8 concerns facing the hotel industry
22 OCTOBER 2014 6:05 AM
Amid a backdrop of robust performance data, hotel executives tackled areas of concerns ranging from Ebola to living wages to limited-service “ankle biters” during The Lodging Conference.
PHOENIX—Robust industry fundamentals were not enough to distract hotel executives speaking during the 20th annual Lodging Conference from addressing various blips dotting their respective radars.
Potential sources of pain ranged from Ebola to the rise of limited-service “ankle biters” to Airbnb and other disrupters.
Following are some of the concerns mentioned during the “A view from the top” panel that opened the conference, which was held at the Arizona Biltmore.
“We haven’t taken a position on that issue. We’re watching it closely,” said Katherine Lugar, president and CEO of the American Hotel & Lodging Association.
The AH&LA’s role for now, she said, is to be a sea of calm in otherwise choppy waters.
2. Minimum wage
Organized labor’s targeted attack on the hotel industry regarding so-called “living wages” is one of the more recent and pressing challenges, Lugar said.
“Let’s call it what it is: It’s another ploy by (organized) labor to grow their numbers,” she said.
The industry, thus far, has missed an opportunity to tell its story, she said. For one thing, the hotel industry is not, by and large, an employer of minimum wage employees, with approximately 20% of its workforce falling into that category.
Of those who do receive a minimum wage, the “vast majority” moves into higher-paid positions within one year, Lugar said. The rest advances within two years.
“We’ve missed an opportunity to define who we are, the jobs in our industry and to tell the countless stories of individuals who start as bellman and work their way to the top,” she said.
“Most of us that sit up here started as dishwashers,” added Roger Bloss, president and CEO of Vantage Hospitality Group.
The panelists urged attendees to rally behind the AH&LA to help tell that story.
3. Limited-service ‘ankle biters’
Topping the list of concerns for Greg Marcus, president and CEO of The Marcus Corporation— which owns and manages 18 primarily full-service hotels under its Marcus Hotels and Resorts umbrella—is the emergence of what he called limited-service “ankle biters.”
Each new entrant to the field skims a bit of demand from existing full-service properties, he explained. Like a frog in a pot, the impact isn’t felt at first; only after the water starts boiling do you find yourself dead in the water, Marcus said.
“Select-service hotels are what’s driving the industry. That’s what customers are looking for to a large extent,” said Joel Eisemann, chief development officer, the Americas, for InterContinental Hotels Group, whose select-service portfolio is highlighted by Holiday Inn Express.
4. Brand USA reauthorization
Enacted in 2010 through the Travel Promotion Act, Brand USA has attracted more than 1.1 million additional visitors to the United States, which resulted in $3.4 billion in spending. But now the future of the private-public partnership dedicated to increasing inbound international travel to the U.S. is at risk as it faces reauthorization in Congress.
“Congress is at a time of all-time dysfunction,” Lugar said, but efforts to support travel and tourism have attracted support from both sides of the aisle.
“There is really strong alignment right now and strong bipartisan support … for Brand USA reauthorization,” she said. Legislation to do so has cleared the House of Representatives and likely will be addressed in the Senate during the lame duck session or, at the latest, early in 2015.
“This is an area where we are optimistic,” Lugar said.
5. Airbnb and other distribution disrupters
When facing stiff competition from distribution disrupters such as peer-to-peer booking platform Airbnb, there’s only so much operators can do, panelists agreed.
“It always comes back to channel management, revenue management. That’s why brands have become so important. You really can’t afford to do this at your own property typically,” Bloss said.
More urgent is the need to get all troupes on an even field—one on which all players are remitting taxes and taking the proper steps to ensure the safety of all guests, panelists agreed.
Here again is an area in which unified advocacy is needed, they said.
“What do we do as industry to fight some of these things? We have to be organized. We have to have a front. Katherine is a front,” Eisemann said of Lugar and the AH&LA.
6. Hidden fees
In the wake of a recent report regarding a surge in hotel industry fees and surcharges, Lugar was asked whether legislation might surface to dictate the ways in which hoteliers report them.
“Here’s the reality: As long as there’s transparency and disclosure, consumers are making informed decisions, then that usually staves off legislation,” she said.
Transparency is ideal, Marcus agreed, but it’s not always easy to achieve in a competitive booking environment in which customers are using online travel agencies and metasearch to shop on price alone.
7. Franchisors as joint employers
A late July decision by the Office of the General Counsel of the U.S. National Labor Relations Board has the hotel franchising community in fear of possible major changes which would name the parent company as a joint employer of franchisees and thus liable for the acts of its franchisees.
“It’s serious … and will be very interesting what happens there,” said Geoff Ballotti, president and CEO of Wyndham Hotel Group, who urged attendees to support the AH&LA and other associations in advocacy efforts.
8. Frothy pricing
Concerns depend on one’s core business, Eisemann said. Private equity players, for instance, are facing higher asset prices in the face of increased competition for acquisitions.