Executives from IHG, Hilton, Alliance Hospitality and more spoke with Hotel News Now during the ALIS conference about how their companies are changing and growing to meet industry and guest needs.
LOS ANGELES—Hotel companies of all types are recognizing that today’s hotel operating environment requires constant change to keep up with guest trends and competition.
Executives from InterContinental Hotels Group, Hilton, Alliance Hospitality, LW Hospitality Advisors and Preferred Hotels & Resorts shared what their companies are doing to adjust for maximum profitability and growth momentum.
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IHG’s Maalouf talks tech, Kimpton
Elie Maalouf, IHG’s CEO for the Americas, said the company is primed for further expansion as it focuses on its asset-light business model. While IHG owns less than 1% of the 5,500 hotels in its system around the world, it has plenty of momentum for further growth, he said.
“We are now over one million hotel rooms open or in the pipeline,” Maalouf said. “A million shows the confidence of the industry in our brands and the growth we can bring.”
Of the rooms in IHG’s pipeline, 45% are currently in the construction phase, he said.
During a wide-ranging conversation, Maalouf also said technology is more important than ever.
“Our tech continues to fuel this success,” he said, specifically pointing to IHG Connect, the company’s Wi-Fi platform, as a technology that guests have embraced. “That’s the kind of technology that our guests want and our owners prefer.”
Approximately 1,800 hotels in the Americas region have adopted the platform, he said.
The importance of a robust distribution platform can’t be underestimated, according to Maalouf. In 2017, the company surpassed the $1 billion mark in revenue on its mobile platform.
Another milestone accomplished during 2017 was completing the transition of Kimpton Hotels & Restaurants to the IHG booking engine, Maalouf said.
“Every successful brand has to evolve with time,” he said. “(A brand) must stay true to its core … but also evolve.”
“With KHR in particular, every hotel is really designed … to succeed in that submarket,” he said.
Hilton CFO shifts focus
Hilton CFO Kevin Jacobs has slightly adjusted his role following the company’s early-2017 spinoff of its real estate assets in the form of Park Hotels & Resorts.
“Having less real estate to look after has made a little bit of difference,” he said. “My time allocation now focuses more on the core franchise business.”
Jacobs said his hotelier career has helped him immensely as CFO.
“Having an opportunity to work in this platform is really fun because it’s so powerful,” he said. ”I’m a deal junkie at heart—you always love the prospect of doing (mergers and acquisitions), but it’s also really fun to look at a business that can produce this kind of (return on invested capital).”
The biggest challenge for Hilton is keeping pace with the rapid change in the world, he said.
“You have to be really good at using technology to have a better relationship with the customer,” Jacobs said. “We need to remember we’re still a business of people serving people. The way that you combine those two things is what sets you apart.”
“The trick is if it just becomes all about automation and you get away from your core of people serving people, you could find yourself in a situation where your product becomes commoditized,” he added.
The company’s business has remained strong in all facets, including from an earnings growth perspective, Jacobs said.
“It starts with core performance in the business,” he said.
Jacobs said Hilton has completed its strategic transformation, including the spinoff of Park, which has been appreciated on Wall Street.
“We have a balance sheet in really good shape and a strong cash flow story,” Jacobs said. “It’s a complicated business but a pretty simple story.”
“We’re sitting here eight or nine years into recovery, (and) we’re just now getting back to capacity additions that are long-term averages,” Jacobs said. “Things feel pretty good.”
Alliance Hospitality CEO likes Delta brand’s future
Last year, Raleigh, North Carolina-based Alliance Hospitality Hotel Management opened the fourth Delta-branded hotel in the U.S. in the suburban Chicago city of Glenview, Illinois. Rolf Tweeten, Alliance’s president and CEO, said he likes the way the brand is heading despite parent company Marriott International giving it a little less attention than he was expecting.
“Certainly Marriott has taken a lot on in a short period of time,” Tweeten said, referring to the company’s acquisition of Starwood Hotels & Resorts Worldwide in 2016 and its acquisition of Delta in 2015. “They focused more on figuring out what they had in different buckets.”
“I do think that challenged Delta’s initial takeaway,” he said. “I also think that with the acquisition there’s lots of opportunities just being uncovered.”
The Delta Hotels Chicago North Shore Suites is at 100% revenue per available room index, according to Tweeten. The former Wyndham-branded property was completely renovated.
“We touched everything,” he said. “We’re the newest reinvented hotel in the market. I’ve had a lot of success with repositioning hotels, and the secret is it’s got to have strong bones and be in a market that supports an upward lift.”
The property earned “opening of the year” honors for the brand, he added.
The 255-suite hotel is the 10th hotel in Alliance’s portfolio, and the company is looking at various development sites, Tweeten said.
“We’re an owner/operator and also a third-party manager,” he said, adding that he likes to keep a 50-50 mix of owned and third-party-managed hotels.
“Because we have operated 70-some hotels in the last eight years, we’ve been in a lot of markets; we know a lot of people; we can find people to run hotels,” he said.
LW Hospitality Advisors: Asset managers need to measure metrics
Gary Isenberg, president of asset & property management services for LW Hospitality Advisors, is a believer in knowing the numbers.
“Whatever you’re tracking, if you put metrics behind it, it will get done,” he said.
Managing payroll expenses is an area in which better tracking could easily occur, according to Isenberg.
“No matter where you go, there’s always an opportunity to tweak payroll,” he said, adding that payroll represents between 50% and 60% of costs at a select-service property. “A 5% reduction of payroll at a 10% (capitalization rate) is $1.5 million in value. That’s what owners are seeing—finding those places where you can tweak to enhance value and enhance profitability.”
In addition, real-estate taxes and utility costs should be constantly monitored, Isenberg said.
At that same select-service hotel, reducing energy consumption by 10% can lead to $600,000 in property value, he said.
Steering away from high-cost distribution channels also is essential to drive hotel profitability, Isenberg said.
“When you’re in compression periods, why do you even have OTAs open? Because you’re just competing with yourself,” he said.
Isenberg said LWHA has seen growth for its asset-management business in the select-service sector.
“Institutional capital continues to move into that sector,” he said. “It’s about rooms and payroll and driving revenue.”
Preferred Hotels & Resorts: Expansion on horizon
Preferred Hotels & Resorts doesn’t see traditional hotel branding companies entering the soft-brand space as a bad thing as it looks to grow its 650-hotel portfolio around the world, said Jada Jackson, VP of strategic development for the Newport Beach, California-based group.
“How we view the environment today … it’s a compliment for hard brands to come into our space,” Jackson said, adding that the company celebrated its 50th anniversary on 29 January.
Owners who seek out soft brands such as Preferred are seeking relief from one thing in particular, she said.
“It’s been a great ride—everyone’s hitting their top line (goals),” she said. “But they are concerned with expense creep.”
Preferred, which Jackson said uses five-year agreements and has a 94% retention rate, is looking to expand into key markets where it doesn’t have a presence. Among the targets are the Pacific Northwest in the United States and the Nordic countries.
Many eager potential buyers have inquired about what properties in its system might be coming to market or which ones might need new management contracts, Jackson said.
“There are a lot of opportunities to put stakeholders into our properties,” she said.
The company provides a central reservations system, revenue management support and a loyalty program, among other things, she said.
“One of the reasons they come to us is the cost of brand loyalty programs,” she said, adding that Preferred’s method is to provide a reward certificate, with the hotel paying a 15% cost of redemption when the certificate is used at the property.
Shatterproof honors Corcoran, raises nearly $600k
Shatterproof, a national nonprofit organization dedicated to ending the devastation the disease of addiction causes families, raised more than $580,000 at a reception honoring industry veteran Tom Corcoran as the first Shatterproof Hospitality Hero Award.
Corcoran, president and CEO of TCOR Hotel Partners, is a member of Shatterproof’s advisory board.
“It was my privilege to receive this award, but more importantly, to help raise awareness and mission-critical funds for Shatterproof,” Corcoran said. “Our industry is disproportionately affected by addiction and helping to end stigma and talk about it at a high-visibility event such as ALIS (Americas Lodging Investment Summit) is extremely important.”
More than 40 hospitality companies joined together to sponsor the event during ALIS in support of Shatterproof and its founder and CEO, Gary Mendell, a former hotelier whose son Brian lost his life to addiction in 2011.
Studies have shown that the hospitality industry is affected by addiction at two times the rate of other industries, so Shatterproof’s mission is particularly important, according to the organization.
“I am blown away by the incredible support of the hotel industry,” Mendell said. “I could not be more grateful of my peers’ commitment to our cause. These leaders of the hospitality world embody the industry’s resolute support of ending the stigma of addiction, and they are truly making a profound impact.”