The more things change, the more they stay the same. That old adage couldn’t be more appropriate for the hotel industry as we turn the calendar to 2012. Looking back at the trends of 2011 and forecasting what lies ahead for 2012 reveals a strikingly similar landscape for the hotel industry.
The data doesn’t lie
The U.S. hotel industry saw some seriously unexpected growth in demand during 2011, so will that continue into 2012? I think not. There will be some demand growth but not the robust performance of 2011; STR expects to finish 2011 at 4.7%. The bigger question is how hoteliers will be able to leverage that demand into rate growth. The industry remains a long way away from peak performance numbers of 2007 and 2008. That gap will continue to close during 2012, but it will continue to be at a modest pace. The most revealing data comes when it’s sliced by top 25 markets vs. the rest of the industry. The performances of the top 25 markets in the United States have been healthy; not so much for hotels in the rest of the country, however. These secondary and tertiary markets must see a better performance during 2012 if the industry, as a whole, can say it is in a true recovery from the recession.
Social media frenzy
Social media isn’t a fad; it’s a legitimate way to conduct business for hotels. One has to look no further than the significant role social media played in political events and protestsduring 2011to see how it permeates the fabric of society. Hotels will continue to experiment with ways to monetize the social-media revolution, and the winners will be consumers.
Distribution channel mix
Here’s hoping the much-anticipated Distribution Channel Analysis Study from the American Hotel & Lodging Association, STR and HSMAI Foundation is released soon. What we discovered via various presentations of some of the data during 2011 is that online travel agencies comprise about 10% of a typical hotel’s bookings. That’s surprising because the OTA discussion seems to take about 90% of the discussion when it comes to bookings. The reality is this: OTAs are here to stay. That’s a good thing. The more channels a hotelier has by which to sell rooms can only help them make more money in the long run. The challenge is this: finding the right pricing structure that makes the transaction equitable for all parties involved. As contracts between hotel brands and OTAs mature, you can bet that the commission structure of the OTAs will be the talking point that starts every conversation. In the meantime, expect OTAs to increase their reach as they look for more revenue opportunities. One or more of them will dip into the vacation rental market during 2012 and that will present another option for consumers, as well as more leverage for an OTA in the battle for commission from hotel-room sales.
Tight lending continues
Lenders will continue to be prudent during 2012. Financing structures won’t change a whole lot during the year, and the lenders that are making loans will do so with the expectation that there’s plenty of capital being put into the deals. Forty-percent equity in a deal is a reasonable expectation for owners looking to borrow money. This, of course, will lead to little supply growth during 2012—something brands don’t necessarily like, but in the long term it’s not a bad thing.
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Brands putting money in deals
So if brands can’t grow through new construction, they will find other ways to build their portfolios. 2012 will continue to see hotel owners converting their properties into different brands in an effort to kick-start revenue production. Plenty of flags on properties will change during 2012, and the brands most likely will offer aggressive incentive packages to get deals done. We will see more renovations of lobbies and public spaces than we have during the past eight years—much of that will be driven by having to maintain brand standards.
Brand relationships
As owners continue to expect more from brands, they aren’t going to sit by idly while a property they believe should be performing better is struggling. Situations such as the high-profile cases of the Waikiki Marriott and the Summit Hotel Properties-Cambria Suites are going to become more of the rule rather than the exception as owners demand better performance from the brands and management companies with which they align.
Mobile means everywhere
The growth of mobile phones and tablet devices is staggering. Mobile is the most preferred way to stay abreast of what’s going on for a growing majority of travelers. These devices will be primary booking tools by the end of 2012. All businesses must work to find a solution that makes their websites platform agnostic so it can be used on all devices. It’s a tall order, but those hotels that don’t get on board will be left in the dust. Let’s face it: successful businesses will figure out a way to break through the clutter when it comes to the myriad screens in a consumer’s life. Providing an integrated experience is vital.
Upon further review, we’re going online
It won’t be surprising to see hotel brands commit to using online review sites as their primary guest-satisfaction tool. We are living in an era of personalization, and reviews are a primary resource for consumers. Getting a handle on weeding out bogus reviews is an essential next step, but it is clear that online review sites have a direct impact on consumers’ behaviors, which leads to a direct impact on hoteliers’ bottom lines.
Google, Apple everywhere
Google Hotel Finder made its debut during 2011 and while it hasn’t yet had a dramatic effect one way or the other on hotels, it has the potential to be a formidable driver of bookings for hotels as soon as late 2012. Next up is Apple’s iTravel travel check-in application, which is supposed to be launched during the next 12 months. With an integrated experience between devices so vital, will it be Apple that sets the standard?
Getting a handle on costs
The biggest complaint I hear from hoteliers is the inability to plan ahead. 2012 will provide no relief in that regard. With the skyrocketing costs of personnel, insurance, utilities, OTA commissions and just about everything else under the sun, hotel owners are searching frantically for ways to keep costs in check. Good luck with that. With a presidential election looming in November, U.S. hoteliers can expect nothing but hot air from both sides of the aisle and little regard to the needs of business owners.
And finally, Web-sters come of age
2012 marks the 18th anniversary of the launch of the World Wide Web. That means all of the children born that year become bona fide consumers—they are the true Web generation as they’ve known nothing but “dot-com” their whole lives. Good for hoteliers? Not if they don’t have a clue on how to market or deliver the message.
All in all, I expect the hotel industry to hold its own during 2012. There will be stops and starts along the way, but the general feeling coming from hotel owners, operators and developers is that they are looking for more stability during 2012. Four years after the worst economic crisis of our time started, stability would be a good thing, wouldn’t it?
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