INTERVIEW
OLGA FAZULLINA
Founder and Senior Partner of PROSPECTA

Olga has more than 11 years experience at leading advisory practices with specialization in the hospitality industry. She has been involved in more than 150 projects in Russia, CIS countries, Eastern and Western Europe
Five key ingredients of a successful hotel project
Olga Fazullina, PROSPECTA Senior Partner, on how to plan a profitable hotel
1. Demand
What is demand for a hotel? It is dissatisfied hotel customers in the coverage area of the project. Because there is no hotel in the price category, which these customers need and offering the range and quality of services they need, these customers have to stay in more expensive or cheaper hotels, and sometimes even in hotels in other districts or cities (this also happens).

How can we tell whether demand exists?

First, we analyze statistics:

- overnight stays in hotels in various segments;

- total inflow of visitors to the region;

- take-up of hotel supply in different segments.

But it is also important to consider competition and impact of current and possible future demand generators depending on dominant features of the market (business or leisure visitors). For example, if a stadium is being built near the hotel site, where a landmark event will take place (Olympic sports, etc.), there is likely to be a peak period for hotel occupancy, with possible state-regulated prices, followed by a decline.

It is also crucial to identify your own niche in the hotel market.

2. Positioning
The nature of demand dictates positioning of the project. The future hotel has to meet the needs of its future guests for class, quality and range of services. It may therefore happen that a hotel concept, which takes full account of local market specifics, does not fit with the standards of international chains. In that case, the concept comes first and a brand must be chosen to suit it.

There were projects in our practice, which called for non-standard hybrid products, for instance: a budget hotel with a full-fledged restaurant, a midscale project with a spa, and a high-level hotel that included small rooms. Contact with international chains is important in such cases in order to agree on the most suitable brand.Location of the hotel at a place with maximum traffic is always an advantage.

Some international chains already have brands in their stable that allow creative, non-standard solutions (there are actually more and more of these: brands with a DJ console in the lobby, or a brewery instead of the main restaurant). Sometimes a hotel can be launched under a brand that strictly defines the concept, but with some divergence from the standards. The only requirement that must always be observed is fire safety.

Ultimately, wise positioning and attention to detail, rather than blind adherence to standards, is the way to maximize revenue
3. Interior zoning for future management
Architectural planning decisions are decisive for operating efficiency of the hotel. The interconnection of premises within each profit centre is crucial (guest rooms and related areas, catering facilities, conference area, spa and sports facilities). The spatial connection between different profit centres is also important, and between profit centres and their respective service and technical areas. This has direct impact on final profitability.

The key point here is to give as much space as possible to the premises that generate income. Most income is from guest rooms, so they should be the priority and should dictate the location of all other premises. The catering concept is also important. Different restaurants in a single hotel are not like different restaurants on a city street: they work together, often (though not always) from one kitchen. They should be organized to cater for a large number of guests at the same time (breakfast, coffee breaks or banquets). Also, experience shows that every extra turn a waiter has to negotiate on the way from kitchen to table takes its toll of broken plates, so the distance should be minimal. 4. Strong team of partners You can only hope to carry out each of the complex processes in implementation of a hotel project properly if you have a strong pool of specialists leading and supporting the project – you can't be a professional in everything. This means hiring an experienced hotel operator (management company) and careful choice of the general contractor responsible for construction. Involvement of architects and engineers with experience of hotel projects from early stages of the project significantly reduces spending on revisions and corrections at later stages and after the hotel opens.

4. Strong team of partners
You can only hope to carry out each of the complex processes in implementation of a hotel project properly if you have a strong pool of specialists leading and supporting the project – you can't be a professional in everything. This means hiring an experienced hotel operator (management company) and careful choice of the general contractor responsible for construction. Involvement of architects and engineers with experience of hotel projects from early stages of the project significantly reduces spending on revisions and corrections at later stages and after the hotel opens.
It is my belief that partnership with professional hotel operators, including international chains, is a key factor for the success of a hotel.
In practice, the operator manages your hotel for you, and if you make a contract with an international сhain, the hotel operates under a well-known brand, such as Marriott or Hilton.

This ensures that efficient business standards will be applied. Sufficient staff will be hired to ensure smooth operation, but without excess hiring. Equipment, consumables and food will be purchased at optimal quality, quantity and price. Services provision will be standardized (maids follow standards for how and when they clean rooms, etc.).

Operators and international chains should be involved from the outset, as soon as economic viability of the future project has been established. That way you will take all the steps together with an experienced partner who can help to design and equip the hotel. You will avoid mistakes and obtain a hotel that is easy and not over-expensive to operate and maintain, and that offers what guests need, maximizing income of the owner.
5. Tight control of construction costs
The efficiency of a hotel investment depends on two factors: construction costs and project revenues. Costs incurred by the project owner at the very beginning of the project cycle are bigger than income at the later end of the forecast period. Construction costs are usually very large and they need to be carefully controlled (without cutting corners).

Well-targeted spending depends on a competent general contractor (hired through a tender or previous positive experience working together). Experts in construction audit and (occasionally) project managers may be hired separately.

Money spent on quality materials and equipment, which ensure sustainable functioning of the hotel in the future, is money wisely spent. Purchases ahead of hotel launch should be sufficient for smooth operation, but not excessive taking account of the hotel's positioning. The best way to achieve this is through partnership with professional operators or with procurement specialists, who have experience of hotel launches.
In our practice, equipment purchase plans are sometimes excessive. For example, a hotel planned to buy one fondue set per restaurant seat, although one set per table is usually sufficient and the restaurant did not intended to specialize in fondue. Equipment may be too expensive or not expensive enough (premium furniture for midscale and economy hotels, or vice versa). It is important not to compromise on quality: cheap furniture will need replacing before long.
November 15, 2017