The U.S. hotel industry might have dodged a bullet last month when the General Services Administration froze per-diem rates instead of going through with previously discussed 30% decreases, but the suffocating hand of government austerity still has a tight grip around hoteliers’ throats.
As many of you know, the House of Representatives on Tuesday passed H.R. 4631, ominously titled the Government Spending Accountability Act of 2012. The bill, sponsored by Republican Rep. Joe Walsh of Illinois, attempts to curb the misuse of funds by capping the amount of money available for government conferences to $500,000 per conference, requiring federal agencies to submit a quarterly itemized report to Congress of all expenditures related to conferences and meetings.
In an ironic twist, the bill is in some ways a response to the now-infamous GSA conference in Las Vegas, which critics argued was too lavish an event to hold on taxpayers’ dimes.
The do-as-I-say-not-as-I-do reverse of action now has hoteliers in the cross hairs, and the bullet is making its way out of the barrel.
In a statement from the U.S. Travel Association, president and CEO Roger Dow gave a rallying cry to oppose the bill. “As this bill makes its way to the Senate for consideration, U.S. Travel will continue to encourage our Senate champions and allies to prevent the bill from passing in its current form,” he said.
But in an election year where unemployment is still hovering above 8% and an anxious middle class is hurting, a vote to curtail government spending—consequences notwithstanding—is a slam dunk for most politicians.
As case in point, only one member of the House rose to oppose the bill in Tuesday’s proceedings.
Affirmation in the Senate is sure to follow, which means H.R. 4631 and all its bureaucratic, one-size-fits-all restrictions will be coming to a city near you—and I’d wager within the next few months.
The question, then, becomes what hoteliers are going to do about it. Fortunately, the short-sighted action comes at a time when demand is at an all-time high. Thus, savvy hoteliers—and those with the benefit of strong localized market demand—can simply shift their business mix accordingly. Greg Cross of Hyatt describes this as “firing” your lower-rated customers. (Love that terminology.)
That means many government conferences will be pushed out of traditional conference centers into secondary markets, which might provide a spark to demand in some cases. (We’ve also heard talks of government events being held in army barracks, but that’s a different story.)
But I’m curious, dear reader: How are you preparing for the passage of this bill, if you’re even preparing at all? I encourage you to share your thoughts and strategies in the comments section below, or email me directly at email@example.com.
Stat of the week I
5%: The increase in committed ADR on the books in North America for period of August to December, according to TravelClick’s “North American Hospitality Review.” Occupancy for the same period is up 5.4% compared with last year.
Stat of the week II
150: The number of U.S. markets that use Priceline’s Tonight-Only Deals app, which is more than triple the level of participation at launch. The industry is walking along a precarious edge here, between unloading distressed inventory to generate some incremental revenue and promoting this bargain-hunting booking behavior from travelers.
Quote of the week I
“They don’t give a rat's ass about public shareholders. It’s just not what they think about.”
—David Loeb, Robert W. Baird Company’s senior research analyst, discussing Hyatt Hotels Corporation’s post-IPO misfires with shareholders.
Interestingly, Loeb later said he has a “buy” rating on Hyatt’s stock but not for the reason you might think. The “reviled” stock—his words, not mine—is so detested in the investment community that it has nowhere to go but up.
Quote of the week II
“We basically gave them a price that we were indifferent about between the two outcomes. If we got taken out at the price, we’d make a very attractive return … Alternatively, we could basically take the assets and do what we do, which is fix problems.”
—Brian Kim, managing director of real estate at Blackstone, discussing the firm’s win-win approach to securing payment from Eagle Hospitality Properties. Eagle eventually agreed to sell its 13-property portfolio to avoid foreclosure from lender Blackstone.
This particular deal was interesting for two reasons: 1) It provided an interesting peek into the inner workings of the notoriously media-shy Blackstone. Reading Kim’s comments, you can’t help but understand why the firm is the successful real-estate powerhouse it is today. And 2) it provides a great case study for the more stringent approach to maturity resolution in the hotel industry. As HotelNewsNow.com has written about with increasingly regularity of late, lenders are done kicking the can down the road. I wouldn’t be surprised to see more resolutions like this one in the near future.
Comment of the week
“Ok hoteliers, lets forgive all the bullying, threatening behaviour, the gazumping of hotels in search results by non-permission base use of the hotel name in adwords, threats of suspension if the hotel tries to promote a webonly rate &c &c &c No one disputes they are a sort of necessary evil, adding no value to the travel experience, taking no inventory risk - yes hoteliers allowed them to get that way and nothing is likely to change anytime soon”
—Commenter “robertgilmour26” responding to last week’s edition of my “Checking out” blog, in which I actually defended—yes defended—OTAs from the misguided school of thought that they alone are the source of every ill in the hotel industry.
Email Patrick Mayock or find him on Twitter.
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