Wednesday, 26 August 2015

By Giovannino again...

So who owns this place?

Yesterday the Chinese economy slumped. Billions of Pounds, Dollars, Euros and Yuan were wiped off the values of companies and individual stock portfolios. Even Warren Buffett lost out. Crowds of conventional economists, Finance Ministers and journalists could be observed huddling together, quietly chanting “La la la, not listening, not listening, nothing to see here …”

All I thought was “Shit, another year of no payrise…”. Should I worry? How else, apart from a possible slump in demand, could this affect me? I have no shares, no real property to my name, so why am I bothered?

 I do worry, because I have no way of knowing what the owners of my Hotel have invested in, or more importantly, how deep their Bankers and investors are in the shit.  On TV there is a big Sports Day in Bejing, but right now they are doing summersaults in Shanghai, and somebody might even be for the high jump…

If you stay in a Hotel, you probably know that the name above the door is a Brand. Somewhere deep down, we all accept how Branding works – a company owns a brand, and then licences that brand out to other, smaller companies. You know that Top Shop doesn’t own factories in Indonesia, that McDonalds Restaurants are mostly franchises, that Karrimor isn’t made in the UK anymore. Just so with that Hotel you have walked into.


The Worlds biggest Hotel chains long ago discovered the secret to growth lies in the McDonalds model – franchising rather than actual ownership - at all levels of the market, as well as Management contracts. This frees up a lot of money that would otherwise go on maintenance, equipment or wages for directly employed staff. Money that would of course be better spent on Marketing, Board Renumeration or shareholder dividends.

                                  That luxury hotel you're staying in?.....It's a bit like this....

So, you enter the Hotel Lobby, cleaned by agency workers, go to your room (ditto), go to the restaurant or bar, possibly also agency staffed (your plates were cleaned by agency staff in the wash-up). The receptionist hands you the bill next morning  (now they probably are directly employed) – but your Bill has no reference to the actual owners of the Hotel, just the franchised brand they operate. Welcome to the outsourced and surreal world of Hospitality. For us too, our training will be Brand-specific, yet each month our paycheck comes from a different company. Some properties change Brand frequently – obviously the owners want a better (cheaper) deal, with HR norms that favour their interests even more, and access to maybe a bigger Marketing operation in specific markets. Some companies even operate franchises and management contracts with multiple Brands.

So who are we actually working for? How do we know exactly what to expect in pay and conditions? 


Back in 2012, with the Olympics and an election looming, Boris Johnson needed a story to prove that the fun and games would directly benefit even the lowest paid Londoners. A senior executive of a worldwide Hotel operator stepped up to the plate and announced that by 2017 all workers in his company’s London Hotels would be paid The London Living Wage – see what a business friendly Mayor can deliver!!!! That company waited a little while, then sold its flagship in London, whilst retaining the management contract. It is not even 2017 yet but I guess those workers already know the small print – “sorry, but you are no longer our actual employees…”  His HR director pockets more than £1 million a year – money well spent I would say.

It is not just the big chains – smaller operators also have their secrets. One UK chain of luxury properties went bust three years ago when it was found that its charismatic head had fiddled the books by quoting increased property values for its Hotels as profits. Overnight hundreds of people didn’t know if they would be paid that month, and as suppliers pulled out staff were sent out to supermarkets to buy food and drink for functions with petty cash. A friend who worked in this company once told me “I should have got out when the manager told me that they didn’t care about the stock take results”.

Of course, everyone knows that with the Grand Luxury Hotels, the ones you have heard of, ownership is a very rich man’s game. Non-Doms, Sultans and assorted tycoons all have their vanity projects in London and around the world. In these cases the staff will pay their taxes, the owners – well, less so, sometimes even the Hotel will get away with tax avoidance.

Another set of owners are the big banks – one company I know that specialises in luxury, and is headed by a true Hotelier, can only say that it owns a fraction of its hotels – the rest being leased from the same bank that finances it. So if you are working away trying to pay down that mortgage or overdraft, chances are your ultimate boss is the same bank sending you those stern letters. Ironic no?

You’re Welcome


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