CEOs: Labor, loyalty, distribution still top of mind
CEOs: Labor, loyalty, distribution still top of mind
05 FEBRUARY 2019 9:13 AM

Hotel company CEOs speaking at the Americas Lodging Investment Summit offered their viewpoint and solutions for addressing the industry’s top issues.

LOS ANGELES—The issues top of mind for U.S. hoteliers and hotel brand companies continue to be labor, loyalty and distribution. But instead of complaining about them with no resolution, speakers at last week’s Americas Lodging Investment Summit were eager to talk about real solutions.

As the U.S. hotel industry works through a year that many say will look similar to 2018 in terms of M&A, transactions and the overall economy, brands and operators are keen to dissect all costs and disruptors in order maximize their revenue and business growth.

Labor and related costs
Labor continues to concern hoteliers, and speakers on two “Boardroom broadcast” general sessions at ALIS talked about the importance of strong fundamentals in labor-related fields, such as training, investment in good people and even exploration of technology.

Wyndham Hotels & Resorts President and CEO Geoff Ballotti set the scene by explaining that “we have 9 million jobs to fill in this industry, and 900,000 are unfilled. We have 10% unemployment in our industry and that’s a big issue for us, an issue we need to solve.”

He spoke a lot about the American Hotel & Lodging Association’s efforts to attract young people to the industry by showcasing its benefits.

“The labor shortage is probably the most pressing challenge we face; the challenge is what are you going to do about it,” agreed David Kong, president and CEO of Best Western Hotels & Resorts. “The efforts of AHLA and AAHOA are laudable and much-needed and at the same time we need to communicate that this industry offers career progression. And at the same time, we have to consider that we’ve been able to pay at a certain wage scale, but maybe we need to reconsider and rethink our compensation scheme. Otherwise, how will we compete with other industries taking people who would … be working with us?”

Rob Palleschi, president and CEO of G6 Hospitality, agreed that labor is “the No. 1 concern” at his company across the nation. One of his company’s solutions, he said, is to partner at the community level with cities where G6-owned hotels are located to spread the word grassroots-style about “the value of our business and the great long career it offers.”

Several speakers spoke about investigating technology as a solution to growing labor concerns. Greg Mount, president and CEO of RLH Corporation, said it’s not about replacing jobs, but more about creating positions for people to see better advancement.

“We’ve begun a test of a robot that can clean everything in the room except make the bed,” he said. “I don’t think it replaces the housekeeper … it provides an enhancement for that position and allows owners an opportunity to supplement what housekeepers (traditionally) are doing.”

Ken Greene, president of the Americas for Radisson Hotel Group, agreed that technology is worth a serious look, and needs to be carefully weighed.

“Yes, you look at every piece of technology, whether it’s a robot or a salad-making machine,” he said. “But you need the right training and tools for your employees because the big cost of labor is in turnover. The best tool is building the right culture for your company.”

Michael George, president and CEO of Crescent Hotels & Resorts, agreed that the right investments into labor and culture, and maintaining that culture, mean you’ll never have a labor problem.

“When you look at population growth and supply and number of jobs, we’re not out of kilter. There’s still capability to staff,” he said. “What you need is to create a work oasis at your hotel for associates. In most markets, you can attract and retain (people) and reward them for referring others, but you have to invest. Benefits, career opportunities, compensation, uniforms—that all comes together. Factor it into your business model and test it. Get feedback through associate satisfaction surveys, address (problems) and hold yourself accountable if you find them.”

Part of investigating technology as a solution to labor problems means testing—and sometimes rejecting—various initiatives.

Kong spoke about Best Western’s pilot program to test smart speakers in guestrooms as a way for guests to make special requests.

“We found out that most people disconnected it when they got in the hotel room, presumably because they didn’t want Alexa listening in … and people were being woken up in the middle of the night by it,” he said. “We tested it and it didn’t go well. We didn’t see any lift in satisfaction scores.”

He contrasted that pilot with another one the company is undergoing where guests can text requests. “That has a tremendous lift in satisfaction scores,” he said. “I think there’s a smart way to use technology to simplify (tasks) that might require people.”

Loyalty and distribution
On the guest-facing side, “Boardroom broadcast” speakers talked a lot about the intersection of loyalty and distribution, including how to court the most high-value and loyal guests.

“The brands are winning against the OTAs, and I feel that very confidently,” George said, attributing that edge to “the ability to attract and retain that guest and get them to book direct … to your benefit.”

Mount talked about how channel management has matured, and companies including RLHC are better equipped to “understand when to leverage (certain) channels and understand consumer booking on them … because understanding those channels and when to use them is really where the direction is going.”

Ballotti and Kong underscored the double benefits direct booking and loyalty have on a hotel’s bottom line.

“Loyalty is our fastest-growing channel,” Ballotti said, citing the company’s plans to merge La Quinta loyalty program members with Wyndham Rewards. “The larger we become from a leverage standpoint with FF&E sourcing and distribution, the more important.”

Kong also spoke about the other aspects of hotel profitability that loyalty directly affects.

“Without loyalty, you don’t have a database or a promotional platform,” he said. “You need an acquisition strategy, a growth strategy, a retention strategy, a reactivation strategy. How are you going to do that without a database and a promotional platform? If you don’t have a loyalty program, you can’t pursue any one of those strategies effectively.”

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