The Hospitality Industry’s Intense Eye on Human Capital: A Hot Topic in Strategic Circles

At the recent Global Restaurant Investment Forum in Dubai, Marc Blazer, Chairman & CEO of Overture Investments and co-owner of Noma, was heard saying, “I am not in the investment management business, I am in the talent management business”. This comment nicely sets the scene and actually summarises the key takeaways from a number of different industry events Aethos™ attended across the globe as of late. Whether it was the HR in Hospitality Conference in Scottsdale/Arizona, the International Hotel Investment Forum in Berlin/Germany or the Global Restaurant Investment Forum in Dubai/UAE, one thing was clear: Human Capital is back on top of everyone’s agenda.

Operators and owners both agree that the way organisations handle Human Capital has a tremendous impact on their profitability and often comes to define them. So it should be no surprise that the best practices for recruiting, training, mentoring and supporting people have been amongst the prevailing themes at the conferences.

Of course, it should not be ‘big news’ to anyone working in the hospitality industry that there has always been an intense struggle for sourcing the right talent. So, why has Human Capital crept back up on the agenda of most hospitality company boards? Arguably, three major factors help to explain the current interest:

• Firstly, investors have increasingly come to realise that their role is not purely that of a ‘bank’, providing the monetary funds to continue expansion. Equally, business leaders have awoken to the fact that their role is not purely that of strategists steering the company in the right direction. In fact, the role of investors and business executives has become that of creators and guardians of a company culture that creates a sense of shared purpose and branding that drive people towards a common goal and ultimately towards success.
• Secondly, the hospitality industry – once again – is undergoing a major transformation and consolidation. Big hotel operators are looking to merge with competitors that have complementary brands (as reflected, for example, by the Accor-FRHI deal) or to acquire smaller start-ups in order to rapidly gain access to new market segments (as portrayed by Carlson-Rezidor’s acquisition of German Prizeotels) whilst restaurant start-ups and smaller F&B concepts are quickly being acquired by ‘bigger fish’ to create and capitalise on synergies (see Casual Dining Group’s recent shopping tour of Las Iguanas and La Tasca). Such heightened M&A activity comes with its operational challenges, so business leaders must better have quick and useful solutions to HR-related issues such as: How do you successfully integrate two companies with rather distinct (and often dissimilar) corporate cultures? Whom to keep and which talent is dispensable?
• Thirdly, and in line with the increased M&A activity, the hospitality industry is continuing to attract cross-border investment interest. Specifically, Asian capital is backing much of the recent transaction activity: Whether this is Chinese Anbang Insurance bidding for Starwood Hotels & Resorts, Fosun’s acquisition of ClubMed or Hong Kong’s CTS Metropark Hotels Co. Ltd. successful take-over of Kew Green Hotels – Asian money is (currently) everywhere. However, leadership and communication is vastly different in these Chinese, American, French and British companies – so, for a ‘successful marriage’ to last, both parties involved in such M&A activity will want to make sure that adaptation is at the heart of their every doing.

It is encouraging to see that industry players are again paying closer attention to Talent Management and recognising the strategic value it brings to the table. However, discussions should not be purely centred around hiring, training and retaining the best possible candidates – we have had those discussions in the past and whilst those have been productive it would be important for other Talent Management issues to be broached in board rooms and at conferences around the world. For example, it would be beneficial to hear more about the value proposition of diversity in attracting top talent and informing better decision-making by guarding against ‘group think’.

Think about it: If you were to map out the people you know at work, how likely will it be that you will come up with a highly diverse list of individuals of different ages, gender, socio-economic, ethnical or cultural backgrounds? Is your organisation providing equal opportunities to abled and disabled employees? How about any prevalence of ivy-league school graduates? Sure enough, the hospitality industry provides employment to individuals from a plethora of backgrounds and its workforce is an extremely international one. However, does it give enough opportunities for individuals to move up the ranks? Are there glass-ceilings not only for women but also for other groups? And, does the industry do enough to capitalise on an aging workforce whilst keeping the Millennials engaged?

Keeping in mind the heightened M&A activity and the international buy-out or take-over activity that the hospitality industry is currently witnessing: How well do you think your organisation would fair if it were made up of likeminded individuals not used to be challenged or questioned by a different perspective? By individuals who predominantly come from the Western world and, although having gained international work experience, who have first and foremost made their careers in European or American institutions with belief systems quite distinct from their Asian counterparts?

What companies and industry leaders should really talk about and address is how modernisation (in emerging markets) does not necessarily mean Westernisation; how growth does not necessarily need to be managed in the same old ways by the same old people; how leadership values in one country may differ to another and how talent management programs may (and should) be vastly different from one region to another. In short: Copy-pasting tried and tested processes (or ‘plug-and playing’ successful business leaders) may not always work. Embracing diversity is key and finding and retaining those individuals who are adaptable and open to change with an ability to constantly re-invent themselves. The conversation should hereby steer away from the typical gender-focused diversification. Instead, it should be focused on incorporating as many diverse perspectives as possible.