Can Asian Brands Go Global?
(Interview, July 2009)
Giovanni Angelini has been in the hotel industry for 48 years, “working in every position from the front door to CEO,” as he tells AHCT. His career has taken him from summer internships as a teenager to a stint at London’s Savoy where he was paid £6 a week when it cost him £9 to live, through to senior positions in Asia, Europe and North America.
Angelini has worked for many different hotels and 15 different ownership structures. For 18 years he was with Shangri-La Hotels and Resorts, moving up the ladder from General Manager of the Kowloon Shangri-La to CEO. He stepped down in 2008 after close to 10 years in this post as CEO to become an Executive Director, finally retiring in May of this year to become an independent consultant.
This is a man who can speak with authority on the future of the hotel industry.
Angelini believes that for hotel chains to realise all their potential, they have to be global. He couches this theory in the context of the continued growth of the global travel industry, the second largest employer in the world after government. For a hotel company to be truly global it needs to have at least 120-150 hotels across the key cities and resorts of the five continents.
Angelini remembers the huge impact that Japanese tourists had on the hospitality industry when they started to travel yet, he points out, that outbound Japanese traveler number never exceeded 19 million per year. This is a fraction of what can eventually be expected from the China market and while Chinese travelers are currently short-stay guests unwilling to pay European or North American rates, Angelini believes this will change. However, Asian guests will want to stay with brands they are already familiar with and thus Asian brands must go global to remain competitive.
The basics are very clear – grow or be left behind.
The big question though is what the Chinese brands will do. Will they go after the many distressed properties around the world that are on the market now? If so, how will they operate them without repeating the mistakes the Japanese made in the 1980s? Japanese brands wanted to become global players but tried to impose their own way of operating and controlling hotels around the world and failed. A global industry must be globally operated.
The 14-step programme
The commitment and full support of the shareholders and board of directors is essential to grow and expand. Both must be willing to see where the industry will be in 10-15 years time, and be ready to expand by moving out of their comfort zone and region.
Hand-in-hand with that commitment, must come the appointment of a qualified and expert leader, a CEO who is tasked with building a strong team of committed and focused professionals.
There must also be a clear delegation of authority from the owners to the CEO and his team. The chairmanship should remain with the owners.
Angelini has worked for 30 years in Asia and has found some owners in this part of the world difficult. However, many have also been in a prime position to assess the situation and see tremendous possibilities if things are done correctly.
Angelini finds the owner-operator formula too idealistic and recommends that any company seeking to expand should form two companies: one holding the assets and another with the management team. The estimated cost of forming a management company with systems in place, programmes, standards, people and offices is around US$50 million.
“From a quick overview of the present Asian hotel brands, one will notice that in most cases, behind those brands there is a strong local family/owner who is very hands-on and for good or bad directly drives the fate of the company.
“Let the professionals do what they are good at and run the management company with consistency and profit,” says Angelini. A professional management team is the cornerstone of Angelini’s plan and without them all that follows is “a waste of time”.
The next step is for the board to define its direction, whether that means owning, leasing, managing or franchising properties, and what the required ROI is. Angelini is a big fan of management agreements in Asia, firmly believing that brands can use them to expand with only a small equity participation and that they give a better ROI.
Companies have to develop their culture, vision, mission, values and guiding principles and convey them to every employee. “Many Asian companies failed because they had not developed a company culture. Knowing what you want to do and who you are is critical.”
Closely related is the need to define the brand category and the product and market positioning. It’s vital not to confuse consumers with a mix of physical products. Stick to 5-star, 4-star or 3-star but make clear your strengths against the competition. A follow-on to this is the creation and implementation of a strategic plan detailing steps to achieve that personality. The board has to be aligned with this plan and whatever it takes be it short or long term incentives and success fees to market the brand to developers and investors. There also need to be incentives for the employees assigned the role of expanding the brand.
Consistency is vital and must be a prime consideration when developing the design and layout standards of the agreed brand position and the physical properties, particularly when passing on briefs to architects and designers. Differentiation from the competition is one of the key points here. For new hotels the ideal situation is to develop mixed-use complexes with offices, retail and residential units as well as the hotel itself.
Angelini is a proponent of technology and says hoteliers have to invest in systems that make them more efficient.
“We are a people business and a computer will never cook you a meal or make up your bed, but a proper system will make operations efficient and facilitate the bookings,” he says.
Along with efficiency comes standards, both for service to guests and for administration. Each of a hotel’s many divisions must have proper quality and service benchmarks and there must be accountability. Angelini warns that while this sounds basic he knows of companies that have failed simply by not having the proper structures in place.
Marketing is the next crucial phase and it must be in place before properties open; the sales network must be operating in the right markets. Marketing programmes, the right image, the market position and loyalty programmes are all crucial, as is making it easy for customers to book by having the right technology and a global presence.
What about the workers?
Employees make a great hotel even better, and must work in a culture of continuous learning and improvement based on the company’s guiding principles. Staff also need to be well-rewarded with competitive compensation packages and abundant career growth opportunities. Angelini points out that much work in a hotel is labour-incentive and done by the unskilled, for whom income is a very important incentive.
Suppliers should be seen as partners and should be selected on the basis of quality and consistency. For Angelini a hotel is “like a small town” that needs everything from engineering equipment to laundry facilities to kitchen supplies. These are heavy investments and are only worth making with partners who can be relied upon, and who can be flexible when times are tough.
Lastly Angelini thinks that hotels should implement both customer and employee satisfaction programmes to ensure that both are satisfied in their relationship with the hotel. Employees who are happy will stay with the company and help to make a lasting impression on each and every guest.