A new and compelling study from Hospitality eBusiness Strategies seems to sound a loud alarm for all hotel owners and operators. The message, as written by Chief eBusiness Strategist Max Starkov, is that hotel owners and operators all of a sudden got stupid during the last economic downturn and ceded their marketing clout, their revenue management expertise and, most critically, a large chunk of their profits to the online travel agencies.

Starkov got the story half right. As he points out, the percentage of Internet hotel bookings the top 30 brands channeled through OTAs climbed from 24 percent in 2007 to 28 percent in the first quarter of this year. That means 72 percent of Internet reservations still funnel through brand websites, which is by far the most cost-effective distribution vehicle. This shift toward greater reliance on OTAs, says Starkov, has led to more than $5 million in “leakage,” or the revenues hotels give up to the OTAs in the form of commissions.

His warnings sound very dire, but I don’t believe the vast majority of hotel owners and operators have been conned, bullied or outmaneuvered by the OTAs. Contrary to their pirate-in-disguise reputation, Expedia and the other Internet travel sites are merely capitalist entities looking to maximize their revenues and profits—very much like all hoteliers. And, not coincidentally, Starkov’s firm is looking to sell its Internet marketing services to frightened and supposedly hapless hoteliers. And, as it turns out, we’re all capitalists.

Many hotel operators have upped their use of OTAs in recent years because business has sucked, and they need to fill rooms, not at any cost, but at a cost (25 percent is a typical OTA commission) that still leaves some profit for hotels. The oldest aphorism in the lodging industry still rings true: hotel rooms are perishable commodities that don’t hold over from one night to the next. Thus, a sale at a deep discount is usually better than no sale at all.

Sure, some operators (particularly independents without the benefit of chain negotiating powers with the OTAs) have succumbed to the lure and pressures of OTA promises and threats. But I believe most GMs, revenue managers and owners are smarter than Starkov gives them credit for, and they use the power of OTAs wisely and for the mutual benefit of both sides of the relationship.

It’s nice having the beleaguered airline industry to kick around. In recent years hoteliers have talked about the opportunity they have welcoming disgruntled customers coming from the nearby airport where they’ve been hassled, harangued and hit with additional charges, fees and maybe even a loose piece of luggage.

InterContinental Hotels Group is taking that a step further. IHG announced a new promotion that rewards guests by reimbursing their checked bag fees when travelers stay two straight weekend nights at any IHG property. The “Check it Free” promotion period begins Sept. 1 and runs through the end of the year.

“With Labor Day, Thanksgiving and the December holidays just around the corner there are many opportunities for weekend getaways, or even a week-long vacation,” said Del Ross, IHG’s vice president, U.S. sales & marketing.

Kimpton has a similar program it began a couple years ago when airlines first started charging for checked bags.

As much as the hotel industry likes to kick around its travel counterpart, there have been grumblings within this industry the past two years about the idea (and opportunity) of more ‘a la carte’ pricing and added charges for added services. There are plenty of examples of resort, Internet and other random fees that customers already love to complain about. Continuing that and adding more would be a mistake. Leave that to the airlines and hoteliers should continue to be the hospitable ones.

It wasn’t that many years ago, hoteliers would never even consider replacing wrapped bar soap and bottled amenities with dispensers. I think that time has passed, and many GMs and owners—and more importantly, guests—are ready to accept dispensers as the smart way to distribute hotel bathroom amenities.

As a recent post in Hotel Chatter reveals, hotels in all markets and segments are switching to dispensers. Dispensers makes sense on many levels: they’re cheaper, they’re certainly greener and, as a recent study shows, consumer sales of liquid soap have outpaced bar soap sales for a number of years. Most people use liquid bath products in their home so why wouldn’t they accept dispensers in their guestrooms?

I recently toured the prototype guestroom for Hilton’s new mid-scale extended-stay Home 2 brand. (The full-scale, completely furnished room is in a Hampton Inn in suburban Memphis near the brand’s headquarters.) In the bathroom of the new brand, which will debut later this year, are dispensers for bath soap and shampoo/conditioners.

Smart owners and operators will jump on the dispenser bandwagon. There’s no reason any more not to do so.

Sometimes the best evidence is anecdotal, and this may be one of those times. While most people in the hotel industry still believe financing is extremely difficult to find and, as a result, the hotel transactions market is at a standstill, there’s a lot of buzz lately that at least some deals are getting done.

In the last week alone, we reported on these transactions:

• FelCor’s completion of its $99-million purchase of the Fairmont Boston Copley Plaza,
• The acquisition of two Holiday Inns near the Denver airport by Stoneridge Capital Partners,
• Chatham Lodging Trust’s 13th acquisition since April, a $32-million deal for an Embassy Suites north of San Diego,
• Fairwood Capital’s purchase of an Embassy Suites at the St. Louis airport and
• RockBridge Partners’ purchase of a 197-room Four Points by Sheraton in Ann Arbor, MI.

And yesterday, Host Hotels & Resorts, the largest lodging owner in the business, said it plans to dive back into the public markets to raise up to $400 million to buy more hotels. Jones Lang LaSalle Hotels recently re-forecast its projections for the size of the 2010 transactions market. The firm now says hotel sales should total between $4 billion and $4.5 billion this year, up by nearly $1 billion over its previous estimate.

“The uptick in investment volume gained considerable momentum with deal volumes marking a rise for three consecutive quarters,” says JLL Managing Director Art Adler. “The outlook for hotel transactions is increasing favorable.”

This flurry of deals doesn’t mean you’ll probably be able to go out and get an 80-percent loan to buy that Hilton Garden Inn you have your eye on. In fact, much of the current deal flow is fueled by cash-rich lodging REITs who must consummate transactions to meet their investor obligations. But, like with most things in business, as the number of deals begins to increase, lenders will slowly develop a greater affection for the lodging market again, opening the money spigot that might even be wide enough for you to get funding for that Hilton Garden Inn. But don’t bet it will be an 80-percent loan. Those days are over for a while.

There’s a fascinating story playing out in Nashville, and I can’t wait to see how it ends. As you may remember, the Opryland Hotel was devastated by a hundred-year flood this spring that knocked the 2,881-room mega-convention hotel out of commission until some time this fall. It was a tragedy for Gaylord Entertainment, the hotel’s owners; the 1,700 workers who lost their jobs; and for the entire Nashville tourism economy.
But according to a recent story in the Nashville Business Journal, the company is turning disaster into opportunity. Led by charismatic CEO Colin Reed, Gaylord has used the three months since the hotel closed to build for the future, not look to the past. In a speech to local leaders last week, Reed says the company has nearly completed the flood cleanup, which caused $225 million in damage (in addition to $62 million in lost business so far.) And until the planned November reopening, crews will perform nearly $30 million in additional upgrades that were planned before the tragedy struck.
And the company’s sales team has been hard at work: Reed says the hotel has booked 300,000 roomnights from January to June of 2011. That’s a 10-percent increase in advanced bookings from the same date last year. Even more heartening was news the hotel has begun rehiring its laid-off work force.
The secret, Reed told the business group, was the company’s extensive disaster plan. And as he so eloquently said, “It’s absolutely stupid for organizations—it doesn’t matter how big or how small—not to be prepared for emergencies.”

Quick update to a story from last year on universal design. Rosemarie Rossetti, paralyzed from the waist down since 1998, is now two-thirds of the way toward her dream of building the Universal Design Living Laboratory.
It will be where she lives, and completely built using universal design principless, and also a national demonstration home open to the public. The UDLL, located outside Columbus, OH, was created to show the principles of universal design and green building concepts and how they can benefit not just those with disabilities, but everyone.
Rossetti has 143 international, national and local contributors who have helped make her dream a reality. Check out her site for more information and photos of the project.

I’m tired of upscale and luxury hoteliers trying to explain why it’s necessary to charge guests for high-speed Internet access. I’ve never talked to a business traveler who at some point in the conversation doesn’t bring up his or her hotel pet peeves, a list that’s almost always headed by hotels charging for Internet access.
Well, you don’t need to take my word for it, anymore. A new survey from D.K. Shifflet and Associates affirms my point of view: In a study of 400-plus business travelers, nearly 60 percent of them say they’re more likely to return to a hotel if it offers free Internet service. Free parking was a close second, followed by sound-proof rooms, smoke-free facilities and free breakfast.
Some hotel companies are beginning to see the light, although in small measures. Yesterday, for example, Hilton said beginning next month top-tier members of its Hilton HHonors program will receive free HSIA at all hotels in the company’s 10 brands. That’s a start, but Hilton and every other hotel company need to institute free Internet now. Everyone mocks the airline industry for its new-found passion for nickel and dimeing customers. The hotel industry shouldn’t fall into that trap.

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.”