PHOENIX—Call it the calm before the storm. While much of the hotel industry is experiencing smooth sailing at the moment, recent macroeconomic indicators suggest choppy waters ahead—and executives from some of the major hotel brands are ready to batten down the hatches.
Navigating 2012 will require flexibility and a proactive approach, participants on a general session panel said during day two of the Lodging Conference.
“You’ve got to be nimble. You’ve got to be responsive. You’ve got to move very, very quickly,” said Jim Kauffman, COO of the Americas—Western region for Marriott International.
While strategies and targets might be based on today’s market, hoteliers must have plans B, C and D in their back pockets should another recession strike, he added. “You move very, very quickly … to be responsive to what’s happening in that market,” he said.
During the 90-minute session, Kauffman and his four fellow panelists shared six more tips to prepare for the uncertainty ahead.
1. Revisit distribution strategies
“The No. 1 thing owners typically make the mistake on is pricing,” said David Pepper, senior VP of global development for Choice Hotels International. “We’re very focused on making sure you’re loading your rates correctly, making sure you’re on the right websites.”
Marriott is helping owners do that by simplifying pricing strategies into six “buckets” to reduce headaches and complexity at the property level.
Tom Magnuson of Magnuson Hotels advised attendees to revisit their distribution channels to track sources of revenue.
Tom Magnuson is taking a similar approach at Magnuson Hotels.
“We’re very focused on trying to restore some sanity in the pricing environment. Hotel owners are struggling significantly of a downward death spiral of hyper promotions where they’re just giving up too much,” he said.
One the biggest problems is some hoteliers don’t know which channels their rooms are on or where their revenues are coming from, Magnuson said.
“You need to know what channel you’re in and what all of the costs are so that you can maximize your operation,” he said.
2. Cut costs
While hoteliers have cut much of the fat during 2009 and 2010, there are still opportunities to reduce expenses—especially in distribution channels.
“Don’t overuse (online travel agencies) if you don’t have to. It’s the most expensive way to sell a hotel room,” Pepper said.
“The most important thing is cost,” Magnuson said, placing an emphasis on distribution channels.
To put his money where his mouth is, Magnuson on Wednesday announced his Global Hotel Exchange, an online room-distribution program that allows owners to sell rooms at no cost.
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3. Look out for new opportunities …
With so much debt coming due, Pepper advised attendees to keep their eyes peeled for smart acquisition opportunities.
“You’re going to see a lot of people scrambling around trying to get refinanced,” he said. “You’re going to see some real troubles coming up here in ’12. It’s going to start.”
Marriott’s Kauffman agreed, saying there will be a lot of conversion opportunities in the months ahead.
Brands have to be cognizant of their standards when those opportunities arise, but both Kauffmann and Pepper said they’re willing to show some flexibility with property improvement plans for the right owners in the right situations.
4. … but don’t forget the fundamentals
With so much going on outside the industry, hoteliers can’t lose sight of what really matters, Magnuson said.
“We advise our owners that strategy is also choosing what not to do, to try to not get caught up in chasing what everybody else is doing and to just stay focused on the fundamentals of good service, a clean place, a straight-up price, and as much distribution as possible,” he said.
5. Drive revenue
At Best Western International, president and CEO David Kong is focused on driving revenue at the property level. Best Western increased its marketing spend to US$65 million this year.
The company also spent millions of dollar upgrading the company’s websites.
“We need to enable our hotels to compete more effectively,” Kong said.
6. Sell aggressively
Pepper urged attendees to get out into the real world and sell hotel rooms the old-fashioned way.
“You can steal market share. It’s still out there,” he said.
Best Western is taking a similar approach. The company also boosted its sales spend significantly during 2011, Kong said.
“We have to be calling on the clients directly,” he said. “It’s important to step up the sales presence in the marketplace.”