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Owners: 2013 challenges outweigh opportunity
January 3 2013

A recurring theme among hotel owners is the increasing cost of distribution and how hoteliers ensure all channels are delivering enough demand to compensate for increased costs.

By Jason Q. Freed
Contributing Editor, Tech Impact Report

Editor’s note: This is the second in a three-part series examining the year ahead. To read about the brand perspective, click here. Operators will share their perspective Friday.

REPORT FROM THE U.S.—No matter what year it is, top concerns for hotel owners always revolve around revenue and profitability.

Three hotel owners were asked by HotelNewsNow.com to identify the industry’s top challenges and opportunities headed into 2013, and—perhaps a sign of the times—the number of challenges significantly outweighed the number of opportunities.

A recurring theme was the increasing cost of distribution and how managers can work with owners to ensure all channels are delivering enough demand to compensate for the increased costs.

(Note: Responses presented in alphabetical order.)

Mark Carrier, president of B. F. Saul Company Hospitality Group

Mark Carrier
B.F. Saul Company Hospitality Group

HotelNewsNow.com: What is the biggest challenge facing owners during 2013?

Carrier: Key concerns are: Are we able to generate a significant amount of flow through to provide reasonable returns for their risk we’re taking? There are increasing costs across the spectrum for things that hit (profit-and-loss statements), whether it’s from the brands or intermediaries. There are people lined up to essentially increase our cost structure, and do we have enough revenue growth to satisfy that?

HotelNewsNow.com: What is the biggest opportunity facing owners during 2013?

Carrier: International demand. Why aren’t we getting a surge of traffic coming to visit the nation’s capital? New York attracts the inbound foreign traveler that no other city does.

Also, if we can get our fiscal things right, we can go places. One thing that is just so fundamental is we may be an energy-independent county. With the emergence of natural gas, it could be a wonderful run over the next 10 to 15 years.

HotelNewsNow.com: What is the biggest unresolved issue facing the hotel industry as we head into the new year?

Carrier: Inelastic demand. The reality of it is, with the exception of potential inbound travel, we’re in a mature industry with inelastic demand.


Brian Quinn, executive VP of development for Driftwood Hospitality

Brian Quinn
Driftwood Hospitality

HotelNewsNow.com: What is the biggest challenge facing owners during 2013?

Quinn: I think the biggest challenges the industry will face in 2013 include managing the ramifications of the new health-care law and increasing guest satisfaction against profitability, especially as guest expectations continue to grow.

HotelNewsNow.com: What is the biggest opportunity facing owners during 2013?

Quinn: Emerging and creative initiatives in food and beverage in the lobby space and expanding use of technology, particularly in the guest experience will be areas to watch in 2013.

HotelNewsNow.com: What is the biggest unresolved issue facing the hotel industry as we head into the new year?

Quinn: The challenges from the 2008 fallout of the real estate market will continue to work their way through the hospitality market in 2013.


Michelle Russo, president of HotelAVE

Michelle Russo
HotelAVE

HotelNewsNow.com: What is the biggest challenge facing owners during 2013?

Russo: 1) A general lack of adequate F&B expertise and resources at management companies and, in particular at a regional level, the necessity to maximize F&B profitability; 2) the impact of union benefit expense on F&B operations; and 3) managers’ challenges of sourcing great leadership talent.

HotelNewsNow.com: What is the biggest unresolved issue facing the hotel industry as we head into the new year?

Russo: The increasing cost of intermediary commissions—not just third parties for transient, but almost 50% of group is now commissionable. Along with that, we need to be rethinking the most appropriate ways to compensate brands for business delivered to the hotel based on channel and channel cost.

COMMENTS   Show All
Eli
1/24/2013 2:25:00 PM
I believe Mark means "elastic" demand. If the hotel industry had "inelastic demand", i.e. demand stays the same (perfectly inelastic) or else moves less so than price movements, then hotels could increase rates and not see a corresponding drop in occupancy. (or else see a corresponding drop such that revenue increses)
Alison Fitzgerald-Conroy
1/7/2013 9:12:00 PM
Great articles, good conversations/comments
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