REPORT FROM THE U.S.—The future is looking up for the hotel industry, but there still are matters for hoteliers to keep in mind, said a group of hotel industry presidents at the 2012 Hunter Hotel Investment Conference.
During 2012 there have been healthy signs toward a recovery, the speakers said during a general session titled “President’s Panel.”
Jim Abrahamson, CEO of Interstate Hotels & Resorts, said based on what he has seen thus far in the first quarter, he believes revenue per available room will increase by more than 6% this year.
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Jim Abrahamson
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Interstate’s properties in spring break markets are performing well, which is always a good indicator of how the remainder of the year will fare, Abrahamson said.
The speakers agreed the large amount of debt coming due over the next couple years is worrisome, but they all are seeing a lot of movement from special servicers.
If transactions steadily continue into the second half of the year, it will be a buyer’s market, Abrahamson said.
As for the economy, the presidents have modest views.
Edward M. Kobel, president and COO of DeBartolo Development, attributes his views to “low (gross domestic product), not a lot of job growth and not a lot of leadership in Washington from either side.”
Steve Joyce, president and CEO of Choice Hotels International, agreed. “You’ve got a scenario where there’s really no job growth. The stats are misleading, I think,” he said.
OTAs and demand
There is no doubt online-travel agencies play an important role in demand, Abrahamson said. However, he said the hotel industry put them in business and created the situation it is in.
Now, Abrahamson said, is the time to “get control of your inventory.”
Abrahamson foresees newer players, such as Google and Apple, further entrenching themselves in the travel space, giving consumers more of the ability to have information all the time whenever and wherever they would like it.
“It’s not the OTAs that are going to transform this business … This is about the battleground of who owns the customer,” he said.
Hotel brands should have followed suit when the airlines took a stance against OTAs in earlier years, Joyce said. “I think brands should have been providing more leadership and are now beginning to do what they should have done seven or eight years ago,” he said.
The introduction of Room Key into the world of OTAs is a good start to controlling inventory and hoteliers’ investments in the industry, Joyce said.“It’s something we can guarantee will be a fair channel for the owners … regardless of how popular it becomes.”
Moderator Michael Medzigian, chairman and managing partner of Watermark Capital Partners LLC and also director, president and CEO of Carey Watermark Investors, brought up the double-dipping concern many in the industry have about brands’ participation in Room Key.
Room Key is not about profits, Joyce said. It is about lowering costs for owners and operators. “It would be a huge mistake, and it would also be received very poorly if the founding partners started making lots of money from (Room Key) … If the founding partners forget that, it will be a big issue.”
Abrahamson agreed Room Key is a great first step, but marketing is still a major concern. To become a competitor against the mature OTAs, Room Key has to put up more funds toward marketing. “Look at what Expedia spends. Look at what Priceline spends,” Abrahamson said.
Looking ahead
Each of the panelists expressed concerns about the political environment.
Abrahamson said he is most concerned about health-care reform and foreign-related issues, under a second-term Obama administration.
Adding higher oil prices to that could be detrimental for many in the industry, he said.
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Mit Shah
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Even with a new president, there will still be a lack of positivity coming from Washington, said Mit Shah, CEO of Noble Investment Group.
“There’s been a paradigm shift in Washington,” Shah said. Democrats and Republicans alike are disconnected from their constituents.
The panelists all are proponents of the visa-waiver program, which makes it easier for visitors from China, India and Brazil to enter the U.S.
“We lost a third of our market share in this country. If we retain that market share, that’s hundreds of millions of tax dollars, and that’s hundreds of thousands of jobs. We can just begin to gain back what we had prior to 2011,” Joyce said.
The positive impact of the visa-waiver program will be felt in all regions of the U.S. “The next three years I believe will be fantastic times for our industry … unless we have a black swan,” he said.
Despite the concerns, Joyce said there are many opportunities for the industry to be heard in that nation’s capital.
“We’ve got a voice like we’ve never had it before,” he said. The only way for the industry to keep it, however, is by keeping in touch with legislators and giving money to organizations that can do the industry’s bidding on Capitol Hill, Joyce said.
