An unprecedented opportunity to reset

Last Updated
15 April 2020
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In the second episode of QUO’s The Future of Travel series, David and Catherine speak with Langham Hospitality Group CEO Stefan Leser on how the hotel group is navigating the COVID-19 crisis. 

Stefan takes a philosophical viewpoint on the situation, choosing to focus his energy on those things he can actually affect rather than the ‘paralysing forces’ out of his immediate control. He also takes great hope from the green shoots of recovery taking place in China, where people are out on the streets again, consumption is returning and—in second- and third-tier cities—hotel occupancy has risen above 20%. 

TRANSCRIPT

START AUDIO

 

David Keen 0:10 

Hi, this is David Keen. At QUO, we’ve worked for the last 20 years with many of the world’s best-known travel brands. During this unprecedented global crisis, our world of travel has changed, possibly irreversibly. This series will see us speak with many global leaders to understand how they see the future of travel.

David Keen 0:44 

Welcome Stefan Leser to the second podcast from QUO on the Future of Travel. We’re very honoured to have you, the Chief Executive Officer of Langham Hospitality Group, join us this morning. I’m sitting again with Catherine Monthienvichienchai, our Chief Branding Officer at QUO, and we’d love to hear from you how you feel the impact of the virus is going to be on the world of travel. But before we get into travel Stefan, how is humanity going to adapt to the virus?

Stefan Leser 1:24 

Well thank you very much for having me. Hello Catherine, hello David. I think we are resilient to a lot of things that come our way, and I think also we’ve changed the way we behave through external events. This is a new scale, this is on a very different scale, from anything that obviously I have experienced in the past. Normally we look at it, and we try to learn from those events and prepare for the next one. I’m not so sure that we’ll be facing a similar one any time soon or the next event might be a very different one, so I have great faith in the adaptability of what we do, and how we behave. Having said that, I don’t think that we’ve really ever had the magnitude of reset experienced on a global scale that we do right now, so I wouldn’t be able to predict how we change. But I’m definitely believing it will have a significant impact on how we view things, whether it’s travel, or whether we take certain things for granted. I mean four, five, six weeks ago I was travelling literally around the world and [the virus] was a distant – not even a potential [threat] in that point of time that we were looking at. And then within a few weeks we were confronted with it, and people have different conversations, in some aspects deeper conversations, and that’s something that I really enjoy.

David Keen 3:11 

Given the economic impact (apart from the obviously dreadful human impact the virus is having), I think while a lot of people are already talking about the economic impact, regardless of stock markets, the recession that some are now talking about that we’re going into, will create a new normality, will create a new world, a new order, a new way we do stuff.

Stefan Leser 3:45

I’m not sure about a new world order, but it’s definitely a reset. It will definitely impact behaviour in terms of savings, in terms of taking risks. I think the last 10-12 years were a little bit, the only way is up. And therefore leverage on assets, on investments, was something that you would almost have been viewed as stupid not to do, and that’s definitely a change. From a macroeconomic perspective, I think that’s also something that hasn’t been modelled – or at least I haven’t seen any model that has predicted that kind of reset and that kind of global impact.

David Keen 4:31 

Do you fear for the future?

Stefan Leser 4:35

I don’t fear for the future. I am pretty pragmatic. I usually say, and this is how I lead also in my job, I say I’m worrying about things that I can really make a difference about, or I can impact, and not about things that I can’t change, because I think that that would only be a paralysing force that doesn’t help. I definitely have a great curiosity about what will really happen in terms of changes that we experience. A lot of things, I think, depend on how quickly we actually see a new normality. And a new normality may be lasting for 18 to 24 months until we might go back to a more robust growth trajectory.

David Keen 5:32

Before we started recording, we were talking about the impact on the airline industry. Without access, clearly the hospitality industry is going to have even more problems. How much do you think the impact on the airline industry will actually impact the next 12 to 24 months.

Stefan Leser 5:53

That’s my biggest worry to be honest. I’m not in the airline industry, but I’ve worked in it. Post 9/11, I’ve seen the experience when I was part of Swissair Group, and how the events on 9/11 put basically the final nail into the coffin of that group. But at that point in time, it wasn’t, let’s say, dramatic, but it was a regional event that had an impact on a few players and not on everybody. And I’m worrying at the moment that basically all airlines, all players, are so significantly impacted that you won’t most likely see what you have seen before – that when one is in trouble, another one picks him up. Or even that when somebody goes out of business, then that capacity is picked up by another player, so basically all the planes stay in the system and therefore, the overall capacity that takes people from A to B, doesn’t really change. And that’s my biggest worry at the moment because the airlines are an infrastructural prerequisite for us to go back to at least long-haul travel. Short haul, we have the high-speed trains in China and we have some high-speed train infrastructure in Europe. But when it comes to a more international travel component, we are dependent on air capacity put in place, and at reasonable prices. I mean the low-cost carriers – whether it was in the beginning in the US or then in Europe and then in Asia – have provided a lot of growth to a lot of destinations. And if that infrastructure is not there, then destinations will suffer and, consequently all the businesses that are further down in the value chain will be significantly impacted. And it’s a little bit beyond my comprehension at the moment how we will get out of that funding gap that those players actually face.

Catherine Monthienvichienchai 8:00

I think feeding into that answer, Stefan, is thinking about consumer sentiment, thinking about once things start to improve once borders start to open up again, once planes start to be able to fly, even if it’s in less than numbers. How much will consumers want to get straight back in there again start travelling? How much will they have this pent-up demand that will get them straight back out there traveling again? Or how much do you think they’ll be held back, both by fear and by economic constraints because of the likely recession we’re facing?

Stefan Leser 8:35

I don’t know about you, but I have itchy feet. I mean if I stay too long in the same place, and especially if I’m forced to – if it’s a self-chosen local experience, then it’s a different, different story – because at the moment we’re actually holding people back. So I think there will be the desire to [travel], whether it’s vacations, or whether it’s just meeting people or reconnecting, on a business level or on a private level. Technology is fantastic and yes, I don’t want to think about the times when an international call like right now would have cost me five dollars a minute. And so there is maybe a little bit of a compensation, but I think the strong desire to go back and travel and experience will be there. I think there will be a significant economic impact that will, in my opinion, not necessarily hold people back from travelling but it might change the selection of destinations. But we are now living in a world where it’s not as it was maybe 20 or 30 years ago where destinations were in a certain price category. Right now you can experience every destination in every price category, so people will not be held back by that – if air travel is affordable, because that’s a component that obviously was very much enabling this growth that we’ve experienced in the past. That part about fear that you’ve talked about Catherine, the way I view it, I think as soon as there is some form of treatment out there that prevents people from dying, that the fear of dying is somewhat comprehendible, then I think we will go back to normality in terms of travel patterns relatively quickly. Because even now, when you travel you take risks and there are diseases out there, whether we talk about malaria or zika or dengue and all those kinds of things we incorporate into our travel patterns. But this is one that we don’t comprehend yet in terms of how real and how viral it is, and that impacts the overall movement of us the most.

David Keen 11:17

You mentioned pricing, which leads us nicely into evolution of brand, and perception of brand, and perception of specific hotels but of the brands. We feel that there will need to be a greater purpose for individual product brands imbued into the brands as we move forward given the supply and demand scenarios that we’re going to be looking at where there’s massive supply and limited demand. Do you feel, one: that that is true, and two: that you at Langham, for your two product brands, that you are ready to evolve and to pivot or to change in any way.

Stefan Leser 12:17

We are so small that if we wouldn’t have purpose, people wouldn’t choose us. We’re not a household name where it’s very clear that this is why I select you because it gives me very clear and understandable ‘this is what I see this is what I get’ positioning in the world. We have to have a strong purpose, and it’s not for me to judge that purpose, it needs to be judged in the consumer’s eye. If the consumer says, ‘Okay I understand what Langham stands for, what Cordis stands for, and this is why I connect with that company and this is why I choose them as my place to be,’ this has actually, I agree with you, gained in relevance. And that’s a chance for people that obviously have a strong inner core and have communicated not only that, but also live that. And from that aspect I actually was very well positioned. There might be other brands out there where consolidation is needed, because they were established just to grow the portfolio and to have the opportunity to sign development agreements and circumvent area restrictions that would have prevented some companies from growing. And that’s not what we are.

Catherine Monthienvichienchai 13:52

Stefan, a large section of your portfolio is obviously in mainland China. What are you seeing in terms of recovery in China, and what hope is likely for you in terms of recovery elsewhere? And is there any change in the way consumers are interacting with your brand with your portfolio within China now that there is a little bit of domestic travel coming back?

Stefan Leser 14:13

China is on the forefront in using technology in terms of interaction anyhow. I mean we have a lot of WeChat and Fliggy and other things that I sometimes cannot even read because I’m not comprehending the Chinese language. But what we see and what gives us great hope and confidence is that, especially now the second and third tier cities, are going up in in occupancy levels already and there you see that the domestic market, which is the single most important market, has returned to a certain extent. And we’re not talking about high occupancies, but we’re talking about double-digit occupancies – you’re not in the teens anymore, you’re in the 20% occupancies – and that means that travel has returned. We’re watching very, very closely, obviously, that there is no second or third wave re-emerging, because that would break the confidence. I think that would be very, very negative. That’s what the Chinese government is super concerned about, and you can see that they’re very quick in acting. The first-tier cities, whether it’s Shanghai or Guangzhou, they’re a little slower in the recovery because they also have a larger international component in their travel. There we’re maybe in the low teens, but also there is business [coming] back. And what we see and what is the lead indicator in my opinion is actually that there are people out on the streets. There are people going into outdoor venues, and they’re not only walking their dogs but they’re also consuming. And you can see life returning to the streets. And I think that’s a good role model. I mean we have properties in four continents, and I have experienced now all positions in the lifecycle of this event through talking to my individual colleagues, and sometimes you have to give them hope. And sometimes you also have to hold them back and said, ‘Look, you’re in week four. You know we are in week 12 right now, so there is more darkness in the tunnel until the light is really on the horizon,’ but it’s a very good kind of pattern that we can share. And I think that, again with the disclaimer being that there is no second or third wave happening, we are seeing some good signs of recovery in China.

David Keen 16:48

Do we feel that the Chinese model, or the way that the Chinese are recovering, is a model that we believe we will see in, for example in Chicago or in London or elsewhere? Or is it too early to tell?

Stefan Leser 17:06

No, I think we can draw some conclusions, or you know, correlations. I think if I look at our Australian portfolio or our North American portfolio, especially the North American hotels that rely on domestic heavily, yes that will be the first business to return. And then, I think there is some pent-up demand as we discussed around business travel. We need to get supply chains going again and there are business meetings needed. We might think of what the long-term impact on business travel is, but I’m quite sure that business travel will return, especially domestic travel. And then when the borders are opening – I don’t want to predict when that’s the case – the first test will be, will mainland China towards Hong Kong open in early May? I think that would be a very good sign. And so I can see there is a comparison in terms of pattern: domestic first, and business travel triggering domestic business, and then a gradual increase as individual countries, individual routes and traffic reopens.

Catherine Monthienvichienchai 18:21

I was reading that one of your hotels in London was at some point recently giving out free cocktails to those self-isolating at home which sounds like a fun and very upbeat initiative during these slightly depressing times. What else have your individual hotels been doing, or even collectively, to try and keep people’s spirits up to keep people feeling a little more positive.

David Keen 18:40

Ha ha, spirits.

Stefan Leser 18:44

Yeah, obviously the spirits double meaning that’s good. I like that. Now what we did, in China we started with literally preparing pastries and preparing drinks for the healthcare workers and going out there. And it’s not so much about the drink or the pastries, it’s about lifting spirits, as you rightly said. We did the same with the community but also with our employees. One of the examples that I like very much was in Pasadena. We literally handed one evening a care package to every employee, and basically there were some ingredients in there, some pasta in there, some famous toilet paper and other things in there just to ease people’s minds to get them into a positive state of mind and [to show] that we care for each other. And it’s not about the value, it’s about the interaction, being there for the community in which you operate because in London, yes, those are not necessarily the clients that would stay with us but we’re part of the community. And the same obviously in Pasadena, or in some of our mainland China hotels. Look, I love our industry because we’re so incredibly creative. The people have so much passion and creativity that they bring to work, and you can clearly see that if they are not able to serve clients, they have to come up with something. We have to use the energy, and this is why we are in the industry, because we love it. And it will return, I’m quite positive.

David Keen 20:21

Stefan Lesor, Chief Executive Officer of the Langham Hospitality Group, thank you so much for sharing so candidly your thoughts and your views on the future of travel. Thank you, Stefan.

Stefan Leser 20:35

Thank you very much for having me.

 

END