LAS VEGAS—The attendees are getting antsy. It’s Day Two of AAHOA’s annual conference, and the panel of CEOs on the main stage aren’t telling members what they want to hear.
The topic at hand is capital expenditures. After years of relaxed standards and deferred payments, the big brands want to see money going back into their properties.
“If you want to regain your rate … you really need to reinvest in your properties,” says Nancy Johnson, executive VP, development, at Carlson. “Any brand worth its salt is going to make sure they’re encouraging the brand standards.”
Johnson can’t finish her sentence without a chorus of boos erupting from Hall A of the Sands conference center.
She isn’t the only one to deliver the pending ultimatum.
“We’re getting to the point where if we don’t begin to make investments into the properties, it becomes harder and harder to bring them back,” says Steve Joyce, president and CEO of Choice Hotels International.
Liam Brown, executive VP, select service and extended stay hotels at Marriott International, is the next to stick his neck out.
“We’ve still got to work to take care of our guest at the end of the day,” he says. “If you lose the value proposition and if you lose that brand equity, you’ve got nothing.”
The boos continue.
Tough times at present
Times are still tough. Hotel performance throughout the country is still choppy. And the 11,000 members of the Asian American Hotel Owners Association are still asking questions.
Where is money for property improvement plans and new brand standards going to come from? Bank lending is still scarce, and cash flow is more like cash trickle.
Perhaps more importantly: Will owners ever see a return on those investments?
To answer that first question, Choice (http://www.choicehotels.com/en/about-choice/aboutchoicehotels) is developing a program that will match hotel owners with trusted sources of financing.
The crowd likes this solution—or at least they don’t oppose it. Faint clapping echoes from the crowd. The sound is quiet enough to highlight the conspicuous absence of boos.
To answer the second question, Eric Danziger provides some context and some color. Wyndham Hotel Group’s president and CEO tells attendees CapEx isn’t everything. They can overcome a lot of deficiencies with exemplary service.
The clapping grows louder.
But that still doesn’t address the topic of return on investment. Danziger admits some brand initiatives are mere window dressing. He points to a brand mandate that required all properties of an unnamed extended-stay brand to have stainless steel appliances in their kitchens. There is not a single guest who will choose to book a hotel room because of stainless steel, he says.
Brands and the management teams behind them must reevaluate every standard to determine what really matters to consumers. Before they ask owners to invest, hotel executives must turn inward: “Is this the right investment to help our owners grow their business?”
The question is rhetorical, but the audience response is very real. A wave of applause and enthusiastic whooping erupts in the hall. Danziger sits back contently. It takes a full 20 seconds before panel moderator Sam Winterbottom, senior VP and director with Grubb & Ellis, can deliver his next question.
OTAs and the AAHOA solution
When the discussion invariably turns to those dreaded online travel agencies, the panelists present a united front: OTAs are just another distribution channel. OTAs are useful in generating incremental revenue. OTAs should never be used at the expense of proprietary brand.com websites. OTAs require strategy and expertise. And OTAs are going to get a whole lot scarier when giant Google enters the space.
This isn’t news to anyone. Attendees nod their heads in positive reinforcement, waiting patiently for the executives on stage to voice their opinions on an issue that’s a little closer to home.
They call it mybesthotelrate.com. The program is an AAHOA initiative designed to consolidate members’ properties under a single URL. Bookings made here will cost only 8-10% in commission fees—a far cry from the 25-30% charged by the likes of Expedia, Priceline and Travelocity.
The program, which officially launches in the fall, is now accepting member enrollment.
Mybesthotelrate.com generated some noticeable buzz when AAHOA chairman C.K. Patel provided an update Thursday during the conference’s opening session. Less than 24 hours later, the bodies on stage are considerably less enthused.
“The Expedia budget is hundreds and hundreds and hundreds of millions of dollars,” Danziger says. Does mybesthotelrate.com have the muscle to create real attention in a crowded marketing space? If not, can those same dollars be better spent elsewhere?
The arena is only getting more competitive, Johnson says.
“It does take millions or billions of dollars to market to the level that Google will be able to,” she says
The big boys and gals will have better apps, stronger inventory and a more dominant footprint on the minds of consumers. Being able to compete will be very difficult, she says.
“Good luck,” she adds, “and God bless ya.”