3 ways the hotel industry is changing
03 JUNE 2015 8:45 AM
NEW YORK CITY—J. Allen Smith has a problem.
“I keep feeling: ‘What should I be worried about?’” the president and CEO of Four Seasons Hotels and Resorts said Tuesday during a general session “The leaders forum” panel at the 37th annual NYU International Hospitality Industry Investment Conference.
“You’re mindful of a plethora of risks. None of them seems to be materializing in a way that seems to be disrupting anything, but you have to be mindful of them,” he said.
Smith’s comment succinctly summed up the sentiment on Day Two of the NYU Conference. With the industry hitting on all cylinders, it can be difficult to find things to be concerned about.
Difficult, but not impossible it turns out, as top leaders from around the industry discussed their biggest concerns in this part of the cycle. One of the recurring themes throughout the three-hour long series of morning general sessions had to do with how the hotel industry itself is in transition.
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“We’re in the midst of a demographic and psychographic change,” said Kirk Kinsell, president and CEO of Loews Hotels & Resorts. For example, “A year ago, I don’t think we could have spelled Airbnb.”
Following are three ways the industry’s top executives see change occurring in the industry and how they are dealing with this new reality.
1. OTAs powering up
The most Twitter-friendly quote of the conference might have been uttered by Jim Abrahamson, CEO of Interstate Hotels & Resorts. Abrahamson was discussing the proposed merger between Expedia and Orbitz and what a team-up like that might mean for the hotel industry.
“We’re under attack right now,” he said. “We’re under direct attack. We’ve got Expedia and Orbitz planning a merger. They have 75% of the online marketplace. This is like the Klingons and Romulans teaming up together.”
David Kong, president and CEO of Best Western International, said he is not surprised to see consolidation among online travel agencies considering that some hotel companies are consolidating, too.
“Seventy-five percent of the U.S. market seems like a lot,” he said during a session titled “The leaders check in—part two.”
“You can almost create a monopoly,” Kong said.
Cyril Ranque, president of Expedia Lodging Partner Services, had his opportunity to respond to the allegations. Panel moderator Adam F. Weissenberg, global travel, hospitality and leisure at Deloitte & Touche, asked Ranque if it’s true the OTAs would control three-quarters of the online global marketplace.
“It’s 5% of the global travel market,” Ranque responded, drawing scattered laughter from the audience.
2. The guest experience
Kinsell said it’s becoming too easy for hotel executives to become bottom-line-driven and forget about what is at the heart of every hotel: a supreme guest experience.
“There’s a focus on efficiency and market share and not the guest experience,” he said. “As a brander and an operator, it’s about (revenue per available room), (earnings before interest, taxes, depreciation and amortization) and yields. I think we as an industry are in all of the places that (customers) desire, but I also think we’re in denial. The guest experience is fundamental to our business.”
Simon M. Turner, president of global development for Starwood Hotels & Resorts Worldwide, agreed with Kinsell’s assessment. He said executives should be careful not to rely blindly on a property’s guest satisfaction index scores.
“You can get blinded by a heck of a lot of science there,” he said. “It’s important to be actually getting out into the markets and talking to the people, talking to guests every day. Saying, ‘Here are what the numbers say; walk me through this.’ Looking behind the numbers is just as important as looking at the numbers.”
3. Starwood’s future
With Turner as a participant on “The leaders forum” panel, moderator Scott D. Berman, principal and industry leader, hospitality and leisure at PricewaterhouseCoopers, couldn’t resist bringing up the rampant speculation over the future of Starwood Hotels since its April announcement that it was launching a strategic review process.
“The media is having some fun with this,” Turner said. “It’s an interesting story. It’s the nature of the world we live in now, where shareholders have a voice. And they should.”
He added: “Will (Starwood) have a different ownership structure in the future? Time will tell.”
Kinsell offered some words of advice to Turner and his Starwood colleagues.
“Stick to what you do and do it well,” Kinsell advised. “You can’t be consumed by external forces, many of which are fabrications in other people’s minds, or change for the benefit of other peoples’ agendas. You have to stick to your own agenda.”
Berman asked Four Seasons’ Smith if his company might be interested in scooping up Starwood.
“Oh God, I have no idea,” he answered. “I spend very little time speculating on that sort of thing. I have enough challenges of my own to worry about.”