Hotel executives who participated in a Hunter Hotel Conference leadership panel touched on confidence with scale while staying relevant, consumer spending, catering to baby boomers and more.
ATLANTA—Brand launches and mergers-and-acquisitions activity continue to dominate the hotel industry, as scale and muscle in certain segments have been top of mind for many industry leaders.
InterContinental Hotels Group, which launched Avid Hotels in September 2017, has signed about 75 hotels since its year-end earnings call, according to CEO of the Americas Elie Maalouf. During the “Presidents’ panel” at last week’s Hunter Hotel Conference, Maalouf said the company’s goal is to have more muscle through targeted scale.
Are there too many brands?
When panelists were asked if there are too many hotel brands, the consensus was no—as long as the right energy and discipline are applied to each brand to keep it differentiated, distinct and meaningful, Maalouf said.
“By the discipline and the process, I just don’t think the industry will ever have too many successful brands … If a brand grows to scale in a market, it must have met some customer need, met an owner need or hopefully both,” he said.
Maalouf added he’s less concerned about whether the industry has too many brands and more about if IHG has the brands that will be most successful in taking the greatest market share.
Geoff Ballotti, president and CEO of Wyndham Hotel Group, agreed that relevance is key, which is what excites him about Wyndham Worldwide’s pending $1.95-billion acquisition of La Quinta Holdings’ franchise and management businesses.
Ballotti said La Quinta is a consistent brand that franchisees love, but he admitted it’s all about what’s popping up on the street corner.
“We don’t want any of our brands tripping over each other,” he said.
From an owner’s perspective, David Marvin, founder and president of Legacy Ventures, said the emergence of new brands is two-sided.
He considers hotels to be one of the most underdemolished real estate classes, and the introduction of fresh ideas and assets makes sense. But when brands start to “reach for their handle, using owners’ money, not theirs” to introduce new amenities or design dimensions, it can come across as aspirational or unproven, he said.
The bottom line is new brands are great, Marvin said, but there needs to be constraint.
Patrick Pacious, president and CEO of Choice Hotels International, said his concern is if a company reaches up to 30 or 40 brands, then you almost start to become an online travel agency.
Once too many brands come into play, some could move down in the pecking order, he added.
“Can the brand company continue to maintain the focus on the various brands and really make sure they’re not just driving owner returns, but also keeping the brands relevant?” Pacious said.
Consumer confidence at a high
Panelists agreed there is demand for existing brands, as evidenced by revenue per available room growing 96th consecutive month, according to Jan Freitag, SVP of lodging insights at STR—parent company of Hotel News Now.
Consumer spending is at a high and unemployment is at a low, Maalouf said. The only thing he’s keeping an eye on is consumer debt, which could trickle down.
On top of that, Pacious said some other positive signs come from the nearly “10,000 baby boomers retiring every day,” he said.
“Those people have a lot of discretionary income … they’re going to spend it on travel. And a lot of that is going to be leisure travel,” he said. “So there’s a lot of midscale hotel performance. … That’s going to be a real positive for the industry and for our brands.”
A look at the horizon
The decline of international inbound travel to the U.S. is still a concern, panelists said.
“It’s not helping,” Ballotti said. “I think you hear all this talk on the loss of market share and it’s become more pronounced over the last year.”
And for about the last two years, Ballotti said, the hotel industry has been losing share. Global inbound travel to the U.S. dropped 100 basis points for the first time in 2016, then fell another 100 basis points at the end of 2017.
Ballotti stressed it’s critical to get in front of Congress, letting them know just how important it is to maintain Brand USA.
“We should all be talking about how important Brand USA is,” he said. “Thank goodness the demand has been as strong as it’s been on domestic travel to make up for that, but we need to gain back that loss there.”
Guest experience still a priority
When building a new hotel, Marvin said he doesn’t necessarily think hotels always have to keep “experiences” top of mind, but in reality that’s what the hotel industry is all about.
Marvin said Legacy Ventures has worked to add more to the food-and-beverage experiences.
And the increase in baby boomer travel is one thing he said is pushing him to spend more time on creating these unique experiences.
“The days of commodity travel, at least on a discretionary basis, are over,” he said.