LOS ANGELES—Hotel investment conferences aren’t only focused on capitalization rates, Libor spreads and loan-to-value equations. Executives speaking during the Americas Lodging Investment Summit opening general session closed their discussion Tuesday afternoon at the Nokia Theatre with a realistic look at technology and the challenges it presents hotel owners and operators.
“Our property-management systems as an industry are very archaic,” said Mit Shah, CEO of Noble Investment Group. “These are systems that are used to integrate the check-in, check-out experience. Every brand is going to have to figure out in varying degrees—Marriott (International) has perhaps the most archaic system because it was created the longest time ago—to really allow for two-way interface with that customer and that property.”
Shah, who also serves as the president of the franchise board for Marriott, conceded that it’s difficult to move an entire franchise system to upgrade because owners are asked to spend money to enhance various aspects of their hotels.
“But if you don’t do it, those customers are going to continue to be dissatisfied, much like they’re dissatisfied if they can’t stream (Internet content) in their rooms or pay extra for it or not …,” he said. “All of this is happening in real time. It’s something as an industry we have to deal with quickly, and the brands are going to have a very difficult time to push this forward.”
Panelists also discussed the role online travel agencies play in hotel bookings. A question from an audience member praised Choice Hotels International CEO and President Steve Joyce for his company’s tough approach with Expedia.com a few years ago, and Joyce chose his words carefully when he responded.
“It demonstrated to me how relatively uniformly the industry felt about that distribution channel,” Joyce said. “The other big thing we immediately decided was we never wanted to be in a position where we could not walk away from any distribution channel that was not a friendly channel.
“The waters are murkier than ever,” he added, noting that the emergence of new OTAs, which could include Apple and Google, among others, will continue to put the topic in the spotlight.
“The distribution game over the next five years is going to have winners and losers in it,” he said. “We are in the best position to win, but it's not at all determined at this point who is going to come out on top.”
The advent of mobile devices further complicates the issue. Shah said every hotel company understands the No. 1 consumer trend is how they are looking at and buying goods and services on mobile platforms.
Jim Donald, CEO of Extended Stay Hotels, said the usage on mobile platforms will double by 2016. “Whatever it is now, it doubles,” he said.
Robert Gaymer-Jones, CEO of Sofitel Worldwide, said the important thing for hotel brands to remember is to keep the mobile booking process as simple as possible when going through hotel technology systems—or consumers will flee to OTA sites to book their rooms.
Outlook for 2013
The executives also discussed a number of topics, including their bullish outlooks for 2013.
Shah said 2012 demand outpaced expectations, and he expects more of the same in the new year despite some headwinds.
“We put a lot of stock in the (request for proposal) process ... That's been a little of a mixed bag,” he said. “We want people in our hotels to take risk in terms of pricing because that's where the momentum is going to come from.”
Joyce said he expects the strong leisure traveler business of 2012 to continue into 2013. And it could get better if the economy continues to improve.
“Our business is very impacted by unemployment,” he said. “Barring something unforeseen, we should have a pretty good year.”
Joyce said he also expects the overall industry to continue gaining back the revenue per available room that was lost during the recession in 5%, 6% or 7% increments during the next three or four years.
Gaymer-Jones said rate is back to the peak levels of 2007 at most of Sofitel’s 123 hotels around the world.
When discussing government regulations, the panelists’ consensus was the fewer the rules, the better.
Shah said regulations are just one more obstacle to overcome, and the effects of legislation such as that surrounding health care can’t be measured until the final cost estimates are determined.
Joyce said the threat is as big as ever that over-regulation could disrupt business—in particular the renewed efforts to unionize hotels. But he also said there are positives on the regulation front, including visa reform and attracting more foreign visitors to the U.S. He said it’s imperative for the industry to have regular, ongoing dialogue with government officials that is “positive when things go the right way and punishes when they go the wrong way.”