Fernando Vives is chief commercial officer of the
NH Hotel Group and leads its commercial strategy for sales, distribution,
reservations, business intelligence, and pricing and revenue management.
“We are doing extremely well right now,” says an upbeat Fernando Vives, chief commercial officer of NH Hotels, the Madrid-headquartered operator of more than 350 hotels in Europe and the Americas. “We are above 2019 numbers in many destinations, ADRs (average daily rates) are quite high, and in Europe we are overdelivering.”
The company, part of the Minor Hotels group, returned to profit in March and reached 2019 price levels in April. Its occupancy rate grew from 53 per cent to 72 per cent between March and June, while its ADR increased from €97 to €139 over the same period.
In the group’s H1 2022 results published at the end of July, it said the second quarter of the year was the best Q2 in the group’s history, with revenue reaching €509 million – compared to €469 million in Q2 2019 – and attributed it no small part to the acceleration of business travel in tandem with a “solid pricing strategy” and “strict cost control”.
It pointed to a “significant upturn” in corporate travel to key cities which “explains this outstanding performance”. It acknowledged, however, that it is facing increasing costs for energy, labour and external services. Nevertheless, the company remains bullish.
Vives says NH has seen rapid recovery among SMEs and groups, meetings and incentive travel, but larger corporates – who traditionally have the buying power to drive down ADRs – have been the most sluggish to recover.
“They are the ones that normally drive your rates down because they are more likely to have fixed rates but they have been slow to return,” he explains.
“It’s not that corporate travel isn’t strong, it’s that we’re seeing a different segment – more smaller and medium-sized and non-traditional corporates.”
The launch of corporate loyalty scheme NH+ in 2021, amid the downturn, has paid dividends, claims Vives. The four-tier programme rewards businesses with discounts of a minimum 12 per cent off flexible room rates, rising to a 20-25 per cent discount for companies booking more than 75 nights per year with the group.
“We’ve always been strong with small and medium accounts, but it’s been mind-blowing. We managed to launch the perfect programme at the perfect moment,” says Vives.
“We thought it would be driven mostly by small and medium accounts but the value proposition is so strong that we’ve seen bigger corporates sign up too, especially as future travel patterns for many remain unknown.”
Even in 2019, only ten per cent of large corporates accounts had negotiated fixed rates with the group. The vast majority operated on what the group calls its Open Corporate Rate – a variable discount off the dynamic rate.
“It gives us the chance when we are not fully booked to further discount to our most loyal customers,” says Vives. “Then when we are close to fully booked, of course, we give the discount but with a lower level.
“We started this strategy in 2017, migrating corporates to dynamic rates, so for two years we were just extending corporate agreements, but now we are seeing some corporations going back to the traditional RFP process.”
The group’s home market, Spain, was “very strong” even during the pandemic. “We reopened hotels as fast as we could and when customers had to travel often the only hotels they would see open were NH properties,” says Vives.
That alone, he believes, saw it add some 25,000 new accounts to its database “that had probably never booked NH before”.
While Germany was one of the slowest European markets to recover, Vives singles it out for a strong 2023. “I’m very optimistic about Germany in the fourth quarter and into 2023. I always say it’s like a diesel tractor which takes a while to get up to speed but once it’s going it’s very steady.”
Returning to the economic challenges highlighted in its H1 report, Vives describes the increasing cost of energy as “absolute madness”.
“Corporations need to understand that we will need to transfer those additional costs to the customer. It’s not just energy, it’s also food and beverage, payroll, business rates… but with the value proposition we have we will always be able give good value for money and work with corporates to sign contracts,” he says.
On a more positive note for the industry, Vives expect staff shortages that have plagued the industry to be behind us in 2023 and that the group sees no sign of a recession.
“We have very strong demand patterns this autumn and winter. What we are also optimistic about is that the traditional big corporations – which are today trading at -60 per cent compared to 2019 – will really come back in force.”
He continues: “All those people during the pandemic that said corporates would travel substantially less because Zoom and Teams would be the future… we’re not hearing that now.
“People may travel differently – fewer trips, staying longer; and those flights from Madrid to Paris for a one-hour meeting may go – but nothing beats the reality of face-to-face meetings.”