MADRID — Resort operations that mix global brands’ distribution with third-party management models can lead to higher profitability margins, but navigating that relationship is often fraught, hoteliers said.
Each company in the partnership likely brings with it a distinct culture and management style, regardless of its size. Despite the reach of global hotel companies that can drive bookings from anywhere, smaller regional firms have invaluable perspective in that they know their markets like no one else.
During a session on hotel operations and brand partnerships at the Atlantic Ocean Hotel Investors’ Summit, panelists discussed how both sides in the partnership must display humility from the onset to get the most out of the new working relationship.
Blue Diamond Resorts — which operates such resort brands as Royalton — has a distribution agreement with Marriott International’s loyalty platform Bonvoy. Blue Diamond Resorts Executive Vice President Daniel Diaz said his firm brought 9,000 rooms to the deal, a number nevertheless dwarfed by Marriott’s overall rooms portfolio, which comprised nearly 1.6 million rooms as of the end of 2023.
“We had leverage in some terms of our negotiations, but we are humble as we have a small portfolio of keys. We saw we needed to speak the same language, and the balance has been positive and extended our footprint outside of the Caribbean,” Diaz said.
Phil McAveety, who started in May 2023 as CEO of Iberostar Hotels & Resorts, said the Spanish resorts firm has maintained a distribution agreement with IHG Hotels & Resorts since July.
He added systems integration is complicated but only one part of the marriage, and that process is ongoing.
“There was legacy on both sides, and it was a learning curve to integrate. For example, we offer full- and half-board, which makes it a more complex booking process,” McAveety said.
Through the partnership, Iberostar hopes to grow its share of direct bookings in its distribution strategy, McAveety said, adding that IHG has been helpful in making that goal more attainable.
“They’ve been equally humble. We were already at 25% direct, but once we are integrated, we want to make sure that percentage is at least at that level. I thought when I entered we needed three years, and we are on track,” he said. “Our intention is to take that number and grow it while driving rate. Wholesalers and travel agencies still are an important part of what we do.”
Profitability Goals
Nuno Galvão Pinto, regional vice president of acquisitions and development at Hyatt Hotels Corp., said there needs to be a healthy interest in profitability to make these partnerships work. Back in October 2022, Hyatt announced one of its affiliates formed a partnership with Germany-based hospitality company Lindner Hotels AG to promote portfolio growth of Hyatt brands in Europe.
“There is a perception that hotel companies do not obsess about profits. That’s not true. You have to budget properly for the top line to make sure your bottom line looks good and for both sides to be successful,” he said. “Our partnership with Lindner gives us a footprint in a segment that is a feeder market for southern Europe.”
Lindner has 24 properties, mostly urban resorts, primarily in Germany but with a properties in Austria, Belgium, Czech Republic, Slovakia and Spain.
“Growth is key, and it has to be done with portfolios that are complementary,” Galvão Pinto said.
Iberostar's partnership with IHG has made the Spanish resort company more competitive, McAveety said.
“We’re operators in a platform-based industry, so we require a balance between saving costs and delivering guest experiences. We cannot complete in loyalty with the big companies, but our partnership with IHG gives it space it did not have, particularly for the U.S. customer,” McAveety said.
Diaz said that raising prices is necessary to deliver the type of experience guests are looking for.
“To increase the bottom line, you might have to increase costs, as guest expectation is here to stay, especially in our space that is upper-upscale resorts,” Diaz said.
Federico Holzmann, global head of real estate and development at Barcelona-based Catalonia Hotels & Resorts, said Europe-based hotel and resort companies are more cost-conscious and have a larger profitability gap to bridge compared to U.S. hospitality companies.
He said Catalonia’s largest slice of bookings distribution comes from online travel agencies, followed by tour operators. Bookings from loyalty program members have also grown significantly.
“The third is direct, but we’ve also seen a great evolution in that area in the last five years,” he said.
In 2019, Blue Diamond Resorts' business was almost all with tour operators, but that percentage has fallen to 75%, Diaz said.
“We’ve significantly invested in marketing and [central reservation systems]. We have a franchise agreement with [Marriott's] Autograph Collection, and that is a big differentiator, commanding stronger rates,” he said. “We own 22 of our resorts, and added to that, Marriott is itself learning more about the resort environment.”