ROME — Italy is a country of family hotel owners and operators, but change is in the air as domestic and international hotel brands gain more footing.
As that evolution takes place, third-party management companies are growing in importance.
Speakers at the Italian Hospitality Investment Conference here cited two trends in branding: Domestic hotel brands are expanding their presence in general, while international brand companies are bringing their luxury brands to the country.
International brands scaling up in Italy, and family offices looking to do the same in a market attracting more international capital, may find success by engaging third-party management firms that understand the country and are able to negotiate often complex bureaucracy, speakers said.
Luca Boccato, CEO of Venice-based hotel management firm HNH Hospitality, said he sees the issue from two sides. HNH was a hotel owner, but he recognized the company "could not grow without dividing our strategy," he said.
“What we needed is economy of scale, and it is difficult to work with local brands and be sexy with international travelers,” he said.
HNH has 16 hotels and 2,033 rooms across Italy branded with several international firms and brands, including four with Phoenix-based BWH Hotels.
Guillermo Pérez, managing partner of Madrid-based Panoram Hotel Management, said he had some experience dealing with similar industry evolution in Spain as hotel companies and strategies matured.
“In Spain, we saw a huge gap in service, pricing and scale, and profits. We, too, are a family business, but we saw we must be reducing our risk and increasing our ability to learn and to use our expertise with international brands,” he said.
Pérez said he fully expects planeloads of executives from new capital partners to arrive soon in Italy.
“Domestic investors still are small in number, but those, too, will come, which might lead to changes in a property’s business model. It is super tough in Italy at the moment,” he added.
Sara Digiesi, CEO of BWH Hotels Italia & Malta, said there is an opportunity for membership hotel firms such as hers to expand branded coverage in Italy.
Collection and soft brands also bring with them something for an intermediate period, she said.
“Our membership structure impacts the decisions we make. We’re 100% franchised, and do not have a share price. It is about what we can bring the hotelier,” she said.
Saurabh Chawla, vice president of transactions at owner Westmont Hospitality Group, said Italy is going through a classic reorganization scheme between bricks, brains and hotel brands.
“We want brands to bring value to the bricks, but brand involvement does lead to conflict, so how can we better bring in repurposing?" he said. "How can it be managed better and more excitingly?"
Westmont is not a third-party manager, but Chawla said the company acts like one in many ways.
"Asset-managing a property ourselves lets us get more out of the asset,” he said.
This separation will continue in Italy to the benefit of certain models, Chawla said.
“Franchises have become a more acceptable model, along with the rise of third-party management companies, as both create value,” he added. “One thing that needs to happen is on the [third-party management] fee side. That is a little more than the brands would charge, but that will change.”
Brand-agnostic in Bologna and Ancona
The growth of the branded hotels throughout Italy will stumble before it runs, panelists said, with the end result proving to be more valuable due to the care and attention required.
When developing branded market, it is important for owners and third-party operators to be open to brand options, Pérez said.
“Most of the success of a hotel comes before opening. It needs to be good for both parties,” he said.
Boccato said the number of variables that must come together to align the right brand with the right hotel can seem to be almost unlimited.
“Institutional investors need us to create value in both the short and long term, but sometimes investors are in love with a certain brand for any number of reasons, and that is not rational,” he said.
Digiesi said BWH is developing in Italy with 11 of its brands. She added this is more than sufficient choice to please hotel owners.
“We are not launching anything new,” she said.
Hotel operators’ track records play a critical role in providing comfort to owners, Boccato said. So does flexibility from all sides.
“Flexibility has to come from the brands in terms of conversion and soft brands,” he said, reiterating that such a solution adds another layer of comfort for all sides and can and will lead to more trusted relationships between owners and those soft brand’s international and domestic hotel brand firms.
“We are happy to pay fees if a brand delivers,” Westmont’s Chawla added.