Many of the usual suspects are back on top of this year’s North America Hotel Guest Satisfaction Index Study from J.D. Power and Associates, but what is somewhat surprising is overall guest satisfaction increased in all six segments. It’s a credit to savvy hotel owners and operators who have been forced to cut costs (and staff) to survive the worst downturn in the industry’s history, yet still managed to find a way to keep their customers happy.
The real challenge will be during the ongoing recovery as occupancy returns while rate continues to lag. Will any of the programs or employees slashed be brought back or will properties be stretched even thinner? Scott Steilen, a principal of asset management firm Warnick + Co., noted during the recent Midwest Lodging Investors Summit that operations have been scraped to the bone and can’t become a permanent thing. But if rate and revenue aren’t returning as quickly as guests, what will give?
The six leaders in guest satisfaction, according to the J.D. Power’s study, by segment:
• Luxury: The Ritz-Carlton (Four Seasons ranked first last year)
• Upscale: Omni Hotels (Embassy Suites last year)
• Mid-Scale Full Service: Hilton Garden Inn (for a second consecutive year)
• Mid-Scale Limited Service: Drury Inn & Suites (for a fifth consecutive year)
• Economy/Budget: Microtel Inns & Suites (for a ninth consecutive year)
• Extended Stay: Homewood Suites (Staybridge Suites last year)
Other interesting nuggets from the study:
• The proportion of guests making reservations online increased from 54 percent to 58 percent, a year after a three percent drop. Good for brand companies and owners, the study showed more guests booked using the hotel’s site than independent travel sites.
• The top five “must have” amenities for guests are wireless internet access, free breakfast, bedding and pillow choices, pillow-top mattresses and free parking. Seventy-seven percent of guests said they would rather use WiFi than wired connections.
• Guest awareness of “green” programs increased slightly with 68 percent saying they were aware of a property’s efforts.
The study was based on responses from more than 53,000 guests who stayed at a hotel between May 2009 and June of this year.
Leonard “Buck” Hoyle, former head of the Hospitality Sales & Marketing Association International, died last Saturday at age 71. Among his many accomplishments as HSMAI chief for 13 years starting in 1981 was the launch of the Affordable Meetings trade shows, which has become the association’s big moneymaker.
Here is a remembrance by Betsy Bair, editorial director of Penton Media’s meetings publications and websites. Lodging Hospitality is also a Penton Media publication.
It was difficult to read the true mood of the speakers and attendees at last week’s Midwest Lodging Investors Summit, produced by Lodging Hospitality. While there was a lot of uplifting talk about improvements in the hotel market—occupancies and RevPARs are unquestionably on the rise—in nearly equal measures speakers talked of the considerable challenges ahead—a weak financing environment, little growth in average rates and the looming specter of hundreds of millions of dollars of real estate debt that comes due in the next 24 months.
Here is a review of some random quotes from MLIS speakers that show both sides of the optimism/pessimism spectrum on display in Chicago:
• “New development has nothing to do with supply and demand,” said Jerry Cataldo, president of Hostmark Hospitality. “It’s all about financing and once it comes back, there will be a rush to develop again.”
• “We’ve faced the same issue for decades,” said La Quinta President & CEO Wayne Goldberg in discussion of brand proliferation. “Not many new brands will reach critical mass in the next 10 years.”
• One of the few disagreements during a panel of industry CEOs came over the topic of online travel agencies and their effect on industry room rates. Goldberg of La Quinta believes Internet rate parity results in no effect on ADR, that a consumer gets the same rate whether he or she books on Expedia or a brand website. David Kong, president & CEO of Best Western, disagreed, noting a $100 rate on an OTA may only yield $80 to the property.
• Ravi Patel is executive vice president of Hawkeye Hospitality, one of the few hotel companies still developing (six under construction, nine opened in the past 18 months.) While he hasn’t seen construction prices much lower during this era of limited development, “we’ve been able to receive better quality and value from the construction firms we deal with.”
• “When it comes to controlling expenses, cut where the guests will never see it, but never cut marketing,” said Mark Skinner, partner with The Highland Group. “If you do cut marketing, you’ll never get out of the hole.”
• “In the hotel industry’s new normal, some secondary markets may no longer be viable locations for luxury hotels,” said Jim O’Shaughnessy of Cornerstone Real Estate Advisors, citing the recently deflagged Ritz-Carlton in Dearborn, MI. “These are markets where it will no longer be possible to get luxury rate premiums.”
• Similarly, O’Shaughnessy believes owners of upper upscale properties, especially in high-cost urban areas, need to carefully scrutinize the viability of their food and beverage operations. “In many of these hotels, it may no longer be sustainable to offer food and beverage as an amenity,” he said.
• Steve Van, president & CEO of Prism Hotels, had a particularly sobering outlook for hotel owners facing loan maturities in the next year or two. “Things are improving, but the hotel economy won’t recover enough by 2012 to generate sufficient proceeds to pay the loans that come due in that year.”
• Further exacerbating that situation, Scott Steilen, principal of Warnick + Co., said, “Hotels have scraped operations to the bone, but they can’t be permanent cuts, especially as occupancies improve. Also, at some point, owners will face CapEx and PIP issues that will require further funding.”
Many of the speakers at the opening day of the Midwest Lodging Investors Summit, underway this week in Chicago, chose to look on the bright side of the street. While they admit challenges and uncertainties lie ahead, most presenters believe the hotel industry has weathered the worst of the downturn and better times are ahead. Whether that’s fact-based analysis or mere wishful thinking will only become clear in the months to come.
The real good news is the intelligent approach many owners, operators and brands have taken to the stressful times. As both Roger Bloss of Vantage Hospitality and David Kong of Best Western told a general session audience, a downturn is the time to focus on sales and marketing, not wanton cost cutting.
“During the recession our response was to go out and sell, sell, sell,” said Bloss, while Kong said Best Western dramatically increased its advertising and marketing budgets to grab market share from its competitors. “Mere cost cutting is no pathway to prosperity.”
Some of the owners and operators speaking on panels had more of a nuts-and-bolts approach to fighting back in the face of tough times. Bill Morrissey of Morrissey Hospitality presented a laundry list of initiatives he uses at his properties to build relationships with his guests and, as he emphasizes, generate incremental revenues. His sound philosophy: Do nothing unless it produces revenues. A smart tactic is all times, but especially when times are tough.
And while many MLIS attendees have moaned about frozen capital markets, Ravi Patel of Hawkeye Hospitality says his firm is still building hotels: six are under construction and nine opened in the past 18 months. His firm uses a mix of USDA guarantees, SBA funding and local tourism guarantees, along with local banking relationships, to find the capital to build.
That’s the kind of American hotel ingenuity that will ensure a rebound, probably not soon enough for most hoteliers but nearly a guarantee.
I’ve read a lot of press accounts lately of hotels in trouble. In fact, the pace of lodging assets going into distress seems to be quickening. One explanation of course is the convergence of a depressed hotel market with poor financing and development choices. In other words, some developers overleveraged themselves and opened properties just as the market was turning ugly.
That’s true in many cases, but nearly as often it’s plain bone-headed development decisions—not just the economy or shaky financing—that has doomed some properties. That light bulb turned on for me this morning as I read a press account of the Se San Diego, a boutique property that filed for bankruptcy this week. Reasons cited by the owner were poor timing of the opening (December 2008) and a “crushing debt load.” Those issues are severe, to be sure, but an observation from consultant Robert Rauch really tells the story. He mused that the property’s real problems are more basic:
“It is a property that has an inferior location and no brand and a huge amount of debt in a terrible market,” he said to sum-up the situation.
Rauch provides a valuable lesson that hotel’s developer either forgot or never learned: An ill-conceived hotel will probably never be successful, even in an up market, and it makes no sense to violate the laws of the hotel jungle. Of course, the kicker in this situation is the developer made another dumb mistake in tacking 23 condos—all unsold—onto the project, as though that would have made it a viable proposition.
As Forrest Gump said, “Stupid is as stupid does.”
I recently attended the Elite Meetings Alliance, a gathering of luxury hotels and meeting planners at the new Terranea Resort in Rancho Palos Verdes, CA, and spoke to several directors of sales from luxury resorts in Arizona and every single one said they have had at least one group cancellation because of the state’s stringent law on immigration. They also said several potential bookings were on hold because of the law and boycotts. Early reports indicated backlash from the law could cost the Phoenix area $90 million in revenue.
And now maybe the one place hurting more than Arizona after last year’s recession and industry downturn, Las Vegas is facing similar legislation. Monday the Las Vegas Convention and Visitors Authority and the Nevada Resort Association filed a joint legal challenge to an initiative to enact legislation mirroring Arizona’s, according to this Las Vegas Sun story. The Nevada Immigration Verification Act could be voted on in 2011 and if enacted, could be the knockout punch to Nevada hospitality.
And a city’s recent proclamation nearly cost one of its hotels a convention, according to this LA Times story. After Costa Mesa’s declaration of being a “rule of law” city with regard to immigration, a California association looked into canceling a meeting at the Hilton Orange County in Costa Mesa.
As HITEC, the hotel industry’s top technology event, gets underway today, hotel owners, operators and, of course, technology geeks are in Orlando to find the next big thing in hospitality IT systems. Judging by the avalanche of pre-show press releases by many exhibitors, two trends are emerging for this year’s HITEC: cloud computing, or software as a service; and mobile technology, particularly applications for Apple’s iPad.
While SaaS has been a concept floating through hotel technology for many years, it’s startling how many tech suppliers have so quickly created applications for the iPad, a device that’s been on the market for less than five months. The questions will be how innovative the applications will be versus just being gimmicky and cool and how many vendors will have fully operating, ready-to-go-to-market iPad-based systems as opposed to theoretical mock-ups.
A final word regarding the HITEC venue: While nearly everyone I spoke to leading up to this year’s show expressed aversion to HITEC returning to Orlando (the main complaints are the oppressive heat and the vast distances between the hotels, convention center and the restaurants and other venues where many extra-curricular events are held), early word is that attendance is up, as it usually is when the event in held in central Florida. Go figure. Next year, HITEC returns to Austin, TX, also a hot place but much more fun and manageable. Many veteran HITECers long for the conference to revisit Minneapolis, the consensus all-time best venue for the event.
There wasn’t much major news coming out of the Asian American Hotel Owners Association after day one, but that could change today. Thursday was more about entertainment and style than information and substance–a heated debate between Karl Rove and Terry McAuliffe highlighted the main general session, which also included honoring many of AAHOA’s annual award winners.
The debate was like watching Fox News vs. MSNBC, both sides blaming the other over and over (Bush did this, Clinton/Obama did that), but the two rival strategists did finally agree to a personal $1,000 wager on predicted democratic losses in the next congressional election with the money going to an AAHOA scholarship fund. It was about the only topic the two agreed on, and that was difficult.
AAHOA also released its latest report on fair franchising, which included direct responses from the major hotel franchising companies who were responding to specific questions from the association and its members. Today, at the morning general session, the results of that may heat up as top execs (from Carlson, IHG, Choice, Wyndham, ACCOR and Marriott) face questions from members. More to come on that, and the entire event, Monday. Check back.
President Fred Schwartz said attendance was off 20 to 25 percent, but vendor participation on the trade floor wasn’t down. Although a few I spoke to weren’t thrilled with the traffic they were seeing. It’s the same story I’ve heard at just about every event I’ve attended this year.
Industry experts generally look to January’s Americas Lodging Investment Summit and last week’s New York University International Hospitality Industry Investment Conference to gauge the future direction of the hotel industry. But to get the real story, I can’t imagine a better place than the Navy Pier Convention Center in Chicago later this week. That’s when several thousand members of the Asian American Hotel Owners Association will gather for their annual conference.
The organization topped 10,000 members last November—in just its 20th year—and a recent report from PKF Hospitality Research showed those members own 40 percent of all hotels in the U.S., a whopping 20,156 properties with 1.8 million rooms. They employ almost 600,000 employees, who are paid almost $10 billion a year in salary, and they spend $31 billion a year on operating costs and $900 million on capital improvements. Of those 20,156 hotels, 75.3 percent are limited service and 62.9 percent are branded.
If you want to hear what’s going on at the ground level of the hotel industry, this is the place to be.
A new study from Ypartnership and Harrison Group confirms what most hoteliers have known since the beginning of the recession: no matter what, American consumers are still going to travel. The trick, of course, is to capture more than your fair share of that business. And, according to the study, that’s done through value, deals and, I hate to say it, lower rates.
The survey of 2,500 households with annual incomes of more than $50,000 showed the group averaged four leisure trips in the past 12 months; 16 percent say they’ll take more trips this year than last; and two-thirds will take the same number as last year.
And since most of those surveyed say the economy is forcing them to moderate their shopping and consumption behavior, they’re all looking for deals and special offers or to trade down in their travel choices. More than a third say they’re more interested in coupons of direct offers this year than last. An equal number look for sales. And it logically follows that these travelers turn to the Internet to plan and shop their travel.
However, in what should be a jolting data point for hotel marketers, 66 percent of the group say they use online travel agencies (Expedia, Travelocity, Orbitz) to book travel, versus 48 percent who use branded sites (Hilton.com, Hertz.com). Just a few (15 percent) turn to meta search sites such as Kayak or Dealbase.
The bottom line is that Americans still consider travel a birthright and they’re not willing to give it up. However, at the same time, no one wants to pay retail anymore, so you’d better be creative in your marketing, i.e., produce value as cleverly as you can, in order to beat your competitors.
