Kevin Murphy: HICAP 2017 Conference Reflections - a GlobalHotelNetwork.com Exclusive

GlobalHotelNetwork.com (GHN) attended the 2017 Hotel Investment Conference Asia Pacific (HICAP) in Hong Kong. In an exclusive interview with Kevin B. Murphy, ISHC, President & CEO, Asiawide Hospitality Solutions (Hong Kong) Limited, GlobalHotelNetwork.com posed two questions.

GHN: What are three takeaways you got from HICAP 2017?

Kevin Murphy: My takeaways were:

No.1. It seemed to me, in Asia at least, what is clear from discussions on Hotel Management Agreements (HMAs) is that the recent consolidation of those same major heritage name brands, has had two implications, one positive and one not so, for both owners & operator side, the effects of which were not widely discussed in all the previous media recounting of those transitions. 

What is clear is that operating contracts are almost universally getting shorter and base fees are unlikely in this region to ever get back to 2% of Gross or anything higher. Most of the majors are now offering owners in the same city multiple product brands of similar standards that serve to give power back to experienced or well-directed owners when it comes to contract terms when enforcing both VP on Sale and performance hurdles at multiple levels that are more finely attuned to local GOP norms at same levels. While the larger brand operators will continue to see, & grab, new opportunities as a result of their enhanced scale and their perceived ability by the owner to harness market demand, the more experienced owner is also having to choose now from a more homogeneous smorgasbord of names/signs while any real difference and definition to drive demand is clouding further for the consumer. Be prepared to see a shedding of some brands that get overshadowed in some crowded brand stables.

No.2. It is not clear that anyone, operators, owners or governments, is seriously prepared to take real responsibility for ensuring that hotels are likely to be hiring trained personnel any other way than by poaching from earlier competitors in those locations they are entering. This has higher cost implications, and more squeezed margins, than many from both sides, may have done their projections on. Thus, service, while touted as of paramount importance often to get the contract, will inevitably suffer and the operators will blame the market. As the only one of the 3 being directly rewarded for managing the service, they continue to avoid discussing the real ongoing cost of in-house training, and certainly not the further cost implication of trying to stem future turnover, while haggling to secure that HMA with future owners. The industry, and those concerned with developing destinations, in particular, need to be sat down and face the reality that improvements can only come when all accept part of that responsibility, and its costs, ahead.  

No.3 While design, lifestyle, modular, boutique and all the other attempts to differentiate for minority markets will continue to fascinate all of us in these meetings, and from which many ideas the general larger industry might eventually take, the reality anywhere is that these generally smaller properties will likely survive better only if, & when, the operators of the greater number of larger sized properties will make more money to meet both city and leisure demand increasingly in and from this area of Asia Pacific. With Asia's phenomenal growth rates on outbound travel, some will neglect to make their own clear changes to improved profitability rather than layering further fees.

To think, however, the larger companies with larger hotels that meet most of that demand aren't moving as fast to change for the better with technology and data would be naive, and risky. As some major multi-brands might grow even further, there will also be further casualties at all levels to watch for.

GHN: Where is the next BIG play in the Asia-Pacific hospitality industry, from your point of view? 

KM: I predict we will see not one but possibly several, Asian based investor groups (and not only Mainland Chinese Cos.) make further plays for both regional and some major international brand companies in the next five years, though whether they do so by a better level of medium to long-term strategy than some recently will reflect also varying degrees of success. Most will need to undertake such efforts with a necessary wider international experience not to get bogged down later or halfway in by 'landmines' some might otherwise have already avoided recently with deeper due diligence. 

Not only with today's expansion are there many new Asian owner players at risk of making the same mistakes as those of old, we should look also to observe those major operators streamlining method, and differentiation while still growing, to themselves let a few fundamentals slip themselves with negative consequences for both owner and operator.

We may also see Wall St and its fellow world exchanges take a more serious look at whether the difference in multiples of EBITDA that always value asset light over asset heavy entities in those more stable markets, in their view, should still continue to be as wide in as the recent past. 

Better qualified, more experienced asset managers with the ability to save owners much of time and money otherwise wasted, and those more experienced operators able to remember their own brands evolutions better are both still in short supply it seems in Asia Pacific at this time, though many players on both sides will continue to lay claim to such qualities that only others before them have built.

About Kevin Murphy

Kevin Murphy is the CEO of Asiawide Hospitality Solutions (AHS), continuing to head a team of highly experienced hospitality professional advisors that provide informed guidance to existing hotel owners and new hospitality investors for their hotel real estate interests worldwide. 

AHS assists both International and Asian based owners with effective and strategic hospitality investment planning, acquisition and asset management and the securing of improved profitability within their existing hospitality portfolios in Asia and elsewhere. 

Kevin served for 11 years from September 1995 to early 2006 as Senior Vice President - Development & Acquisitions in the original creation of the portfolio and the brands of Langham Hotels International, the luxury subsidiary of Hong Kong’s publicly listed Great Eagle Holdings where he led their hotel portfolio investment, brand building and operating expansion following a widely experienced career in major international hotel companies on 5 continents.

Kevin brought his unique international perspective and worldwide hotel experience to the growth of that latter company’s hotel investment portfolio. He was an integral part of the team that launched its own Langham Hotels luxury operating brand in 2003 accompanied by the successful return of management of their wholly owned portfolio to their own new operating company in the period 2003-2006. 

His wide industry knowledge and group experience a perspective on owner operator partnerships and future hotel investment needs particularly relevant to both hotel investors and portfolio owners. He has a well-earned reputation for taking complex and difficult projects to completion and turning problem hotels from receivership into successes with successful management. 

AHS currently guides owners in their interpretation of today’s hospitality trends with an emphasis on Asia and in assisting Asian investors ambitions both there and internationally. 

Prior to Great Eagle and Langham Hotels, Kevin’s career included other senior corporate management roles in Operations & Development as well as Marketing & Sales, with Hilton International and Le Meridien Hotels (when part of Air France) in the Asia Pacific, U.S.A., East Africa, and UAE regions, and with Southern Sun Hotels and South African Breweries Groups in Southern Africa. 

His personal experience extends to direct responsibilities and involvement in over 263 hotel & projects to date.

He served as Past Chairman the Executive Board of the Pacific Asia Travel Association (PATA), an organization that combines Government, and Industry within the Travel & Tourism field across the Asia Pacific region, and is a past Chairman of their Hospitality & Marketing Committees. 

An active member of PATA since 1984, Kevin was awarded the PATA Order of Merit in 2003, the Chairman’s Award in 2006 and their Honorary Life Membership in 2008 for his continued contributions to the aims of the association’s members and in the growth of responsible and sustainable tourism in the Asia Pacific region.

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