the owner, brand or white label. Ah. And the people, the operations.

Speaker B: Yeah.

Speaker A: You're coming from a somewhat uh, unique background and that you've done a lot of things.

Speaker B: I've been fortunate, fortunate to have a

Speaker A: lot of understanding about the operations but also the financial side of things. And you took this uh, during an inflection point in your career when one business kind of diminished and uh, created an opportunity for you to go into asset management. And they spent many, many years there. So you have this viewing point that the asset manager is not per se, fully operational, should, should not be fully operational, should not be fully numbers driven, should be this glue in between these stakeholders to make them all drive towards the same goal which with regards to asset value is uh, maximizing, uh, EBITDA or the bottom line or profit.

Speaker B: Yep.

Speaker A: That is important because the value of an asset is a multiple on that ebitda. And uh, in your ideal situation you will have a lot of incentives, be it percentages or fees or whatever that are based on ebitda, uh, and move away from a situation where you have one stakeholder caring about one target that might actually be uh, totally different than ebitda. Such as uh, turnover, not caring about cost, for example. Um,

Speaker B: and we talked about a lot

Speaker A: of other things like, but, but it seems to me like it seems to be a very dynamic role where you have a lot of people management mixed with um, uh, being like the, the lighthouse of, of of

Speaker B: That's a new one.

Speaker A: The clarity of the organization where you take a lot of different needs and perspectives and you try to put it together. Uh, and uh, to my uh, surprise it seems to be very somewhat operational because you have weekly meetings. You get the stakeholders aligned, you talk, you improve and you enhance.

Speaker B: Yeah, you get regular reporting but it can't be too much. I mean you shouldn't be involved in the day to day hands on situation because there's other people paid in order to do so. But yeah, to keep a bird's eye view, uh, view from your, from your lighthouse if you.

Speaker A: Okay, very good, very good. Alex, thank you so much. Episode. Pleasure to have you on. Thank you.

Speaker B: Okay, take care. Bye bye bye bye.