A Pandemic Upside Is Hotel Chains Are Being Forced to Address Management Bloat

Across the world, hotel chains are looking at some form of reorganization. To say it’s because of the coronavirus crisis is simplistic.

In truth, the industry, which prided itself as a prodigious employer, is bloated and inefficient. That, in turn, is extremely costly and clunky. And chains are finally having to address the bloat squarely, as they can’t afford it anymore with the pandemic decimating hotel revenues.

Accor Group, which lopped off the region layer and with it a number of top executives, is the most high-profile restructuring currently but worldwide, chains are taking a hard look at being lean and agile.

Unlike the snips and trims they made in past crises, which grew back like a starfish arm as soon as recovery resumed, this time it’s different. Covid-19’s extremity and lengthy road to recovery is causing a groundswell for change, one that will have a lasting impact on the future of hotel roles at corporate and hotel levels.

Chains are taking this as not just a matter of reducing the headcount but a studied look at how the business worked before and what must change. A lot of delayering, clustering and redesigning of jobs is happening, and while this may look dreadful today, it can be one of the most important advancements for the sector.

What Causes Bloat

Growth is one factor that causes the bloat; it’s much like how rich food quickly adds layers to the waistline.

In good times, money rolls in and chains keep adding executives in the name of chasing more growth. These costs are partially passed on to owners anyhow, spawning a whole industry of owner representatives — bean-counting accountants who scrutinize every chargeable expense on behalf of their owner clients. But often, chains got away with murder.

Secondly, were the industry to be a person, it’s a micro-managing control freak. Traditionally, its structure is hierarchical, based on control mechanics, said Giovanni Angelini, advisor/consultant, Angelini Hospitality. This results in a lack of autonomy, empowerment and accountability.

“Hotel chains in general have always been very traditional in their corporate structures with the predictable list of functional department heads reporting in to a regional head. I do question whether this has led to efficient support in the field, while hotels themselves continually request additional manpower every year at budget time with limited rationale,” said Christopher Watson, executive director Asia, Renard International Hospitality Search Consultants.

According to Angelini, the industry has never been good at measuring productivity for each function, particularly for executives. “The only credible measurement is the total labor cost percentage versus revenue. Those labor costs are getting far too high at the expense of the bottomline,” he said.

“Most companies have increased positions year after year. Cost of technology has risen year after year, yet cost and number of executives at the top have not decreased.

“I remember when we had the hotel manager [not general manager], the concierge, the chef, the maitre d’, the housekeeper, the accountant, and the sales manager. Each fully responsible for their job, and hotels were much more profitable than now. Do we need so many directors, executives, vice presidents? Hospitality has not changed,” said Angelini, who was CEO of Shangri-La Hotels & Resorts for a decade from 1999.

Waste Not

During a live interview at the Skift Global Forum last week, Accor’s CEO Sebastien Bazin expressed his frustration at what he called “waste” which “existed a long time.”

“A third of our people spent time in meetings, mostly internal, and I had enough of this. Too many people in the same meeting, no decisions made, wasted energy, too many questions asked from central to hotel level, of which probably many were unnecessary.

“The only way to move forward is to cut a layer of decision-making and basically give the keys to people [who are] younger, closer to the field, and eight out of 10 they don’t have to seek permission from Singapore [Accor’s Asia-Pacific headquarters], and Singapore from Paris,” said Bazin.

Accor’s reorganization, happening now, was planned in January, before Covid-19. Bazin said he would have done it earlier. Should any skeptic think chains would return to merry ways once the crisis is over, Bazin had this to say: “We must make sure never to go back to the way we were heavy before. My successor might reinvent it but I would not.”

But among the big global chains, InterContinental Hotels Group was actually way ahead in restructuring. About two years ago it got rid of layers by creating one ginormous region, Europe, Middle East, Asia, Africa, overseen by one CEO, Kenneth Macpherson, and refined this further last November in a bid to achieve more “accountability.”

Marriott International is simplifying even more. Effective January, it will have just two key control centers, North America and International. The latter covers Asia-Pacific, Europe, Middle East, Africa, Caribbean and Latin America.

Craig Smith, current group president of Asia-Pacific, will be group president International, and Liam Brown, current group president of Europe, Middle East and Africa, will be group president North America.

This of course has a trickle-down effect. In Asia-Pacific, for example, Marriott’s regional headquarters has long been in Hong Kong but it is apparent that there’s been a shift to Singapore, covering Asia-Pacific, and Shanghai, covering Greater China. Part of this could be due to the political situation in Hong Kong. Marriott’s spokesperson in Shanghai however maintained that Hong Kong “continues to be a part of our operations in this region.”

How to Be Slim and Nimble

The fastest-growing hotel region of the world, Asia is generally seen as having less lean structures compared with the more mature hotel markets Europe or North America. However, this is changing fast.

Millennium Hotels and Resorts and Pan Pacific Hotels Group, both headquartered in Singapore, and Hong Kong-based SwissBelhotel International are among chains that have remodeled their organization structures, clustered functions or redesigned jobs, or all of the three.

Here’s an argument for clustering: If a chain has 10 hotels in the city and each has its own finance team, why can’t it have one finance team to support all hotels in the city?

Covid-19 has caused “a whole rethinking of clustering,” said Choe Peng Sum, Pan Pacific’s CEO.

It also involves senior executives double-hatting. At Millennium, for example, the regional vice president of operations is concurrently property-level general manager, said the chain’s vice president of human resources South-east Asia, John Tan. The global vice president of marketing takes on global e-commerce role, to name just two examples.

At SwissBelhotel, the senior vice president, operations and development for Europe, Middle East, Africa and India also assumes the responsibility for the chain’s human resources and talent development. The regional director of sales and marketing for that region is also director sales, marketing, branding and communications for the group.

At hotel level, things are changing too.

“We are so stuck in tradition,” said Choe at a recent industry panel organized by the Singapore Hotel Association’s hospitality school, Shatec, and moderated by Skift. “A hotel front office has concierge, receptionist, senior reception manager, duty manager, assistant manager. Why can’t they all be wrapped up into one? Increase automation, reskill and upskill, create a new title for this one job, pay more — this is how we can attract future talent,” he said.

Narrow Job Scope

It transpired that a reason why hotels have found it difficult to attract top talent is that the jobs are narrow in scope.

“Getting a job at hotels means you go to one department, you do one thing. The next generation wants to experience the whole hotel as an operation versus just doing sales,” said Jason Leung, general manager of Singapore Marriott Tang Plaza Hotel.

With reports of massive job losses in the industry, it will be tougher to attract good staff in future.

“We need to be competitive as an industry if we want the next generation to work for us, not just in terms of salaries,” said Wouter de Graff, general manager of Sofitel Singapore City Center. “We need to start from scratch, i.e., not reshape a box to a rectangle [but with start a new box] to create a next generation of workforce.”

Reorganizing teams and roles is no mean task however. For it to work, it takes “buy-in” from employees, said Choe.

But after years of huge expansion in the last 20 years, attitudes have become self-centered than socially-centered, said Gavin Faull, chairman and president of Swiss-Belhotel International.

A sense of urgency, responsibility and self change is hard to communicate and to train, but it has to be done, he said. “The pressures of Covid-19 have bought out the best in our team, but there are also situations where there are selfish impacts. There are real challenges for those who cannot step up, who cannot see that change and effort must come from within them before change can be made in the business environment.”

Dillip Rajakarier, CEO of Minor Hotel Group, has this advice for hotel professionals: “Moving forward, we will see greater efficiencies as we adapt to the business environment. Agility and speed are the key points of success for hotel professionals.”

For that to happen, reorganization is indeed a good starting point.