Virgin move into hotel sector a good sign for start-ups

Virgin Group’s plan to move into the Australian hotel sector indicates the health of the hospitality industry, the Australian Hotels Association has claimed.

Sir Richard Branson’s Virgin empire has announced its intention to extend into the local travel and leisure sectors.

The AHA claims that Virgin’s move is a sign that the hospitality industry is in good shape, despite the revelation this week that the Federal Government will be intervening to boost hotels and resorts to aid the flagging $40 billion tourism industry.

Virgin Group global chief executive Stephen Murphy says the company has conducted preliminary work in Australia with a view to eventually offering “a 4.5 star hotel proposition at four-star prices.”

“In the United States, when you survey consumers, they are very tired of the existing formula offers and I also think that is true here,” Murphy says.

“They are also slightly disillusioned with the boutique offers that miss the functionality that you need in a hotel.”

“We think there is a great space for us to come in and, under the Virgin brand, deliver a boutique experience but with the basic functionality of the hotel delivered much more efficiently, and with the pricing transparency as well.”

Virgin founder Richard Branson has described the Virgin brand as “hot as ever” in Australia and well respected.

“If we can get the right sites, we have the concept for an upmarket, fun boutique hotel group that will be very Virginesque,” he says.

Murphy says Virgin has conducted market studies and has looked at the type of proposition it will offer in Australia.

“We would like to give you more value for the same price with a fun edge to it. People see it as a very logical extension of transportation… We think the hospitality proposition would be naturally understood by consumers,” he says.

Paddy O’Sullivan, AHA Victoria general manager for public affairs, says Virgin’s entry into the market is a “positive statement” for the industry and that there are significant opportunities for start-ups in the sector.

However, he says smaller players need to be aware of the many compliance and regulatory challenges within the industry.

“There is a complicated compliance and regulatory regime that must be adhered to and it takes many forms – whether it be industrial relations, liquor licensing, local government compliance requirements – the list goes on,” O’Sullivan says.

“Increasingly, it is becoming more of a challenge. Red tape seems to be getting thicker and, in that regard, small businesses do need to spend a lot of time and effort, and invest in making sure they have the necessary solutions so that they can concentrate on the core aspect of operating the business rather than the compliance and regulatory obligations that go with it.”

O’Sullivan has two key messages for start-ups looking to get into hospitality.

“Make sure you have the expertise to run a small business, but also align yourself with your industry association who is there to assist you… so that you can make a positive return on your investment,” he says.