BRANDING TWO BRANDS, OR NOT TO BRAND, THAT IS THE QUESTION 0 1700

“Luxury has become an exceptionally difficult territory in which to compete propositionally as well as to make adequate returns.”

Piers Schmidt, Founder of advisory firm Luxury Branding, based in London and Cape Town, explains why two local hotel groups which he has experience of working with have unveiled second brands within days and metres of each other

During September 2018 and within weeks, there were two significant announcements from The Lux Collective and Constance Hospitality Management: the two leading Mauritian hotel groups are to launch second brands – Salt and C Resorts respectively. Intriguingly, the inaugural properties of both debutant marques will be located less than a mile apart at Palmar on the East Coast of Mauritius.

What do these strikingly parallel developments tell us about the state of health and innovation capacity in the island’s hotel groups, a key player in the Travel and Tourism sector, which is forecast to contribute MUR34.7bn or 7.5% of GDP in 2018?

Judging by the recently launched website for the LUX* Collective, the success of LUX* Resorts & Hotels has emboldened Paul Jones to fabricate a house of brands, emulating the established stables managed by the global hospitality behemoths, including Hilton, Hyatt and IHG.

By adopting an opportunistic, multi-brand strategy, has Jones been inspired by the example of the merged Marriott/Starwood supergroup, which now boasts some 30 more or less discrete brands, addressing nine different segments? Or Accor surely the most innovative and dynamic of the big groups today which has overtaken Marriott, the world’s largest hotel group, with no fewer than 40 hospitality propositions of its own?

In addition to its eponymous marque, LUX*, which is now seven years old, and Salt, The Lux Collective will soon be managing two new hotel brands: Tamassa and Socio, about which we are still waiting for further detail. And that’s not to mention the Group’s successful Café LUX* franchise.

CONSOLIDATION VS. INNOVATION

What is going on here? Was it not only a few short years ago that local politicians and commentators were deeply pessimis- tic about the Mauritian tourism industry? In 2012, despite increasing supply, demand was more or less static, growing only 3.7% from 930,500 tourist arrivals in 2008 to 965,400 by the end of that year. A study conducted by the MTPA in 2012 in the is- land’s core market of France critically revealed that Mauritius was “losing its charm among French tourists.” Furthermore, the 2013 Global Travel & Tourism Competitiveness Index saw Mauritius not only yield its number one position in the sub-Saharan regional ranking to Seychelles but fall from 53rd to 58th in the overall table.

In remedy, a rapid diversification from the EURO to BRIC tourists was pursued but even in combination with a welcome liberalisation of air access occupancies hovered stubbornly in the mid-60s. The giddy days of 76%, last enjoyed in 2007 before the Eurozone crisis, seemed like a distant dream. Throughout this period, however, the four largest hotel groups (NMH, Sun, LUX* and Constance) continued to represent around 50% of the entire industry, a consolidation that did little to foster innovation.

During 2011, while we were working together on the development of the LUX* Resorts & Hotels concept and branding, I remarked to Paul Jones that Mauritian hospitality seemed to have gone dormant since I was a regular visitor a decade earlier. In 2002, we had been planning the launch of One&Only Resorts from its mother ship Le Saint Géran and preparing the re-opening of Le Touessrok, two resorts imagined and managed by the legendary South African hotelier Sol Kerzner. Even then, we had to admit, innovation, in the form of Kerzner International, came from an external catalyst.

REDISCOVERING THE MOJO

Fast forward six years and Mauritius hoteliers seem to have rediscovered their mojo. Rates and occupancies are at record levels, debt is back under control and share prices are outperforming the market. Not only can their success be seen domestically as local operators have co-developed hotels and acquired management contracts both within the Indian Ocean (Seychelles, Réunion, Madagascar and Maldives) and further afield in France (Beachcomber andLUX*), Italy, Turkey, China, UAE, Vietnam (LUX*) and Tanzania (Constance).

Until the September announcements from Lux Collective and Constance Hospitality Management, this growth in properties, owned or operated by Mauritian hotel groups, had been derived from one of two models: either by expansion of the house brand (i.e. Beachcomber, LUX*, Constance etc.) or by managing hotels, which failed to meet the ‘luxury’ specifications of those brands as independent properties (e.g. Merville Beach and Tamassa by LUX*).

This was an approach we pioneered with Sugar Beach, La Pirogue and Coco Beach (now Long Beach), the Sun Resorts hotels that were ‘Managed by’ One&Only.

During strategy reviews at One&Only and LUX*, I recall vigorous debate about the most appropriate form of brand architecture to accommodate properties like Sugar Beach and Merville that fell short of the minimum luxury (hardware) standards that had been specified for the house brands.The issue became all the more vexatious given that the service and guest experience in these 3 and 4-star properties was often on a par with that enjoyed in their fancier and more illustrious siblings.

Given these circumstances, there was al- ways the potential to introduce a second tier brand or ‘diffusion line’ under which to house these poorer cousins. Indeed, there were plenty of precedents for this ap- proach: Courtyard by Marriott was an early pioneer of brand extension but from pure- play luxury operators, Evason (Soneva), Angsana (Banyan Tree) and Vivanta (Taj) are prominent examples.

TIME FOR CHANGE

In Mauritius, this strategy met resistance for a variety of reasons. Frequently, Board directors deemed the introduction of a second brand as an unwelcome distraction from management’s proper focus, which was to grow the luxury house brand. Whether this fear was grounded or not, with access to only two or three properties to flag with a second brand, its slight physical presence and modest marketing budget would make it difficult to gain traction. Additionally, we faced an inconvenient truth: Coco Beach and Sugar Beach or Tamassa and Merville Beach were as distinct from one another as they were different from the main lines One&Only or LUX*. Would it be possible to build a credible brand if it was stretched across resorts as diverse as Tamassa and Merville Beach? To this day, the evidence suggests not as LUX* Island Resorts will not only be managing the four brands of its Lux Collective but continues to market and operate Merville Beach and Hotel le Récif in Réunion Island as independent properties. Although I am sure it has little intention of rolling out either of these as a brand, the same assumption applied to Tamassa until recently.

SO, WHAT’S CHANGED? WELL, FOUR THINGS.

First, the increasing need for customer segmentation. In common with the supply side of most industries, the fundamentals of a hotel or resort offering are very similar. The basic accommodations, facilities, food & beverage outlets and those all important immersive experiences are largely the same.

When it comes to demand, however, it is all about horses for courses. There are at least 400 brands of wristwatch available today. Their products perform the same basic function and most of them keep the time as accurately as the next. And yet most of these brands will survive because one man’s Panerai is another’s poison. So, too, with hotels and resorts. There are Aman ‘junkies’ and Four Seasons devotees that would never be seen in the lobby of The Ritz-Carlton. While there is little perceptible difference under the hood between many of the 30 Marriott brands (e.g. The Ritz-Carlton vs. St. Regis), theirs is an exercise in badge engineering.

Closer to home, a loyal client of Prince Maurice would probably feel less comfort- able at LUX* Belle Mare whose own client feels more at home there than at the St. Regis Le Morne. So long as there are sufficient numbers of customers with distinctive tastes and different levels of spending power, producers will be able to slice and dice their offerings ever more thinly to meet the needs and aspirations of precisely defined and deeply understood market segments.

Second, most global hotel companies now employ an asset-light strategy pitching themselves against one another for the same lucrative management contracts. The leading Mauritian hotel groups are no exception. Rather than developing new assets for their own account, groups may even prefer to dispose of their bricks. LUX Island Resorts Limited, for example, off-loaded Tamassa to Grit on a sale and leaseback basis for US$40m in 2016. Going forward, Mauritian operators will also be seeking to grow the distribution of their brands via the acquisition of management contracts, a model that requires no capital outlay and produces attractive annuity income, which is much cherished by stock markets but deceptively difficult to execute.

Here’s the rub, though, and our third driver of change. Owned or not, luxury has become an exceptionally difficult territory inwhich to compete propositionally as well as to make adequate returns. The capital budgets it takes to develop at this level have escalated significantly and the long-term operating costs of luxury hotels are increasingly prohibitive. As a result, there are fewer promoters developing in the luxury segment than previously and yet there is an increasing number of asset-light management companies chasing the same deals.

This double whammy produces a buyers’ market for hotel owners and however at- tractive your Brand Concept, however powerful your sales, distribution and marketing and however impressive the results you are achieving with your owned properties, third-party owners are seeking bulletproof track records achieved on behalf of investors like themselves. They crave the reassurance of a management company that is able to demonstrate repeated and sustained success in relevant markets with equivalent projects. Of equal importance, so do the banks providing the debt portion of their project financing.

In a crowded market for scarce management contracts, small local players, such as those starting to emerge from Mauritius, may still catch the eye of an owners’ representatives and their advisors and this is one of the reasons why one should never discount the value of personal relationships. Nevertheless, as negotiations proceed, it quickly becomes difficult for an ascent and unproven management company to match the metrics and ratios of a Four Seasons (with its mono brand focus) or a Marriott with its reputable stable of thoroughbred brands, each boasting reams of performance data to lend credibility to its projections. And that’s before they even mention the secret sauce, which is their global loyalty programmes.

Fourth, in small destinations, there is market saturation to factor. How many Constance or LUX* resorts can an island sustain? LUX* has three in Mauritius but would it be able to gain Tour Operator support or find even more direct business and airline seats for a fourth in the South? Constance has two resorts in each of Mauritius, Seychelles and Maldives and I know they wouldn’t want yet more rooms in the Maldives, if for no other reason than to hedge their market exposure.

On the other hand, when it comes to risk management, where better to develop more product than in the destinations where you operate successfully already? On that basis, it makes total sense to develop depth in places where you know how to operate and where both consumer and trade trust your reputation in those markets.

It’s to address this quartet of challenges that the international groups have architected carefully, segmented and regulated multi-brand portfolios. And it’s for these same reasons that the Mauritian operators are following suit.

TOWARDS A NEW MODEL OF SISTER BRANDS?

Constance Hospitality Management an- nounced its intention to launch a sister brand to Constance Hotels & Resorts to the European trade in May 2017. The result of more than a year’s development work since then, C Resorts, has been thoughtfully positioned and conceptualised not to cannibalise the Group’s luxury brand. It will offer a distinct proposition designed to appeal to long-haul leisure travellers to largely package tour destinations like Mauritius and Seychelles.

While Salt is also opening its first proof of concept hotel in Mauritius, I believe it won’t be long before we find LUX*’s seasoned sibling sprinkled in less conventional, fly and flop destinations. Salt’s promise of “meaningful” travel experiences designed – in the brand’s own words – for “cultural purists, modern explorers and mindful travellers who travel to satisfy their curiosity and challenge their perception of the world” seems better matched to the more off the beaten track destinations favoured by younger and truly free, independent travellers.

These recent developments are clearly encouraging and we wish both the new ar- rivals every success. One word of caution, however, in closing. In recent months, we have been approached by two internation- al operators whose brand aspirations have got the better of them. These are independent hotel groups both of whom have reached around 20-25 properties open and under management with another 5-10 in their pipelines. Their issue? Too many propositions and too many brands for the number of properties with not enough clear water between them. The resulting confusion in the minds of the consumer and owner communities alike now needs to be undone and the portfolio both simplified and rationalised. Although it makes interesting work for us to untangle the mess, maybe Four Seasons have had it right all along – one brand.

ABOUT PIERS

Piers Schmidt is Founder of Luxury Branding, an advisory firm based in London and Cape Town which assists luxury organisations with elevating service and transforming experiences.

Previous ArticleNext Article
Hospitality.mu
Mauritius B2B Hospitality magazine, a quarterly publication and blog for the industry professionals. Want to reach the hospitality decision makers in Mauritius/Rodrigues? Contact us +230 57 94 64 37 or [email protected]

Leave a Reply

Your email address will not be published. Required fields are marked *

THE MALDIVES, MAURITIUS, SRI LANKA, WHO IS DOING WHAT TO RESTORE TRAVEL CONFIDENCE ACROSS THE INDIAN OCEAN Comments Off on THE MALDIVES, MAURITIUS, SRI LANKA, WHO IS DOING WHAT TO RESTORE TRAVEL CONFIDENCE ACROSS THE INDIAN OCEAN 402

After the recent round of short interviews with hospitality leaders in the Maldives, Mauritius, and Sri Lanka, these were the key messages that will win customers back. 

MALDIVES – No social distancing, but a rather physical distancing in the Maldives.

One month ago the Maldives reopened the country borders to international travelers and since then, welcomed nearly 4500 tourists mainly from the UK, USA, UAE, Germany, Swiss, and Russia. With strict health and safety standard procedures implemented across the country, starting from the airport to the resort islands, the ‘new travelers’ have already voiced their appreciation for the level of care and hygiene on various social media and forums. But if being welcomed by the resort representatives wrapped in PPE and armed with face shield, gloves, and masks might not feel like the most relaxing start of a much-needed holiday, Afeef Hussain, Regional Director at LUX* Resorts in the Maldives, reassures that guests do love the feeling of safety 

“Being able to arrive at the resort and start enjoying their vacation right away not having to worry about anything, is what our guests want”

Together with high levels of hygiene, another key element to restoring travel confidence is the value of the experience. Afeef Hussain shares that the ‘new travelers’ are not going to spend the same amount of money they used to. Therefore, the value of the vacation is under great scrutiny and determines whether your customer might decide to return to your hotel or to travel somewhere else. 

“There is no such thing of ‘new normal’, but rather a ‘new mindset’”

To ensure that each action taken to uphold the hygiene standards at the resorts is mutually beneficial, Afeef says that whatever is done for the guests, is also done for the team members. This ensures their wellbeing and wellness and translates the Company’s core message of ‘care’ into action.

SRI LANKA – Borders are closed, but our resorts are not.

Sri Lanka has recently delayed the opening of the country borders, but hotels and resorts across the island are back in business with the local market. The execution of health and safety standards at each property has been instrumental to restore a domestic travel confidence, says Arjuna Perera – Sales Manager at Theme Resorts & SPA based in Colombo. To start with, Arjuna Perera and his team produced a video message to show all the procedures and reassure their customer base. 

‘We immediately created a survey, to help understand what are our customers’ priorities at this critical time’ 

But, as we know, the local market demand alone does not cover it. A voucher system propelled by Arjuna’s sales team successfully generated over 1000 room nights. This shows that flexibility is another key factor to encourage travel demand. Flights can be canceled or delayed, quarantine systems are changing by the day. ‘All we need is a bit of flexibility’ says Arjuna ‘and the results are showing us that people are keen to travel, they just want to feel safe’. 

But how do we ensure social distancing in Sri Lanka? For Theme Resorts & Spa, more than distancing, we talk about isolation, but in a good way. The nature experience of some of their properties is guaranteed to the point that to reach some of their glamping sites, you will have to be picked up by the hotel concierge somewhere in the jungle.

MAURITIUS – A contactless experience and smart use of technology.

As Mauritius prepares to reopen borders next month, the health & safety checklist of the destination seems to grow longer.

The use of technology, however, plays a key role in the destination, currently undergoing a digital transformation with a brand new website, a travel platform in the making and a range of digital solutions for tourists. Airline and travel industry expert Youvraj Seeam, based in Mauritius, shares that to pick up on travel confidence, we first have to observe the consumers’ changing behaviors and thereafter understand the new demands.

“For this to be truly successful, we need collaboration with all the stakeholders across the industry”

Youvraj shares that tools like the Travel Recovery Insights Portal of ARC & Boston Consulting, the McKinsey Travel Pulse, or the Traveller Trends Tracker by Adara must be on top of today’s agenda for the modern marketer. This would enable industry leaders to have more visibility and start making progress along the way.

Based on his experience in the airline industry, the key message needs to revolve around hygiene standards and procedures from the moment the traveler checks-in, boards the plane and reaches the destination. Once arrived, says Youvraj, a contactless experience needs to be in place to ensure a safe transit until the guest ultimately reaches the hotel.

 About the author:

Dolores Semeraro is a multilingual professional speaker and trainer, fluent in the Chinese language. She provides strategic direction and training courses to companies and tourism institutions helping them to speak today’s digital language of their audience. Her vision is to create a sustainable digital connection between travel industry stakeholders and their desired customers.

IT’S NOW OR NEVER INDUSTRY GLOBAL RESET BY MARC WILLIAMS Comments Off on IT’S NOW OR NEVER INDUSTRY GLOBAL RESET BY MARC WILLIAMS 480

IT’S NOW OR NEVER, I am only tired, as the song goes and so says mother Earth after years and years of succumbing to the filth that are being spilled into her bosom by the 7 billion of us.

 We are at a crossroad and an eye-opening moment that have to be reckoned with. The changes to the way we live, the way we do business and the way we conduct ourselves in this world will happen whether we like it or not. It will be subtle and forcing us to be the architect of this change – it’s another industrial revolution enabling humans to evolve into a more conscientious being for the benefit of all and mother nature. And it’s worth mentioning here the abrupt change we are witnessing in the hospitality industry. 

Being reliant on large number of human capitals, the hospitality industry has been the most affected by the global pandemic, like no other. Think about it, its an industry that needs an intensive labour force to serve its consumers, it needs the use of fossil fuel to allow its consumers to travel and at the core of the travel industry there is the need for the Oil & Gas producers to power the planes and run the establishment that serves the hospitality industry. So, it’s an industry that at the core, survives and becomes profitable on the demands and supply within the Petroleum Market – for instance, when we see a low cost of crude, the demand rises, consumption rises and tourist travels. On the other hand, as the demand for Petroleum products rises, we see a rise in production which accompanies the rise in crude price. At the same time industrial catering contracts are signed in numbers around the Middle Eastern oil producing countries to support the crude majors, like BP or Total, and their service partners.

Then sometime in March 2020 the world stopped…

As every human activity came to a standstill, the price of crude oil stumbled and crashed as the demands crumbled. Unfortunately, we have made crude oil the center of our existential activities; that businesses linked to its production, whether directly or indirectly, are struggling to keep afloat during this pandemic period. This is a true portrait of our vulnerability as humans who have become too dependent on fossil fuel – the only matter that is damaging our beloved mother Earth.

In light of the new normal as we fashionably call it these days, the only way forward for the hospitality industry, but more certainly for the industrial catering sector, is automation and robotics with a change in attitude within the concept by all stakeholders and consumers. This in turn will reduce the heavy reliance on large manpower thereby improving profitability which has hit the industry since the fall of crude price. Although change is a pill hardly accepted by people entrenched within a certain framework and mindset, and unless changes are actuated, the hospitality industry may lose the precious backing of the investors. 

How can we forge this sudden change then…? One aspect with the labour intensive hospitality industry is to use automation and robotics wherever possible but still remain within the framework of good practice. For instance, within the kitchen we have already started using automation when it comes to the processing of veggies, washing up of cutleries, pots and pans. What we need now would be the autonomous self-cleaning equipment – in the domestic market we already have self-cleaning oven – with a bit of imagination we can have self-cleaning combo oven and cooking plates inserted on a stainless free stove where every debris or liquids drops into an underlying tray from where they are sucked into garbage cannisters. The idea here is to reduce the manpower wherever possible and keep only the chef and a small brigade to assist him in the mass production. 

The other crucial change within the industrial catering facility, most appropriately, would be the implementation of self-service as a general rule of the game. This will limit human contact and adheres to the on-going rule of distancing as applied in the pandemic situation. The onus will then be on the catering team to properly and intelligently prepare the plated layout which is then collected by the consumers. This process will help on portion control amongst other things, which is important in controlling the cost. 

Obviously, the arguments for change and innovation within the hospitality industry is a hot subject at the moment and should be for quite some time. After all we do not know when the pandemic will subside nor when will a real cure be found! However, we have already engaged in a new way of living and a new way of doing business, which in the industrial catering sector it means finding innovative ways to reduce the reliance on large manpower and engaging strategic actions to reduce the cost of doing business in order to be more profitable.

Let’s hope at the end of the day, the right course of action is taken with the interest of all the stakeholders considered and enough investments are made to meet up the challenge of considerable change. 

Marc WILLIAMS