Expanding Into New Markets with Limited Resources
By Chris Mumford Managing Director, AETHOS Consulting Group | March 24, 2013
Co-authored by Doug Rosen, Managing Director - North America, HVS Executive Search
'Globalization' has been a buzz word in the hotel sector since the days of Conrad Hilton and his peers. For years now the quest to operate in new markets has seen hotel groups such as Accor, Hilton, IHG, Marriott, and Starwood truly become multinational players. Each week it seems one of these chains pronounces an increase to its development pipeline in one of the world's emerging economies. Starwood for example will take its current portfolio of 34 hotels in India and South Asia to over 100 hotels either open or signed up by 2015. Fairmont Raffles Hotels and Resorts will double the number of hotels open in Middle East and Africa by 2016. IHG not only has a robust development pipeline in China but has also developed a China specific brand.
It is not just the large multinationals that are powering into new markets. Small to medium sized hotel groups are also seeking to export their brands and capitalize on rapidly growing economies. Morgans Hotel Group which has 13 hotels in the US, London and recently added Morocco, now has a development pipeline which will see hotels open in Doha, Moscow, and Istanbul in the next couple of years. Asian based brands such as Anantara, Banyan Tree, and Alila, have been moving westwards from their footholds in Thailand, Singapore, Indonesia, into the Middle East and India.
In a service business such as hotels, signing up new dots on the map leads to the inevitable questions of 'how will we staff these hotels?' With such rapid expansion come significant human capital implications. The HVS Indian Hotel Industry Survey 2011-2012 concluded that, "One of the biggest challenges facing most hotel companies today as they try to keep pace with the growing supply of new hotels is the recruitment of trained manpower, to maintain quality and professional service delivery and product up-keep. . . the average percentage of trained employees per hotel is 83.3%. Going forward. . . with supply expected to increase by nearly 111% in the next five years, the demand for high quality professionals will continue to increase."
This challenge is consistent for all players. Whether you are a large multinational or a small hotel company entering a market such as Russia or Rwanda, you will be faced with a dire shortage of locally trained hotel professionals; let alone a workforce fluent in English and with an ingrained service ethic.
Larger hotel chains obviously have some advantages in that they have the ability to transfer existing staff and knowledge from other hotels, there are well developed support structures in place, and their global brand names carry influence and trust. This article will focus on those companies with portfolios ranging in size from a handful to a few hundred hotels; companies that are more limited in the resources available to them to fight the human capital challenges that international growth brings.