'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[1] 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.
Are the Deal Makers also the Deal Breakers?
One of the foremost issues that hotel companies need to address is the need to include the manpower element in the initial review of a project's feasibility. We have met overzealous hotel development teams signing management deals so quickly that human resources can't keep up. Often times the deal people don't even think about the talent implication; and why should they? They are incented to make deals. Getting the people to run the hotels is always someone else's problem!
Many hotel companies do of course involve Human Resources at the feasibility stage of a new project, however more often than not this is purely to get an understanding of payroll costs and staffing levels for the purpose of a budget forecast. How often is there a discussion around 'talent'? Perhaps consulting HR before entering a new market may help them decide if it's even a deal worth doing. The talent implications might render the project pointless. What if there is no local talent to draw from? Or, what if the fundamentals of the local economy make compensating employees too cumbersome to run a profitable hotel? Typically HR receives the news that a new hotel deal is done and is given an estimated opening date and a whole list of consequent challenges to face:
- How many staff will be required?
- Where will we recruit these staff?
- How will we attract people who have never heard of us?
- What level of training will they need?
- How much will we need to pay them?
- Will we need to build staff accommodation?
- Is there a workforce localization policy in the country?
- Do we have a General Manager willing to move there?
Size Matters
The severity of HR challenges also varies from company to company in relation to company size. The issue for small to medium sized hotel companies is that there is far less bench strength, or talent within their hotel portfolio from which to draw. There is already a steep learning curve when opening in a new market and being able to transfer a proven leader from within the organization is extremely valuable. Having an ambassador who already knows your culture, S.O.Ps, vision and values puts you ahead in the game. This internal knowledge is counter-weighted by the need for local market knowledge; having the requisite technical skill set to run a profitable hotel counts for nought if the GM is unable to effectively navigate local politics and cultures. At Carlson Rezidor Hotel Group, SVP Human Resources Michael Farrell says this weighting of local knowledge versus internal hire depends on the characteristics of the market, "In Russia for example, because of the language, you want a local in the GM role. In Africa on the other hand, we want someone who understands our company, our business, our standards, and can carry the brand."
Companies with limited resources can turn this to their advantage and play up the positives. For instance, small growing companies move their people around faster, giving more rapid opportunities to take on increased responsibility; more exposure to the senior decision makers of the company; and enable an employee to have a higher level of influence and impact.
The Importance of Key Hires
Our conversations with senior-level HR executives also brought up another common theme – the importance of the first one or two hires. Owen Dorsey, VP of Human Resources at Capella Hotels says, "I have long endorsed and applied the approach of finding the one or two key candidates. These are leaders who are respected in their present positions in the market, or who may have previously worked there, relocated for career opportunities or unrelated personal reasons in another market and who may desire to return or are willing to return for the 'right' opportunity."
Tim Williams, VP Organizational Effectiveness at Bangkok-based Minor International adds, "Look for mavens and leverage their network. The key is to hire a GM or HR Director with past experience in the market and a network – once they are in place the whole thing unlocks. At Minor we very deliberately sit down with our managers 3 months after they join and we take a structured approach to dig into their network – find out who they have worked with, who impressed them. For us, typically a new hotel in a new market will have an executive committee made up of half internal hires and half external from the local market."
The Business of Brands
Smaller companies opening in new markets also face a unique branding issue. It is an intersection where the consumer and employment brands cross. In our experience it is much more challenging to market an opportunity to talent where the hotel company has rolled out a brand unknown to the region. When entering virgin territory, a company needs to be able to present a compelling and credible story and strategy. Owen Dorsey states, "Whether an established name, or a new one being developed, we first make sure we have a clear vision of where we are headed. We then must refine the message to effectively communicate Our Vision and be able to describe how an individual can fit into that same vision… the message must be clear, concise, consistent and believable. The same is true whether recruiting in your back yard or in unknown parts of the world."
Potential candidates looking at a company they have little knowledge of may fear it to be a risky move compared to joining a large multinational such as Hilton or Holiday Inn. In the United States for example, an Asian/ European hotel brand that doesn't have an asset in major markets will have a more difficult time messaging their mission and values to potential American employees. To minimize this perceived risk, Tim Williams advocates, "As a small company we need to be clear and credible about growth, to sell the growth strategy and to ignore the temptation to hire for the job at hand but to hire for one role ahead."
This is particularly relevant with regards to senior management positions. It can be argued that at the line level an employment brand is not at the top of a prospective employee's priority list when assessing a new job opportunity. Rather, the factors which carry most weight for them are base salary and service charge; working hours and shift patterns; convenience of location; employee facilities; and perceived generosity of the owning company.
Local vs. Expat
Depending on the ownership structure of the hotel, as well as how much political/governmental influence is wielded in a geography, the mandate to hire a certain number of local candidates needs to be considered.
Most emerging markets are seeing increasing governmental pressure to create more jobs for locals and to phase out the reliance on foreign workers. Whether in China or Saudi Arabia quotas are in place to ensure that hotels hire a set percentage of local workforce. Given that locals are cheaper to employ than expatriates, this is welcome news to the hotel owners. It also forces hotel management companies to think carefully when staffing a hotel. As Tim Williams points out, "Do not hire expats as Resident Manager, Rooms or F&B Director unless you think they have the potential to push through to GM."
In markets which have a very limited existing hotel supply, the emphasis has to be on training, training, training. Michael Farrell shares, "In some markets we are entering there is no local talent full stop, so we have to develop it. We put in a General Manager and HR Director with very strong training focus and put a lot into people development. Over time we can then export and develop that local talent further in our older hotels back in Europe so that they eventually return back home with a raft of best practices to share."
The Compensation Quandary
Hotel companies also need to be prepared to act and act fast if they spot talent. As Roger Casalengo, VP Human Resources at Morgans Hotel Group commented, "A hotel can be 8 time zones away from head office so we need strong, independent managers who can make things happen on their own. When we meet someone good, even if it is too early or not the ideal time to hire them in the opening process, we nonetheless snap them up and hire them."
Compensation is not solely about base salary. A highly personal approach to hiring and retention can often carry more weight than a standard company compensation and benefits plan, eg offering an unmarried employee a standard benefits package which includes a schooling allowance will be of little interest; instead a comprehensive health insurance policy may be regarded as more important and relevant. A good, fair, incentive plan also helps as does a sensible approach to additional benefits such as relocation, and flights for home leave.
Additionally, salary levels should be benchmarked against the local market. Seldom should it be necessary to offer inflated salaries way above market rates unless there is time pressure or the location is a particularly challenging one. We have often seen a hotel come into a market, hire from the local competition by upping salaries and then 6 months post opening losing those employees back to their previous hotel as the total package (salary and benefits) and culture were inauthentic.
Keep it Personal
Hotel companies are constantly espousing that 'our people are our most important asset'. The reality however is often that when it comes to moving employees around the world the personal implications often get overlooked in the rush to meet professional objectives. Does their spouse have a career? Are there children who need schooling? What is the climate like? Do they need to go on a language course? What are the immigration issues?
In our experience, it is more often personal issues which affect an employee's performance rather than professional ones. Relationship issues, financial problems, health troubles, can all have a very serious impact on how an executive performs in their day job. A move could go wrong because the executive's spouse doesn't feel safe; because the children's school is of a low quality; because pollution is aggravating a child's asthma. Not only has the company probably groomed the executive over a number of years, invested in their career development and advancement, but the company will have paid to relocate the family, will have to find a replacement for the executive back in their home role, and will most likely have strategic goals associated with this executive, the achievement of which will take a serious knock back as the company scrambles to find a solution.
The impact of a relocation on the personal life of the employee needs to be tackled early on. If due forethought is not given to addressing the personal implications of a relocation, the result can be that a major part of a leader's time and energy is taken up with dealing with the fallout of their personnel's personal issues. Hotel companies need to apply the same level of attention to detail they give to planning and designing a new hotel in a new market to making sure their talent is taken care of and has their needs addressed.
Best practice hotel companies understand the delicate balance of maintaining brand consistency while respecting local differences when they enter a new market. We believe the same holds true for their human capital strategies. Use the plan that yielded success at home for recruitment: incentive plan design, training, et al, but tweak it for the known challenges of a hotel opening and its specific geography.
Now all of the methods we highlighted are important, but they are meaningless without measurement. When negotiating compensation packages for your executive team make sure you have accurate market data. Are you trying to determine talent. When faced with ambiguity it may seem easier to take a shortcut, and make a decision without looking at your benchmarks. This could be a recipe for disaster. After all, how do you know where you are going if you don't know which candidates are the best culture fit? Use assessment results to compare against your company's high performing where you've been?
This article was first published in the Hotel Business Review. Reprinted from the Hotel Business Review with permission from www.hotelexecutive.com
[1] Indian Hotel Industry Survey 2011-2012 authored by Kaushik Vardharajan, Pooja Goel and Tulika Das; published January 2013; http://www.hvs.com/article/6145/indian-hotel-industry-survey-2011-2012/
About HVS Executive Search
HVS Executive Search is the premier executive search and advisory firm providing consulting services to leaders of the hotel, restaurant, gaming and real estate industries. Practice areas include senior-level executive search, mid-management recruitment, compensation consulting and performance management. Its offices are located in New York, London, Hong Kong, Moscow, Mumbai and New Delhi.
HVS Executive Search is a division of HVS, a fully integrated consulting firm focused on the hospitality industry. Founded in 1980, HVS is the world's leading specialist in hospitality consulting. With 30 offices globally, HVS offers unparalleled worldwide market expertise. www.hvs-executivesearch.com
