Should you trust Michelin’s hotel ratings?

PARIS – At an event at the Musee des Arts Decoratifs on the evening of Oct 8, the Michelin Guide unveiled its first global selection of keys – the equivalent of stars, but for hotels.

But hours before, at a separate event at the ornate 18th-century Pozzo di Borgo mansion in Paris, it unveiled something more controversial: an honest look into the ways that it makes money from such reviews, both on the hotel and restaurant sides of its operations.

It was the first time that the French company spoke explicitly about what many have known to be true for years: that government-run tourism boards pay for Michelin Guide restaurant reviewers to come to their states and cities. 

For years, questions have swirled in the travel industry about whether the company can maintain impartiality in awarding stars to local restaurants while at the same time accepting payment from the tourism bodies charged with their promotion. 

As it turns out, reviewing hotels – a costly practice that has become all but impossible for most publications to do in a thorough independent way – is what forced Michelin to come clean on its practices.

And that is not because Michelin is compromising its standards. Its executives confirmed that the company is paying full-price, publicly listed rates for every hotel it vets, and also for the flights required to get there. It does the same with restaurants, which it visits anonymously.

In order to go global with its hotel ratings, though, the guide has had to create different revenue streams.

In October 2018, it acquired the hotel booking platform Tablet, creating a platform for Michelin loyalists to plan and book their vacations. The company takes a cut from each booking at an industry standard rate of around 15 per cent.

All hotels that are awarded keys are listed on the website, though only a portion are bookable. Executives present made it clear that hotels do not need to be bookable on Michelin’s site to qualify for keys.

In addition to anointing the top three-key designation to 143 hotels around the world, Michelin also used revealed winners of “best in class” awards in four categories for the first time. They included the Burman Hotel in Tallinn, Estonia, as the best opening of the year and Atlantis The Royal in Dubai as the best hotel for architecture and design.

The nods reveal at least two things: that inspectors travelled far and wide, well beyond the limits of the dining guides, to identify extraordinary places to stay, and that outside sponsors footed their bill.

The “Opening of the Year” category, for instance, came courtesy of United Overseas Bank (UOB) and included winners in destinations such as the Seychelles and Corsica.

In another category, honouring hotels that serve as “Local Gateways”, or conduits to their broader communities, the inspectors went farther off the grid, celebrating La Fiermontina Ocean in a remote coastal town in Morocco and Tierra Patagonia in Torres del Paine National Park, Chile.

So, why come clean about the business strategy now? The move to provide greater transparency coincides with an important milestone for the company: new-found profitability.

Michelin spent the last decade expanding the guide internationally and diversifying its business. It has gone digital with a robust content platform; dabbled in “private partnerships” that has seen LVMH among the companies sponsoring its events; and, most recently, teased vague plans to move into the wine world.

All this has reinvigorated an ageing endeavour for the tyre-making giant – and given it new relevance.

If that sounds like a solid brand refresh, consider this: Michelin’s authority means nothing without consumers’ trust in its ratings. And that is the very thing that the company has risked in its effort to get back in the black. 

If tourism officials are paying as much as US$1.5 million (S$1.9 million) for the mere consideration of restaurant stars, are the ensuing reviews as deserving of their special status as they have traditionally been? And if the value of a star is diminished, what does that mean for Michelin’s now-growing hotel reviewing business – and whatever comes next? 

It is a question that brings people back to the unusual announcement. Michelin is hoping that by being open about how it makes money, it can burnish its integrity before it is too late.

“We wanted to give the complete picture now because we are going global through the hotels and are now covering the hospitality sector worldwide,” said Mr Gwendal Poullennec, international director of the Michelin Guide. “It’s about explaining our whole strategy.”

“The genie is out of the bottle,” says founder and chief executive Erich Joachimsthaler of Vivaldi Group, a branding consultancy with an expertise in hotels and hospitality.

“Given the subjective nature of the reviews, this can actually erode trust and give more ammunition to the sceptics,” he says of Michelin’s official reveal.

But he says the company had its hands tied in an unwinnable battle for consumer trust, and that if it wanted to retain any authority, it had “no choice but to come clean now”.  

At the event in the gilded neoclassical rooms of the Paris mansion, Michelin officials were only so candid. They declined to provide specifics about the guide’s profitability or the number of inspectors worldwide.

But they did discuss openly for the first time their reliance on financial contracts with tourism boards.

“The reality is that we need these partners because what we do is costly,” said Michelin’s chief international business development officer Julianna Twiggs, pointing to the cost borne by Michelin of inspector teams flying around the world, staying in pricey hotels and eating multiple times in top restaurants. 

The first of these partners, Michelin officials shared, was Thailand. The Tourism Authority of Thailand was on a campaign to change the reputation of the country from a low-budget party place to a food destination. Current clients, it revealed, include Saudi Arabia, for which a dining guide is slated to publish later in October.

But Ms Twiggs’ comments also pointed to the company’s standards. Michelin does not go to all places willing to pay. Nor does a guidebook result from all contracts.

When a tourism board fronts the cash, she says, it is partly to pay for Michelin inspectors to travel there and assess the maturity of the restaurant scene as part of a “culinary audit”. That work, she says, does not guarantee so much as a single star. In such a case, Michelin inspectors might offer partners advice on how to improve in hopes of future qualification. The Dubai dining guide, officials say, took some seven years to reach fruition.

“It can be a hard pill to swallow, but it’s non-negotiable,” she says. “We have to have partners that see and believe in the value we bring, but are willing to accept our independence.”

For all that, Michelin’s list still skews heavily European.

Though its keys were awarded to 2,457 hotels across more than 100 countries, including often-overlooked gems like Ceylon Tea Trails in Sri Lanka and Nayara Springs in Costa Rica, 55 per cent of its three-key winners were based in Europe.

That is compared with 26 per cent of the hotels on the World’s 50 Best list, which often gets criticised for its lack of geographic diversity. 

Consumers will have to be able to parse the nuances of these various accolades to understand their relative value – or lack thereof. If they are savvy, they will know that Michelin’s practice of paying for stays puts it in a league of its own among those who dole out hotel awards.

The international jury that assembles hotel rankings for World’s 50 Best, for instance, has no rules against accepting complimentary stays, tilting that list in favour of properties with massive marketing and influencer budgets.

La Liste, meanwhile, has even less credibility. It simply compiles and regurgitates the published opinions of global journalists without dispatching any inspectors of its own.

Perhaps it was with that in mind that Michelin offered up the perspective of one top inspector, who spoke via telephone at the event. Calling in from London to speak about her quarter-century career working at the guidebook, she said her teams are kept “separate from the business side” and “don’t have a tick box”.

“This independence is a cornerstone of our credibility, ensuring that every recommendation carries authority, every star is earned fairly,” said the woman, who declined to give her name (Michelin reviewers have long been anonymous). “We know diners use our recommendations to spend their money.” BLOOMBERG