From technology advancements to crisis management to wage increases, here’s a midyear check-in on the hotel industry.
Interest rates are stable, tax laws have improved the business climate and consumer confidence remains strong. Purchasing managers still show strength in the economy and employment levels are at record highs. All of this bodes well for the balance of 2019, assuming we can avoid a trade war or a Black Swan event of some sort.
Here’s a look at some of the continuing trends and challenges so far this year:
US lodging industry
Supply of rooms is increasing in sync with room demand; ergo, occupancy is flat in 2019 and average rates are up just below expectations at 1%. The threats to the industry include Airbnb and other alternative-lodging products as well as an increase in operating expenses, largely payroll and related expenses. While this late cycle economy remains relatively strong, increases in wages and healthcare costs are well above the revenue growth.
Ways to minimize negative impacts
Hoteliers today must be prepared to handle the disruption caused by Airbnb and other home-sharing sites, and must also realize that the late-stage economy could crumble into a recession at some point soon. The first way to handle these challenges is to increase direct bookings by improving customer loyalty. This can be accomplished via customer relationship management (CRM) and by looking at net income per available room (NIPAR) and contribution to operating profit and expense (COPE). Evaluate the cost of rooms through your sales department, all distribution channels and adjust the mix accordingly.
Most guests today want a personalized, unique experience, even if it is at a branded hotel. They want good food, social interaction, community meeting space and an “Instaworthy” photo opportunity for social media. In addition, to get to a point where our customers want to post about their experience, “wow” customer service is required. This can lead to positive reviews and free publicity.
Navigating public relations requires an experienced professional most of the time. Providing real personalization will make it much easier for your PR consultant to identify travel bloggers and editors that can help promote your business via free publicity. You can enable a strong social media presence on your own through personalization and “wow” customer service. Getting those reviews requires effort—not every guest is interested in writing a story about your hotel, so be prepared to help them write the story by giving them the inspiration. All of this combines to help compete with alternative accommodations.
Mobile has taken our industry by storm. Virtually all of our guests have smart phones and many use digital key for check-in, expect their in-room entertainment to be user-friendly and are not excited about standing in line at the front desk for anything. This requires some training of staff on how to handle the combination of baby boomers who may or may not be “tech-savvy” and millennials and Gen Xers who likely are.
The interesting dichotomy between these traveler types can also be a solution to cost challenges. Artificial intelligence can improve productivity and provide service to those guests who prefer to use technology rather than human interaction. AI and technology can also work alongside hotel staff to provide a service for them to be more productive such as robotic vacuuming and text messaging apps. The notion of “high tech, high touch,” coined by John Naisbitt, has never been more appropriate than right now.
“Active shooter” has been added to the arsenal of today’s soft targets like hotels. This training is a combination of “run, hide, fight” communication and preparation. The communication and preparation apply to natural disasters and other crises. Data breaches similar to what happened to Marriott International have already occurred many times over and have targeted both hotel and restaurant companies.
The General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) came up quickly. All of our communication and websites are subject to these regulations, acts and amendments. Violating either of these could cause us to feel like we are in a crisis.
Asset preservation is an area where most GMs are not familiar enough in many cases. Analysis of energy costs, sustainability, compliance and liabilities are all critical to managing the assets we are responsible for as owners and managers. Understanding when to automate and when to repair and replace systems is crucial, as well as knowing how to best care for rooms and food-and-beverage areas.
As an asset manager, we must expect the unexpected and preserve cash—remember, nobody ever said, “gee, I have too much cash” when a recession begins. Always have an industry forecast, a detailed competitive analysis, a marketing strategy and action plans—and be prepared to slice, dice and cut when the time comes.
Robert A. Rauch, CHA, is an internationally-recognized hotelier, CEO and founder of RAR Hospitality, a leading hospitality management and consulting firm based in San Diego. Rauch has more than 35 years of hospitality-related management experience in all facets of the industry.
The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Columnists published on this site are given the freedom to express views that might be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.