Hunter Day One: Hoteliers wary of squeezed margins
 
Hunter Day One: Hoteliers wary of squeezed margins
21 MARCH 2019 8:30 AM

Editors recap the first day of the Hunter Hotel Conference from Atlanta, with quotables, takeaways and more from the event.

ATLANTA—The opening day of the Hunter Hotel Conference raised some common talking points that permeate the hotel industry.

Beyond forecasting the end of the current economic growth cycle, owners warned of rising costs, and investors shared advice on how to navigate whatever comes next. Overall, hoteliers seem to be anticipating the changes needed to evolve their core business.

Video recap

Photo of the day

BH Horn, director of development, new construction, for the La Quinta, Wingate, AmericInn, Microtel, Hawthorn brands at Wyndham Hotels & Resorts, builds with Legos at an off-site Wyndham event at the Museum of Design Atlanta. (Photo: Danielle Hess)

Quotes of the day
“Why we are always the last to change is beyond me. When you buy a plane ticket, you pay for it. Why are we waiting 24 hours before people show up for them to make another decision about paying for the room? Someone stays three days, they should pay for us to clean their room.”
–OTO Development founder and CEO Corry Oakes, on the “President’s panel”

“Sometimes you define yourself by the deals you don’t do.”
–Dan Hansen, president and CEO of Summit Hotel Properties, on the “State of the industry” panel

 
Tweet of the day
Editors’ takeaways
Margin erosion continues to be on the front of the minds of hotel owners. Variations of the topic—increased costs of labor (when you can find it), utilities and real estate, as well as renewed property-improvement plans and capital-expenditure requests from brands—were common conversations during the first day of the Hunter Hotel Conference.

The situation boils down to outbound cost growth far outpacing inbound revenue. That combination is never a good thing for hoteliers. Revenue per available room, which remains the best way to measure the performance of hotels in an apples-to-apples comparison, continues to check in at around 2% while expenses are growing at a 5% clip or more.

Owners know this well, and while they appear to be on board with trying to increase average daily rate while there’s still pricing power left in this economic cycle, they’re also searching for ancillary revenue opportunities and a way to keep in check financial demands from brands.

The “Presidents’ panel” during Wednesday’s opening general session was a perfect example of this. Owners Corry Oakes of OTO Development and Mitch Patel of Vision Hospitality Group were emphatically passionate about this being a big issue. Brand leaders Ken Greene of Radisson Hotel Group and Greg Mount of RLH Corporation were understanding and said the right thing, but their business models don’t allow them to completely halt money requirements from owners.

It’s a discussion that has been around for years in the hotel industry, and it won’t any time soon.
--Jeff Higley, Content Strategist
@jeffhigley1

The word I most heard repeated during Wednesday’s general sessions was “opportunity.” Whether that word came from brand executives talking about where they’d like to see expansion, or hotel owners talking about their abilities to add value to hotel transactions and turn underperforming hotels around, it came up again and again. That’s evidence to me that all types of hotel companies are successfully carving their niche into the current slow-but-steady RevPAR growth trajectory.

Of course, it’s de rigueur these days to talk about the possible cycle shift, so that definitely was a topic of conversation, but it didn’t dominate the discussion like it has at past conferences. As Tourism Economics’ Adam Sacks put it: “There’s no such thing as an expiration date on an expansion. There needs to be a cause: There has to be a bubble … or an external event. Neither of those things is self-evident at this point.”

As a result, we heard on Wednesday about a lot of activity: Brands are expanding, and owners are buying and selling. Rockbridge CEO Jim Merkel said it best: “2019 is going to be a steady year. Everybody feels good. They’re cautious but optimistic about doing things. A couple years ago, people were much more fearful of a recession, and now people are just trying to do things.”
--Stephanie Ricca, Editor-in-Chief
@HNN_Steph

Soft brands are still a hot-button topic in the industry, according to speakers on the “Presidents panel.”

Having gained popularity, popping up in the portfolios of more companies, soft brands often are seen as as a way for independents to keep their independence
while connecting to a big brand engine. But RLH Corporation President and CEO Greg Mount said soft brands cause independents to lose the “independence of their independence,” which poses challenges for owners.

Ken Greene, Radisson Hotel Group’s president for the Americas, said there’s a limited space for soft brands, and as you go down the line of segments, some soft brands seem to be replacements for other brands. But the luxury segment is one area they can be effective, he said.

It was interesting to hear about some of the challenges associated with soft brands from brand CEOs, as these comments seem to usually come from the independents themselves. As more soft brands emerge over the next couple of years, it will be interesting to see how that landscape changes.
--Danielle Hess, Reporter
@HNN_Danielle

During the opening general session, speakers shared the hope that U.S. demand growth will remain sustainable, but they pointed to booming markets such as Austin, Texas, and Nashville, Tennessee, as markets they’d rather avoid prioritizing development or acquiring hotels.

Throughout the discussion, the panel of brand executives and owners suggested the hotel industry needs to evolve to stay profitable and innovate to keep ahead of budget pain points such as rising labor costs and increasing property taxes. With a significant number of unfilled hospitality positions and a millennial workforce that contributes to high turnover, where will hoteliers appropriately invest in their employees: at the hiring stage or by solidifying their retention strategies?

I also snapped out of my note-taking autopilot when RLH Corporation’s Greg Mount said Airbnb’s core business as a direct competitor to hotels doesn’t worry him. He described Airbnb as a “non-issue,” in fact, considering its bigger impact on larger markets and presence on compression nights. What worries Mount is Airbnb’s continued shift toward being a distribution channel, and it’s hard to disagree after Airbnb started listing boutique properties and recently acquired HotelTonight. Airbnb has its sights set on competing with Google and Amazon, and wants to own a piece of the booking journey just like Instagram and TripAdvisor. At what point does the hotel industry innovate?
--Dan Kubacki, Production Editor
@HNN_Dan

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