Operators discuss top concerns for 2013
 
Operators discuss top concerns for 2013
04 JANUARY 2013 7:18 AM

HotelNewsNow.com asked hotel operators about the biggest challenges and opportunities they will face in 2013.

Editor’s note: This is the third in a three-part series examining the year ahead. Click to read about the brand perspective and the owner perspective.

REPORT FROM THE U.S.—The last few months of 2012 were laden with uncertainty for hotel industry leaders. The pending fiscal cliff and the outcome of the U.S. presidential election were among the issues that remained top of mind.

As the hotel industry welcomes the new year, the industry faces a slew of new issues to tackle, including projected weakness in group demand and health-care reform. Still, there are myriad opportunities for hoteliers to grow market share, according to several operators.

HotelNewsNow.com reached out to hotel management executives to discuss the biggest opportunities and challenges they are forecasting for 2013, and here’s what a handful of them had to say. (Note: Responses presented in alphabetical order.)

Gerry Chase, president and COO of New Castle Hotels and Resorts

Gerry Chase
New Castle Hotels and Resorts

HotelNewsNow.com: What is the biggest challenge facing operators during 2013?

Chase: “(Average daily rate) has still not recovered in most markets, and costs have continued to increase. Accelerating ADR in the face of economic uncertainties like the fiscal cliff and Obamacare is one of the biggest challenges we face as an industry.

HotelNewsNow.com: What is the biggest opportunity facing operators during 2013?

Chase: This year, while capital is still in relatively short supply for new builds and renovations, we all have an opportunity to focus on the basics and shore up our business fundamentals so that our hotels are on rock solid foundations when the economy shifts into a higher gear.

HotelNewsNow.com: What is the biggest unresolved issue facing the hotel industry as we head into the new year?

Chase: We still do not understand how Obamacare will impact the quality of the health programs we are able to offer our employees and what the added costs will be as the program starts its roll out.

The industry as a whole still has challenges accessing debt for all but the most exceptional, well-thought-out deals, which continues to hamper a full recovery.


Bill DeForrest, president and CEO of Lane Hospitality

Bill DeForrest
Lane Hospitality

HotelNewsNow.com: What is the biggest challenge facing operators during 2013?
 
DeForrest: The biggest challenge for operators in 2013 is generating top-line growth through affordable channels and managing the ever-increasing cost of delivery. By delivery costs, I am referring to (online-travel-agency) channels or even brand channels, which seem to consistently increase costs associated with their delivery, either as a result of connectivity costs increasing, frequency program costs increasing or other expenses added into the revenue delivery channel, which take limited-rate-growth opportunities and squeeze the net rate as a result of these higher fees.

HotelNewsNow.com: What is the biggest opportunity facing operators during 2013?
 
DeForrest: The industry fundamentals continue to be strong, and demand is growing for all facets of our business. Using very smart revenue-management practices, direct selling and creating programming and offers for the consumer and customer not only in rooms sales but in food-and-beverage, spa services, meeting and conference revenue can add true incremental earnings to our hotels and begin to bring our profitability levels back to a level that allows us to continue to invest in our product and people.

There are many hotels that have made significant investments in their assets, and the consumer is responding well. Through the last few years, the financial pressure assets have gone through have not allowed for new investments in product and people, and recapitalizing those assets will be a big opportunity.

HotelNewsNow.com: What is the biggest unresolved issue facing the hotel industry as we head into the new year?
 
DeForrest: The biggest unresolved issue continues to be governmental pressures, including increasing costs in health-care expenses and local, state and federal taxes, rising government budget deficits and overall regulations that require significant funding and reduces the capital available for more impactful investments. The capital that would go to the hotel investments, which ultimately grow our business and create jobs and has historically allowed our industry to be a leader in job creation and business growth.


Mike Marshall, president and CEO, Marshall Hotels and Resorts

Mike Marshall
Marshall Hotels and Resorts

HotelNewsNow.com: What is the biggest challenge facing operators during 2013?

Marshall: Obamacare is one of the biggest challenges facing our industry. A lot of companies are considering staffing their hotels with mostly part-time workers, but I don’t think that’s the correct answer. We need good people and to get good people, you need to offer full-time work. Like many in our industry, we operate in multiple states and are facing the very likely scenario of having different rules for each state in which we do business. Right now, the uncertainty is the biggest challenge we face.

HotelNewsNow.com: What is the biggest opportunity facing operators during 2013?

Marshall: The opportunity to raise (average daily rate) and with it, profitability, is the bright spot on the horizon. A lot of hotels have not maintained their physical plants, and those that have are now in a position to reap the returns on their investments. Consumers are not necessarily traveling more, as evidenced by the relatively flat occupancy levels, but they are treating themselves to better accommodations and that bodes well for up-to-date hotels.

HotelNewsNow.com: What is the biggest unresolved issue facing the hotel industry as we head into the new year?

Marshall: Deferred maintenance continues to be an issue for many hotels. Owners who haven’t been able to afford renovations are not likely to be able to refinance when their loans become due. That will cause an increase in transactions as new owners buy tired properties and take on the needed (property improvement plans). While it’s an unresolved issue, the sale, purchase and renovation of thousands of hotels will be an economic catalyst for the next several years. One owner’s issue becomes another owner’s opportunity.

Daniel P. Phelps, VP of asset management, Ultima Hospitality and Mark Zettl, executive VP and COO, Ultima Hospitality

HotelNewsNow.com: What is the biggest challenge facing operators during 2013?

Phelps, Zettl: We believe there are two major challenges facing operators in the year ahead. First, the ability to attract and retain top quality talent (which will also remain an issue beyond 2013): the recession reemphasized the importance of operations and those who were successful will be afforded new opportunities. While top-tier talent is now more expensive, we feel it is imperative for future success. Second, our industry has and always will be based on the personal interaction between our staff and guests. Given the numerous electronic communication mediums available to sales and marketing departments, we feel the digital age is placing less emphasis on relationships and commoditizing offerings: understanding when to unplug will be a key to success. To differentiate our product, we continue to stress the importance of visiting a client’s office or picking up the phone. Strategically and selectively utilizing electronic communication to pique interest and following through with our personal touch to close.

HotelNewsNow.com: What is the biggest opportunity facing operators during 2013?

Phelps, Zettl: We believe an opportunity to increase (revenue per available room) exists in 2013 through driving ADR. The simple fact is that we are seeing demand increase, both domestic and foreign, at a time of little to no growth in supply. Paired with our high-impact sales initiatives we can further leverage the value of our client focused amenities. Intelligent analysis and thorough understanding of booking patterns will be key to decreasing reliance on third-party OTAs, helping to significantly boost top-line revenue.

HotelNewsNow.com: What is the biggest unresolved issue facing the hotel industry as we head into the new year?

Phelps, Zettl: Political discord and fiscal ambiguities are restricting growth and dampening projections. Increases in fixed expenses, especially in benefits and insurance, continue to far outpace the rise in asset profitability, and we are concerned that the full impact of the Patient Protection and Affordable Care Act remains unknown. However, preparedness for an uncertain future has had a uniquely positive side effect in that individuals are paying down debt and corporations amassing equity. We remain cautiously optimistic that improved balance sheets and economic clarity will hasten and steepen the global recovery.


Thomas Prins, partner of Gemstone Hotels and Resorts LLC

Thomas Prins
Gemstone Hotels and Resorts LLC

HotelNewsNow.com: What is the biggest challenge facing operators during 2013?

Prins: Rebuilding ADR and the uncertainties associated with Obamacare are dominating industry discussions, but we should not overlook the softening of group demand moving into the next year. Groups are now booking as little as 30 days in advance, putting hotels at their mercy for rate and additional incentives. This is a challenge that has gotten very little attention but needs to be addressed.

HotelNewsNow.com: What is the biggest opportunity facing operators during 2013?

Prins: On the development side, there are significant economic barriers to entry, so we won’t see much new supply in most markets, which gives us an opportunity to grow market share and rate without worrying about something going in the ground next door.

Operationally, transient business is pretty healthy as we enter 2013, so we’ll be focusing our attention on mobile and social opportunities to engage those guests. We’re looking at the trends and technologies that will be in play three years down the road so that our hotels are ahead of the social media curve.

HotelNewsNow.com: What is the biggest unresolved issue facing the hotel industry as we head into the new year?

Prins: Because the hotel industry has become so commoditized, differentiation remains one of the biggest issues facing our industry. Brands are challenged to articulate their unique value propositions and independents, who once dominated the realm of highly personalized service, are struggling to maintain that foothold as technology gives bigger companies greater ability to appear to know their guests. We’ve always believed that genuine engagement between employees and guests trumps airline miles and is a differentiating factor for independents, but now brands are beginning to work in that territory as well.


Tim Walker, president of Island Hospitality Management

HotelNewsNow.com: What is the biggest challenge facing operators during 2013?

Walker: There is currently so much uncertainty that “the unknown” is probably our biggest challenge.

Specifically, what, if anything, will the fiscal cliff mean? What will Obamacare do to the cost of doing business and the ability to staff hotels with quality employees? Will there be further cutbacks for government travel and will we face increased headwinds on the matter of per diems? We also face increased costs from OTAs and from brands that are passing expenses and margin-eroding initiatives on to owners.
 
HotelNewsNow.com: What is the biggest opportunity facing operators during 2013?
 
Walker: Relaxed travel rules for foreign travelers into the U.S. present a tremendous opportunity for our industry. The prospect of new customers visiting from overseas, coupled with low supply growth and occupancy reaching all time highs should enable us to attain significantly higher ADRs.

HotelNewsNow.com: What is the biggest unresolved issue facing the hotel industry as we head into the new year?

Walker: Deal flow continues to be strangled for two reasons: Borrowing conditions continue to be difficult for new construction. And valuations are still pricing strong despite government headwinds and unknown RevPAR growth.

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