Editors recap the second day of The Lodging Conference with takeaways, quotables and more highlights from the event.
PHOENIX—Technology and consolidation led the discussion during the second day of The Lodging Conference.
During the “A view from the C-Suite” session, Hitesh Patel, chairman of Asian American Hotel Owners Association and owner of Capital City Hospitality Group, said the most important thing AAHOA members want from consolidated deals is the return on investment, a deal that makes sense and a seamless process.
“It needs to be a win-win for everybody,” he said.
When Wyndham Hotels & Resorts bought La Quinta Inn & Suites’ franchise and management business, some owners were concerned about how things would change, but Wyndham eased concerns by doing a good job of retaining La Quinta’s company culture, Patel said.
C-suite executives also emphasized technology, which tied in with Day One’s topic of the day: labor. Ken Greene, president for the Americas region at Radisson Hotel Group, said his company recently invested in a scalable system with a long life. The goal of investing in new technology is to help employees do their jobs more efficiently, he said.
Day Two recap video
Photo of the day
Quote of the day
“Competition drives innovation.”
—Keith Cline, president and CEO, CorePoint Lodging, during the “A view from the C-Suite” panel on Airbnb’s impact on the hotel industry.
Tweet of the day
Indeed, labor issues are keeping hotel executives awake at night. Nearly every panel discussion at The Lodging Conference addressed labor in some fashion—and for good reason.
With historic lows in unemployment, a lower influx of international workers and quite frankly the lack of a cohesive effort from within the industry to recruit quality candidates and pay them ultra-competitive wages, the industry doesn’t have much wiggle room on the labor front.
But after listening to hoteliers speak during this year’s conference, it’s clear labor is only part of a bigger issue that is giving owners fits. Rising costs across the board are wreaking havoc in the 2019 budget process. In addition to labor, rising insurance costs, utility prices, real estate taxes and many other expenses are giving leaders headaches.
By most estimates, these costs are generally increasing between 5% and 10%. While the industry’s fundamentals are quite strong—RevPAR has increased for 102 consecutive months, for example—the additional revenue isn’t close to covering rising costs. STR, the parent company of Hotel News Now, projects RevPAR growth of 3.2% in 2018 and 2.6% in 2019.
I’m no mathematician or accountant, but I do know there’s a problem if the cash coming in isn’t growing as fast as the cash going out.
That means some tough decisions are ahead for hoteliers. Tightening the belt isn’t necessarily a bad thing, but owners clearly understand that any cuts affecting the experience felt by guests is a big gamble that most of them will avoid until absolutely necessary.
Despite the lateness of the current cycle—nearing the previous record of 112 months of revenue per available room growth—hoteliers are making deals. They’re able to make deals because lending is still available, and the general consensus seems to be that it continues to be at a healthy, disciplined amount. Supply growth has slowed a bit. Occupancy levels are at record highs. Rate is actually increasing after an extended period of stagnancy.
All of these are signals to lenders that the hotel industry remains a stable industry for investment. However, that doesn’t mean lenders are just throwing money at any project that asks nicely. The days of buying a new hotel with no money down are long gone, as lenders, along with the rest of the hotel industry, generally are being careful not to repeat the same mistakes which led into the Great Recession. Capital is available, but only for the right deals.
The industry continues to do well, but no one is under the illusion it will last forever. Cycles do end. How harshly they end depends on any number of variables, but they do end nonetheless.
The hotel industry has been looking over its shoulder for something to upset the cycle or throw the economy into a downturn. Things are going too well, so something has to be coming to end it. But it hasn’t happened, so months of cautious optimism have turned, for the most part, to regular optimism.
That doesn’t mean anyone has forgotten what happened before. While things are going well now and should continue that way for quite some time, lenders and hoteliers want to be prepared so that whatever happens, they don’t take the same hit they did 10 years ago.
It seems like the tone around talk of Airbnb has changed since last year’s conference. Speakers on the second day of The Lodging Conference talked about the platform as being less of a threat and more of just another competitor to deal with.
One speaker even expressed interest in listing hotel rooms on Airbnb, which isn’t something I’ve heard from hoteliers very often over the last year or so.
It seems like hoteliers welcome the competition to continue innovation. One theme that hasn’t changed is the need for a level playing field. Competition is welcome, but hoteliers want Airbnb to follow the same rules they do.
—Danielle Hess, Reporter