SAN DIEGO, California—With an all-star cast of hotel industry executives, Tuesday’s "Hotel Leaders Outlook" at the Americas Lodging Investment Summit confronted some difficult issues that are facing hoteliers.
With more than 2 million rooms in 100 countries among them, the leaders included:
• Gabriele Burgio, chairman & CEO, NH Hoteles
• Andrew Cosslett, chief executive, InterContinental Hotels Group
• Gerald Lawless, executive chairman, Jumeirah Group
• Christopher J. Nassetta, president & CEO, Hilton Hotels Corporation
• Gilles Christian Pélisson, CEO, Accor
• Frits van Paasschen, president & CEO, Starwood Hotels & Resorts Worldwide
The first question posed to the panelists was whether it was a time for fear or hope.
Van Paaschen challenged the notion: “That question is the wrong one, because neither should drive our actions. We are using reason drive our actions, and if we learned one thing in 2008 it’s that we’re all terrible at predicting the future.
There’s a little bit of hope to be had, according to Pélisson.
“The economy (segment) hotels will benefit from that (decrease in consumer confidence), and the new administration in the U.S. is a sign of hope for the rest of us,” he said. “And money being injected into the economy should pay off at some time.”
And although the media can fuel the economic crisis, Cosslett said there are clearly some real issues to deal with.
“The government action is a unique prospect of hope and I think it will work if given the time … It’s going to be a challenging 2009,” he said.
Lawless said it’s clear that the Middle East is seeing some of the economic fallout.
“From a Middle East perspective, globalization has taken effect across the board. I’m cautiously pessimistic,” Lawless said. “I’d prefer to be pessimistic and wrong rather than optimistic and wrong.”
The McDonalds theory
As co-moderator Scott D. Berman, principal- US advisory leader, hospitality & leisure consulting for PricewaterhouseCoopers LLP, pointed out, earlier in the day Delta airline posted fourth-quarter losses while McDonalds is seeing an uptick in business. The theory: consumers are looking for value more than ever.
Cosslett said companies that can’t find ways to provide customer value for their money will suffer, but that doesn’t necessarily mean they will downgrade.
When times are tough the brand owners and companies that have invested will do well, he said.
“At Holiday Inn with the relaunch of the brand we are encouraging owners to reinvest in their properties, because if we can be seen to be investing in our brand right now, we will see winners,” Cosslett said. “In the short, medium or long term you have to find ways to keep the brand in the lights—keep it fresh and reward people for staying.”
Nassetta added that the issue is not just about trading down; it’s about finding valuable characteristics in a brand.
“The megatrend is that people are looking for things that are more value-minded,” he said. “Even in luxury or extended-stay, they think about value-minded, authentic organic experiences.”
“Wherever you play in the market, you’ve got to offer a reason why,” Cosslett said.
Which also means that rate cutting is not healthy for brand value, which the panelists agreed with unanimously.
Lawless said driving demand for leisure is important for his company. “We’ve got to make sure there is destination incentive to get people to come to it,” he said. “Certainly we drop rates for periods where have a drop in occupancy, but we will come back with rates. We will react, but we’re not panicking.”
Accor is disciplined with rate management, Pélisson said.
“We have a responsibility as management not to drop rates, except in isolated times when we need to drop them in the short term,” he said. “We have done training on rev mgmt and it’s really changing name of the game. We have a tendency to stick to prices and not drop them even if would be to the detriment of occupancy.”
Coming Thursday: Part 2 of this panel coverage, including thoughts about leadership, markets for growth and finding efficiencies during the downturn.
