The hotel industry upcycle has ended, and hoteliers share what changes need to be made in 2020 to adapt.
REPORT FROM THE U.S.—As the hotel industry enters 2020 and leaves a record-setting upcycle behind, hoteliers recognize there is a need for making changes.
The days of 6% revenue-per-available-room growth are gone, at least for now, as the hotel industry is getting ready for the challenges ahead by laying the groundwork now. Hotel News Now reached out to hoteliers across the industry to find out what they believe the industry needs to do differently in the new year.
Romy Bhojwani, EVP at HotelAVE
“Lodging industry fundamentals are decelerating as we go into 2020. Operators and asset managers can still optimize the performance of their assets, by focusing on the following:
“Creating demand versus managing demand: In an environment of slowing down fundamentals, it is critical to focus on sales, revenue and marketing strategies that create demand versus managing demand in a healthier operating environment. Sales efforts should be more proactive than reactive. Revenue and distribution tactics should all be return-on-investment driven, and marketing activities should be aligned with overall demand creation goals. ROI thresholds should be carefully evaluated and only programs that meet this threshold should be actioned for implementation.
“Proactive labor cost management: The industry continues to face significant pressure related to both the availability and cost of labor. Proactive strategies to enhance recruitment, training and retention efforts will help to lower turnover and increase associate opinion satisfaction scores.
“Asset value and investment considerations: A generally slower RevPAR growth environment, or in some markets a declining environment, creates an optimal point in the cycle where owners and asset managers can execute capital projects, while minimizing disruption and displacement. Also, given the availability and low cost of debt, 2020 could be a favorable time to sell or refinance based on stronger TTM cash flows.”
Richard Stockton, president and CEO, Braemar Hotels & Resorts
“The outlook for 2020 is softening and will present challenges to hotel owners. Despite lodging supply and demand being in equilibrium, the industry is expected to post minimal RevPAR growth, while labor, property tax and insurance expenses continue to rise. To better manage revenue, the focus will be on expanding the lower commission direct booking channels, securing early group blocks and driving ancillary revenue streams. To manage expenses, owners will seek ways to enhance productivity, which include commissioning time and motion studies, implementing ‘smart scheduling software,’ re-engineering menus to be simpler and scrutinizing service contracts (and cutting back services as necessary). Innovations such as mobile key entry can allow guests to ‘skip the desk,’ while in-room sensors can highlight unoccupied rooms for housekeeping staff. Owners that have invested in their capex programs in recent years will be better positioned, as those investments can deliver above market returns.”
Donald Urbahn, VP of sales & revenue management, New Castle Hotels and Resorts
“As we move through this period of slower growth, hotels need to get more than their fair share of every dollar spent in the market. Strong revenue management can make that happen. Our internal revenue management resources adjust strategy as often as necessary, many times more than once a day, to address market challenges and opportunities that present themselves. It’s a cost neutral alternative to brand support, and for 2019, the hotels that have adopted this new practice outpaced their comp set in RevPAR growth.
“Similarly, we’re internalizing digital marketing services, as part of an overall initiative to take greater control of our own destiny. As with revenue management, there are great resources available, but we’ve found that we get better results with a team that’s focused on leading the market, not just achieving a fair share.”
Chris Green, president and CEO, Chesapeake Hospitality
“I always think the first step when approaching a softening period in your business, it is instructive to reflect on past successes. Over the past 10 years of solid performance in the industry, it is possible to have forgotten how difficult times were in 2008 and 2009 and what specific actions we took to continue successfully. While I don’t think we are going to see that type of slow down, the specific actions we implemented around sales, customer retention and acquisition, staff modeling and efficiency and profit protection should all be reviewed for application now. Once you have solidified your key actions, you need to build them out and prioritize by a defined ROI calculation. Probably the most pressing and difficult to manage is your labor models. While hotels are topping out on RevPAR, other industries continue solid growth and are in need of labor. Your plan around retention and development must be robust and effective, otherwise the rest of your plans will be nearly impossible to execute.”
Matthew Woodruff, EVP and guest excellence and chief brand partner office, Hospitality Ventures Management Group
“As we roar into 2020, it is going to be imperative for operators to be keenly aware of how their associates and brand deliver the guest experience to win loyalty over their backyard competition. This will be done in varying ways depending on the type of hotel (luxury, full, focused, lifestyle, extended stay, etc.) and, more importantly, by guest preference (high technology vs. high touch). However, one constant will remain the same: hospitality. At HVMG, we are going to be focused more than ever in integrating the service components (task oriented delivery of necessities like check-in, guestroom cleaning and bar/restaurant services) with the ‘hospitality heart,’ which is the happiness, eagerness and thankfulness with which our associates deliver the service. The hospitality heart is the piece that cannot be duplicated by technology and shines thru the efficiency of the process. The power of the phrase ‘Thank you for your business’ delivered by an associate that truly ‘gets’ that this guest had a choice will go a long way.”
Andrea Grigg, managing director for asset management, JLL Hotels & Hospitality
“In today’s environment, and looking ahead to 2020, there isn’t a higher priority than boosting a hotel’s bottom line, and labor management must be a daily priority at every level throughout the owner’s organization.
“Delivering data is one thing, but diving into the numbers to draw out strategic insights and find hidden value is a differentiator. Additionally, it’s not only important to materially invest in a sophisticated labor management system, but to also make sure the right talent is in place to configure the system properly and challenge it on an annual basis. Owners cannot just flip a switch and expect a labor management system to revolutionize your business. Any labor management system must connect the financial goals with scheduling and results measurement practices to drive results.”
Ghee Alexander, SVP of operations, Prism Hotels
“What hoteliers will need to do differently in 2020 as the outlook for the industry is changing: labor management. Labor costs will continue to go up—cities and states will mandate higher wages, benefits and premiums increasing as well.
“We will need to become more nimble of our labor on an hourly and daily basis, whereas in the past we could be more frivolous. Absolutely dive deeper into productivity reports, and evaluate areas of opportunity. Where possible, look for ways that technology can alleviate some duties—for example, robotic deliveries, robotic vacuuming, encouraging more digital key use and self-checkout. Incentivize our most productive individuals (a little reward for the most rooms cleaned or guests checked in), and utilizing those most productive individuals during the most needed times, and for training others.
“A positive work culture will continue to become more important, if we are asking more from our staff. The cost of replacing team members is astronomical compared to a steady, trained and familiar team.”
Joel Rosen, president, GFI Hospitality
“We are always exploring creative ways to drive revenue and position our hotels as more than places to stay but genuine neighborhood destinations with unique design features and food and beverage and nightlife offerings. We’ve been very successful at increasing traffic to our properties by partnering with great brands and premier chefs and designers. This year at the Ace New York, for instance, we were excited to work with the Milk Bar team on the launch of their flagship store, which nicely complements the Ace’s Michelin-starred Breslin restaurant, led by James Beard-winning Chef April Bloomfield. Similarly, at the Beekman we partnered with James Beard-winners Tom Colicchio and Keith McNally; at the James Nomad we worked with renowned designer Thomas Juul-Hansen; and at the Nomad we brought on top culinary talents Daniel Humm and Will Guidara.”
Bashar Wali, president & CEO, Provenance Hotels
“In today’s cashless culture, it’s all too easy to be caught short when you want to leave gratuity. Tipping is not just about the money, it’s about recognizing great service from those on the front lines. As a (solution), Provenance Hotels has partnered with an innovative new app that addresses this challenge head on. Our guests are able to securely share gratuity from their smartphones with the valets, concierge and housekeeping teams without an extra ATM run or tracking down someone to break a twenty. Hotel Murano in Tacoma, Washington, is the first in our collection to roll out this program and we’re already seeing great results with daily usage in the first few weeks of introduction.”
A.J. Singh, director of the Business and Tourism Research Center, College of Business and Entrepreneurship, The University of Texas Rio Grande Valley
“Hotel organizations should work closely with educational partners to embed best practices and processes in specific hospitality courses at leading institutions. This helps to create organizational awareness for internships, placements and awareness of their practices as an employer of choice. Furthermore, if organizations are looking to test out certain processes, classes are an excellent place to discuss this with students and faculty. The same ideas are applicable to companies that provide products and services to the hotel industry. The SHARE Center is a good example of this collaboration with universities and its extension, such as CHIA courses embedded into classwork.”