In previous blogs, Travel Risk Management – Hotel Procurement Risk Management and Keep Your Traveler’s Safe – What Companies Can Do we considered how risk managers and procurement teams could ask the right questions of hotel operating companies and their hotels to improve their supplier due diligence. In this blog we’ll look at how hotel operating models impact required due diligence for travel risk management.
Businesses quite rightly seek to do everything reasonable to keep their travellers safe and secure whilst travelling on behalf of the company and so they understandably select large well-known hotels chains in the expectation that levels of security and safety standards will be consistent across their brands.
Whilst hotel companies will seek brand consistency, this is more of a challenge than many might think and is influenced to a larger or lesser degree by the specific hotel operating model.
Asset-Light Business Strategy in the Hotel Industry
Increasingly many global hotel companies do not own many of their branded hotels as they sort an asset-light business strategy. Most hotel groups now operate two main models ‘Managed’ and ‘Franchise’. A managed hotel will be branded and managed on behalf of the owner whereas a franchised hotel will be managed by an independent hotel management company which may not have the same hotel management expertise, experience or resources as the branding company. This is likely to, but not always, have a significant impact on hotel security and safety risk management and compliance.
The franchise model is becoming increasingly popular with hotel companies because although fees are lower, the overheads for the hotel company are much lower. This is worth knowing because there will be more franchise hotels operating within brands that the Travel Risk Manager might think are ‘Managed’.
It is worth considering due diligence on the franchise hotel management company because should there be any issues, it is this company you will be dealing with not the branding company. This is one of the advantages of franchising to the hotel branding company, it limits the branding company liability exposure. Conversely, where the branding company also manages the hotel, liability sits more firmly in their court.
The Role of Brand Standards
It is likely that hotel companies will claim that consistency, including safety and security, is achieved by contractual ‘Brand Standards’. Brand Standards set a baseline for all aspects of hotel operations from the colour of guest room decoration to crisis management requirements. Brand Standards normally apply equally to managed and franchised hotels. Some hotel companies will have one set of Safety & Security Brand Standards that apply across all brands in the portfolio from 100 room limited service hotel to a 5* property with Standards having to consider the lowest common denominator. Other companies may have additional Safety & Security Standards depending on the specific brand and location.
Hotel companies that have adopted a one size fit all approach face the challenge that contractual Safety & Security Brand Standards apply regardless of the hotel profile or the safety and security environment in which it operates; so the same Safety & Security Standards apply whether the hotel is operating in Teesside or Tunis.
This issue can be addressed in managed hotels by the adoption of ‘Standard Operating Procedures’ requiring additional safety and security to meet additional threats and risks. Hotel brand companies cannot usually impose ‘Standard Operating Procedures’ on franchised hotels and nor would they want to do this because it increases the degree of control a hotel branding company has, which then increases their legal and operational exposure.
Brand Standards are worthless without a stringent compliance and performance management program.
Hotel companies will quite rightly claim that they have Brand Standard compliance regime but there are normally hundreds of Brand Standards across all lines of hotel operation and it would be nearly impossible, and extremely expensive, to check all standards regularly.
Some companies will take a sample approach, for instance annually select say 25 standards across all lines of operation and audit these; Safety & security Brand Standards may or may not appear on the audit.
The second challenge is that Brand Standard auditors are usually ‘Jacks of All Trades’ and therefore whilst they might be able to note the existence of a CCTV camera, they are unlikely to know its capability, if it is operated correctly or if it is delivering the required capability, as another example they might note the existence of a Hotel Crisis Plan but they are unlikely to know if it is any good.
Audits and Inspections
Safety and security at managed hotels are likely to be subject to greater scrutiny with audits and inspections being carried out by direct hire or contracted specialists who understand the unique challenges and spot weaknesses that need addressing. Managed hotels will normally have access to a central corporate safety & security team and resources to advise, support and mentor; franchised hotels will not have this, certainly not from the hotel companies. This said, it is worth noting that under increasing business pressures, some hotel companies have given security management responsibilities to Safety Teams to reduce costs.
Whilst the Safety Teams are usually hugely capable and professional, they are not security specialists capable of dealing with complex threat and security risks issues.
This trend is likely to increase as post-COVID 19 as Hotel Brand Companies seek to save costs.
12 Questions to Ask When Establishing Traveller Programs
Safety & security at some franchised hotels are as good if not better than managed hotels, all that we suggest is that Travel Risk Managers and Security Teams should be aware of the challenges posed by different operating models and perhaps adopt greater security and safety due diligence at franchise hotels. The models and issues discussed in this blog may not apply in full to all hotel companies, but the issues raised are relevant and will hopefully enable Travel Risk Managers and Security Teams understand the lodging risk landscape with more clarity.
The following 12 questions should inform Travel Risk Managers and Lodging procurement decisions from the outset:
- Is the hotel under consideration managed or franchised?
- If franchised, who is the management company and what is their experience and profile?
- Does the hotel have a security manager, if not who is responsible for security? (this is particularly relevant to franchised hotels)
- How are Safety & Security Brand Standards structured, a single set across all brands or bespoke standards for brands and risk environments?
- If a single set approach is taken, what measures are being taken when there is a gap between the mitigation provided Safety & Security Brand Standard and the operating threat and risk environment?
- Do the Safety & Security Brand Standards meet the risk appetite of the procuring company?
- What Safety & Security Brand Standards have been checked at the hotel in the past year?
- Does this meet your security and safety assurance requirements?
- Does the hotel company have a central corporate Security and Safety Teams?
- How often are managed hotels audited for Safety & Security?
- What did the hotel score in its last Safety and/or Security audit?
- Does the hotel have a Safety and Security Improvement Plan?
Keep up the great job of protecting your travelling colleagues. If you have any questions or would like to discuss this issue further, please contact me at NorthPoint International.