As 2015 yields to the new year, hoteliers look to 2016 with questions about the OTA-hotel relationship, the minimum-wage gap and overtime changes.
How quickly 2015 has flown by and how busy and complex the issues were which challenged hotel ownership in these past 12 months.
From the age of disruption to the continuous challenge of distribution, owning a hotel in this economically strong yet cautious period of the cycle requires expertise in micro- and macro-environmental issues. In an era where bogus booking sites challenge the legitimacy of our hotels while minimum-wage issues affect our businesses, it is crucial to reflect on what has occurred in our industry during this past year.
Once again, 2015 was the year of the online travel agencies. Hotel owners now have to maintain a careful relationship with these distribution systems because, if managed by the wrong hands, it can be detrimental.
It is obvious that the OTA relationship is for the long term, so knowing which “partner” to work with, and how to be mutually beneficial requires a savvy skill set. Although the turbulent hotel-OTA relationship is fraught with continuous discussion of commission, we also recognize that OTAs can boost our sales and provide insights to our hotels. At the end of the day, it is a give-and-take relationship that, when developed prudently, can be extremely gratifying. Oh yes, and the rate-parity issue will be on our minds as we kick off 2016, too.
And, like the OTAs, Airbnb is here to stay. Rather than paying out the required commission, hoteliers have yet another alternative competitive player in the arena.
Depending on the market, Airbnb has adversely affected strong occupancy levels and will likely put more pressure on our marketing efforts. We are clearly now in a shared economy. Hotel brands that choose to ignore Airbnb will put themselves at risk.
Instead, we have to take advantage of the opportunities and focus on our unique selling propositions: guest loyalty, brand presence, multiple facilities and safe, regulated infrastructure—all of which will be difficult for Airbnb to replicate.
The prominence of OTAs, unfortunately, unleashes phony sites that appear in search engines as paid advertisements and fool customers into thinking they are booking directly with our hotels. The consequences of this pattern are alarming. This year, we have seen an estimated $2.5 million in false bookings, translated into more than $220 million in lost revenue, which the American Hotel & Lodging Association shared during its April National Tourism Day in Washington. As a result, it is important, if not vital, for hotel owners to take preventive measures and make sure their public is accurately informed about these rogue vendors.
Minimum wage, overtime changes
Understanding the macro effects that increased minimum wages can have in our industry is crucial to be prepared for 2016. It is well known that a large portion of our industry is comprised of entry-level staff. Consequently, extreme minimum-wage rates would not only decrease employment, but more significantly hinder the opportunities for upward mobility within hospitality.
Additionally, substantial minimum-wage increases could contribute to a vicious cycle of high turnover, high stress and high health care costs—all of which can compromise the ability of our level-entry staff to achieve leadership positions. This represents another difficult challenge for hotel owners.
And let’s not forget the looming piece to the salary issue which will hit us by the end of the first quarter of 2016: the proposed rule which yes, enhances compensation for American workers but results in a 10% increase to owners in overtime-associated labor costs. The proposal plans to extend overtime protection under the Fair Labor Standards Act for white collar employees (including general managers and directors of sales, for example) making less than $50,440 annually in 2016, up from the previous threshold of $23,660. This new rule requires us to pay non-exempt employees for all hours worked over 40 in a work week at a rate of not less than one to one and a half times their rate of pay.
A lesson we can learn from all these challenges is that of cooperation. Partnerships among franchisees and brands, and teamwork from owners, operators and the front-line staff are all important for our success. Partnerships with regard to advancements in technology, strengthening of loyalty programs and positive guest dialogue and engagement are critical focal points in the coming year. And in this day and age of cybersecurity risk and terrorism, we must all work together to retain high standards for the protection and safety of our guests.
Kerry Ranson, a 21-year veteran of the hospitality industry, is the 2015 Chairman of the IHG Owners Association. He is also President and Chief Operating Officer of Expotel Hospitality Services, a New Orleans-based hospitality ownership and management company.
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