Speakers on a panel of presidents at the Southern Lodging Summit had positive things to say about leisure demand and even pricing power, but underlying concerns about the industry’s labor picture has them worried.
MEMPHIS, Tennessee—Industry leaders speaking on a general session panel at the Southern Lodging Summit in Memphis this week were optimistic about current hotel demand and performance trends, but couldn’t stress enough that labor issues are having a real impact on all aspects of the hotel industry.
On the positive side, speakers agreed leisure business has done a lot to keep overall industry fundamentals on the positive side.
“Leisure business has been very strong for us the entire year and summer was especially strong,” said Terri Haack, president of Terranea Resort in Rancho Palos Verdes, California. “Rate is up, revenue is up, and the leisure market is up.”
Prem Devadas, president of Salamander Hotels & Resorts, said his company has been able to drive a lot of rate this year based on strong leisure business. He cautioned, however, that “on the flip side, the group side has been flatter, and (flatter) on ancillary spend, adding that “groups are booking but being a little tighter on their programs.”
Rajiv Trivedi, president of Wyndham Hotel Group’s La Quinta Inn & Suites brand, spoke about the direct correlation he sees between positive GDP growth in the United States and discretionary income for citizens, which they’re spending on travel.
However, the U.S. “has not been able to capture the fair share of international travel,” he said.
Strong leisure demand, tempered by some of these issues, has hoteliers walking the line between holding rate and raising it, panelists said.
“I always take a more conservative view, and I’m cautious about what may happen in the future,” Salamander’s Devadas said. “Part of it has to do with this year being a little more tepid than we might have thought with the economy. We’re being careful with expenses. You’re already seeing inflationary costs almost outpace growth, so we have to resist the temptation to grow expenses.”
Haack agreed. “The middle of the P&L is under pressure right now,” she said. “How do you still grow rate? Cost of acquisition continues to rise, as does cost of labor if you can find labor. And particularly for properties with large (food-and-beverage) revenues, that labor pressure is even higher.”
Panel moderator Isaac Collazo, VP of performance strategy and planning for InterContinental Hotels Group, asked the panelists if they thought hotel brand companies are creating incentives for operators to drive occupancy at the expense of rate.
Mark Ricketts, president and COO of McNeill Hotel Company, said it’s difficult for properties to trust when they can best raise rate, particularly in light of some brand initiatives.
“You’re trying to bring that (guest) to book brand-direct and hope you’re saving on cost, but you’re losing some rate on top of that,” he said, referring to rate breaks now offered to some loyalty program members who book direct.
“We’re seeing that the window of booking has narrowed,” he added. “You have to trust the system. As an operator, you want to jump in and say, ‘I need to lower rates to get occupancy,’ but I think that (shorter) booking window has played with our confidence.”
Trivedi said operators must trust their revenue-management systems and play the long game.
“Occupancy brings security; ADR brings profit,” he said. “Revenue management has become a science, and today’s systems knowledge is forensic. What you have in front of you and what the brand gives you provides you tremendous opportunity to maximize your revenue. Ultimately, the idea of building loyalty through your brand will bring more profit to your bottom line. I think the fair balance of having assurance of a certain occupancy and then going after rate is a good policy.”
The labor issue
The panelists spent a lot of time talking about how they and their companies have changed their approach to employee recruitment and retention to deal with today’s labor challenges.
“We have to be very creative; we have to understand how our associates want to work,” said Haack, who employs more than 1,300 people at Terranea. “We’re using hot scheduling so employees can switch shifts between themselves. We’re trying to give leeway to them if they want to build their careers.”
Another key part, she said, is “understanding and allowing your mid-level supervisors to be far more tolerant with the labor force, to help them be what they want to be and still deliver luxury.”
Ricketts said his company has taken a “more holistic approach” to employee retention and recruiting. McNeill created a video to help express the corporate culture and spread that word.
“We also look now at not just the first 90 days (of a person’s employment), but even more,” he said. “Are people still getting the training they need? That’s our big focus for 2019. And we have to practice culture as well as make sure it happens.”
Trivedi said La Quinta also places a high value on workplace culture.
“Do you get the opportunity for someone to come to your hotel (to work) and truly learn your culture and core values?” he asked. “The majority of turnovers taking place are at less than 90 days. We don’t have enough of a pool of people to choose from to find the right candidates.”
He added the hotel industry as a whole has to be more vocal about its challenges.
“It’s important to unify and put time and efforts into strong lobbying for our nation’s leaders to understand the labor challenges we have,” Trivedi said. “If these aren’t resolved, it can become a catalyst for a future downturn. Culture is great. Retention is great. Training is great. But we need an opportunity to find the right people and educate them.”
Haack said understanding employee motivations is similar to understanding guest motivations, and in both cases, getting at the core of why a person wants to be there is critical.
“We focus a lot on the guest and profile to understand why they’re (staying with us),” she said. “The group guest can always turn into a leisure guest later on, so we focus on how we impact their experience as part of a group, and that will translate back into that person becoming a leisure guest.”
Those experiences at Terranea include everything from the guests’ arrival to food and beverage, activities and more, she said.
Ricketts said it’s important for hotels to find touchpoints to interact with guests, especially when they’re not luxury resort properties with a lot of those moments built in.
“For the longest time, the gatekeeper (of the hotel) was the front-desk agent. Now that we have digital key, guests don’t even have to go to the front desk, and we miss that opportunity (to interact),” he said. “It’s challenged us to get into the breakfast area now and get our managers there to interact with guests and have a touchpoint.”