Executives on a panel at the 2018 Lodging Conference discussed what keeps them up at night, with labor being a main concern.
PHOENIX—The hotel industry is on a good track that seems unlikely to end any time soon, according to executives, but that track is not without its bumps, and key among them are labor challenges.
On the “A view from the top” panel at The Lodging Conference this week, hotel company executives said they need to find ways to deal with wage issues, and attract and retain talent.
Dave Johnson, chairman and CEO of Aimbridge Hospitality, said labor is the worry that most keeps him up at night.
“Labor, labor, labor. I think it could be the one thing that really hits us hard,” he said.
Cost of labor was “up almost 2.9% in August—that’s the highest in a long, long time, and I think it’s going to continue to climb,” Johnson said. “We do need to get bipartisan support to do something, or we’re going to derail our economy.”
Katherine Lugar, president and CEO of the American Hotel & Lodging Association, said “doing more in making sure hotels are a great place to come and build a career is absolutely fundamental,” adding that AHLA is working on this through different initiatives, such as a workforce development program and “piloting a cost-free college initiative.”
Liam Brown, president for North America of select- and extended-stay lodging and owner franchise services at Marriott International, also emphasized the importance of getting the word out about the hotel industry being a good place to work.
“We need to do a better job of (touting) the benefits of our business in terms of career goals and opportunities. It’s a great business. Many people in this room started out in very minor jobs, and we’re particularly proud of the fact that 70% of our managers (moved up the ranks),” he said.
Wages are a major part of the labor issue. Lugar said minimum wages are increasing at the local level, but it’s not a big priority in the White House.
“We do believe federally they will look at a change in the overtime laws. That is likely very imminent,” she said. “As far as minimum wage increases, it’s just not part of the dialogue in Washington.”
Dealing with competition
Moderator Don Landry, owner of Top Ten Hospitality Advisors, asked the panel “what the next Uber was to our taxi business,” referring to new threats to the industry, and asking specifically if co-working spaces could be an issue.
Eric Danziger, president and CEO of Trump Hotels International, said many people like to socialize and learn from each other in collective workspaces, which many of the brands have picked up on.
“I don’t see any of these as a threat. … The job that we have is we can’t stop that, so how do you play in that field and win?” he said.
The industry wants a level playing field for those involved, particularly with Airbnb. Lugar said the industry is getting closer to that as cities take action with regulations on short-term rentals.
“What we’re seeing right now around the country is that policymakers really at every level of government, but particularly in cities, have begun to understand and take action,” she said. “When it comes to disruption of neighborhoods, when it comes to the disruption of affordable housing supply, a whole host of safety (issues) … (and) integrity of neighborhoods that were meant to be predominantly residential, we now in just the past few months have seen (new laws) pass in San Diego, Boston (and New York City).
“If you look at the markets in (Los Angeles) and Washington, D.C., both city councils are set to vote in the next month, and what that means now is when you look at the top markets around the country, most of those top markets have (taken action), and we think that’s the right thing to do.”
Inbound international travel, other concerns
Another focus of the U.S. hotel industry should be to bring back inbound international travel, speakers said.
Lugar pointed out the U.S. “is losing market share on inbound international travel,” and has “gone from 13.6% of the world’s market share coming to the U.S. to 11.9%.”
Johnson agreed the industry needs to work on attracting more visitors to the U.S., adding that another concern for him is the impact of the trade war between the U.S. and China on the hotel industry.
“I worry about the trade wars because I think Canada will cave, Europe’s going to cave, Mexico already caved, but China (and the U.S.), they are not good partners. It’s a delicate balance. … It’s like the drug and the drug addict; we both need each other.”
David Kong, president and CEO of Best Western Hotels & Resorts, said he’s worried about hotel costs going up.
“What I do worry about is the cost escalating tremendously for our hotels. You heard about inflation earlier; you know that distribution cost is going to keep rising. … I’m not worried about the revenue side of the equation, I’m worried about the cost side,” he said.