NASHVILLE, Tennessee—In the tradition of Hotel Data Conferences gone by, the dynamic duo of Randy Smith and Mark Lomanno sat down Thursday to take attendee questions. A few key issues rose as top of mind to these hotel industry thought leaders.
Smith, chairman and co-founder of STR, the parent company of HotelNewsNow.com, said the constant long-term increase in supply is one of the industry’s biggest problems—but it happens to be one of the few variables hoteliers can control.
He borrowed a phrase from another panelist, who said, “Let’s don’t build another hotel for 15 years.”
“I would never tell a brand that they shouldn’t build a new hotel … that’s ridiculous,” Smith said. “It’s that constant increase in room supply and our inability to remove (obsolete) properties that is one of the industry’s biggest ongoing problems.”
And bankruptcy laws keep hotels open, he added. “Some of these things that go under, they should cease to exist. They should bulldoze it. I’m all for new hotels. The question is, ‘What do we do with the obsolete hotels?’”
Smith said he thought there would have been a lot of hotel closures during the past 12 months. In fact, very few properties closed during that time period. Lomanno, chief strategy officer, said it’s a real-estate issue. There is no better use for converting the property during an economic downturn.
Smith also noted the supply problem has a lot to do with the way the market is structured—so many different players with different objectives.
This is an evolving structure, which has departed from private hotel companies owning all of the hotels. “When I started in this business, it was much more owner-operated,” he said. “You now have so many different parties involved in running an individual hotel today … that the message to the staff and to the public is very confusing because you don’t have all of those different entities on the same page.”
“When the industry started becoming a part of the public markets, something very regrettable was the short-term planning,” Smith said. “Today it’s, ‘Let’s meet next quarter’s earnings, let’s meet Wall Street’s expectations.’”
At the same time, this change in ownership structure also is putting pressure on tracking metrics oriented toward the bottom line. “There is no question that that’s where it’s going,” Smith said. He noted STR almost had monthly profit-and-loss data flowing about five years ago, but it fell through with the introduction of Sarbanes-Oxley regulations.
“That said, we think now the market is a little more willing to go down that road, because there is more pressure from the investment community to look at the monthly P&L,” he said.