NEW YORK—If there was a word to sum up Saturday’s opening general session of the American Hotel & Lodging Association’s Hospitality Leadership Forum at the International Hotel, Motel + Restaurant Show, it was “challenges.”
Executives during the 90-minute session tackled a wide range of obstacles facing the hotel industry—including revenue-per-available-room recovery, lending and job creation.
In the shadows of the election, moderator John Russell, hotel industry veteran and CEO of Campus Brands, highlighted even more issues plaguing the industry.
“You’ve got an immigration issue that we’ve really got to be a tenant of. You’ve got health-care issues, which is more cost. … There’s going to be a labor issue. … Then you’ve got energy and environment, issues there that could impact us.”
“This is a very challenging year for all of us,” he said.
The top challenge is brand loyalty—or rather the lack thereof, said Jim Abrahamson of Interstate Hotels & Resorts.
“We’re going to see the death of brand loyalty,” said the CEO of the global management company. While the baby boomers were often diehard loyalists of a single chain, future generations care more about the experience.
“People will become experience loyal and less brand loyal,” he said.
In response to a question from a conference attendee, Kirk Kinsell, president of the Americas for InterContinental Hotels Group, discussed the apparent generational divide among staff.
While different demographics value different things and exhibit different behaviors in the workplace, the key is to keep staff member engaged and focused on the overall guest experience.
To meet that end, IHG is revamping its GM training within the Holiday Inn portfolio. Whereas the program used to focus on running a good hotel, today it’s focused on running a good Holiday Inn. There’s a big difference, Kinsell said, as the latter highlights the unique profile of Holiday Inn guests to ensure their specific needs are being met.
Kevin Kane, immediate past chair of Destination Marketing Association International, said his biggest challenge was tempering the expectations of demanding meetings planners.
“Meetings planners have this impression that everything is free. We’re a large part of the problem on that,” he said, explaining how destination marketing organizations used to pay for convention center rent, opening receptions and the like as a means to attract groups in an increasingly competitive national market.
“The incentives that have just kind of exploded over the past decade within destinations to get groups to come to their cities is mindboggling. … There eventually will be a tipping point where people aren’t going to be able to afford to do it,” he said.
The executives covered a number of other challenges during the session, including:
Given the high number of hospitality students in attendance, the executives spent a fair amount of time discussing career development—an area that will be under pressure given the results of the U.S. presidential election.
“I think job creation is going to be limited. If we see a return of more regulation … it could repress overall job creation in our industry,” Abrahamson said.
Many employers might start replacing full-time positions with part-time positions to avoid costly penalties associated with health-care reform, he added.
When asked by a student which is the fastest-growing discipline within the hotel industry, Abrahamson pointed to revenue management, and sales and marketing.
“You can’t have bottom line without the top line. … The people that we’re promoting are the ones who know how to generate revenue for our business,” he said.
Opining on operations
There’s a big difference between the hotel business and the business of hotels, Abrahmson said. While the former involves the day-to-day running of properties, the latter is focused on the buying and selling of the assets themselves—a discipline that has overshadowed operations in the past decade.
The executives expressed concerns that a focus on profit and loss undermined operations, although Kinsell said that tide might be turning .
“I think there’s a pendulum swing. I think what’s going to drive performance of any hotel is the overall experience. That’s delivered not only through product but also through service, which the talent has to deliver,” he said.
While advance degrees in management programs are certainly important, Abrahamson underscored the importance of real-world experience.
“The advanced degrees are definitely not looking as much at the hospitality space as they are the ownership space. … We are producing great candidates in that world,” he said, adding students should seek internships that give them practical experience as well.
“Operations is a great career,” Kinsell said. “It sometimes looks like it’s long hours and it’s hard work, but it’s very rewarding.”
“Work in a hotel first. Learn the trade,” Russell later added.
Pockets of opportunity
What little supply growth exists in the U.S. has been dictated, not surprisingly, by availability of capital, Kinsell said.
“Like all business, it’s oftentimes local,” he said, pointing to growth in the Southwest and Southeast regions as examples, where barriers to entry are lower and it’s easier to get deals done.
But just because something is easy does not mean it’s right, Kinsell emphasized. If one investor can secure financing, that often means others can too. Evaluating larger market growth and dynamics are crucial in any expansion strategy.
Driving business abroad
Global brands with global portfolios must take a holistic view of their businesses, the executives said. That means evaluating demand patterns in key regions throughout the world.
Fortunately, “the various trends are good,” Kinsell said, although he acknowledged lingering challenges from the euro debt crisis, among others.
The G8’s adoption of travel and tourism as a key pillar for economic growth was a huge boon to the global hotel business, as it suggests a concerted focus on travel will follow.
Abrahamson echoed those remarks, pointing to efforts in the U.S. to improve security checkpoints with the Transportation Security Administration.
He also highlighted the emergence of global airlines, many of which are now profitable and provide excellent levels of service.
“Improving the travel experience is the No. 1 thing we can do to get people to travel,” Abrahamson said.