Flexibility and focus will be required to get over the humps and drive revenue in 2017, according to hotel management executives.
REPORT FROM THE U.S. – Uncertainty over a new federal rule that would lower the threshold for overtime pay and potentially drive up labor costs is on the minds of many hotel operators. That, along with the constant challenge of staffing dynamics, makes labor a top concern heading into 2017.
But as these five executives from hotel management companies look to the new year, they also see opportunities to deliver great guest experiences and drive revenue—as long as they stay focused but nimble with their strategy.
EVP of Hospitality,
Chris Green, COO, Chesapeake Hospitality
Bob Habeeb, president, First Hospitality Group
director of operations and asset management,
president and COO,
What hiring and staffing challenges and opportunities do you foresee for 2017?
Shawn Gracey, EVP of hospitality for Key International: “Throughout the hospitality sectors, from luxury to limited service, associate engagement is a key differentiator. Offering competitive compensation, benefits and flexible work schedules has become the bare minimum; associates are looking for more today. The emerging millennial workforce desires engagement and seeks the value proposition, ‘what’s in it for me?’ In 2017, this group is searching for employers that fulfill these needs and provide a pathway to self-actualization—one’s full potential. We’re seeing a shift in employer’s mindset to provide associates with increased schedule flexibility and a well-rounded work experience.”
Chris Green, COO of Chesapeake Hospitality: “I expect, as always, that finding great people will be a primary challenge—I don’t see that changing. New supply in hot markets has created a talent drain in some areas and increased retention efforts on key talent has limited the active pool—and frankly, we have seen fewer people choosing hospitality as a career the past 10 years and we need to change that. I see it linearly—the supply of great hospitality people is tightening, while the demand for them is growing. As those two axes cross, we run into a staffing imbalance. Further, as (revenue per available room) moderates, and wages rise, properties will have to be very thoughtful about employment strategies. We are in the hospitality business and if your focus is skewed toward fiscal performance over service excellence, you will ultimately drive sales down to where you can handle them. Think about it.”
Bob Habeeb, president and CEO of First Hospitality Group: “Labor continues to be a concern in 2017 and coming years. Changes in the cost model driven by factors such as ACA, escalation in the minimum wage and the new overtime rules present a challenge. We are also seeing a generational shift in the workforce as the proportion of baby boomers, who stayed in the workforce longer than expected, continues to shrink and is being replaced by millennials and Generation Z, who are driven by a significantly different set of values. This could foretell continued difficulty in acquiring staff in the service sector in the coming years.”
Ben Kinseth, director of operations and asset management at Kinseth Hospitality: “We expect we will continue to see an extremely tight labor market in terms of finding applicants, hiring and maintaining employment of line-level employees. Employees have a lot of choices.”
Marc Potash, president and COO of RAR Hospitality: “The new overtime rules and continued minimum-wage increases are causing an even more diligent hiring process because the cost of hiring and training is now that much higher. It is also causing operational shifts as we determine if a manager should be hired at or above the new minimum salary threshold versus using an hourly wage.”
What is your strategy for revenue management headed into 2017?
Gracey: “South Florida has been (affected) by multiple adverse factors in 2016 that carry over into 2017. This year, our local market faced the Zika virus and Zika-designated zones in Miami/Miami Beach, an increase in short-term rentals in Miami-Dade (County)—reaching more than 15,000—and Hurricane Matthew. This upcoming year, there is a downward trend for group and transient travel. This shortfall in pace will create a very competitive market for hotels/resorts to try and offset the shortfalls in group business by pricing their rates to drive transient demand. Dynamic revenue management will be key to maintaining a company’s competitive edge and fair share of (market penetration index, average rate index and revenue generated index).”
Green: “We have a nimble, elastic and expansive strategy. When it comes to strategy for revenue management, you absolutely cannot set it and forget about it. Every day is different, so manage it that way—exploit any lack of focus in your competitive set. If you haven’t already, see what worked in the last cycle shoulder periods and attack there. History always tells a story, and we all had areas of success even after 9/11 and the banking crisis. Exploit those areas by changing sales deployment. Attack your aspirational set. The CFO at every major company will be looking for opportunities to hone financials the next few years (travel costs); the business at your aspirational set is at risk for them and available to you. Group is still a huge opportunity, too, as is F&B performance. We will intensely focus on all revenue opportunities.”
Habeeb: “The operative strategy in 2017 will be vigilance. Market conditions continue to shift, and supply growth remains a concern. It will be critical to evaluate changing conditions logically and respond appropriately without overacting and dropping rate, which only triggers a race to the bottom.”
Kinseth: “We anticipate some deterioration of occupancy in a lot of markets where new supply has come online or is about to come online. Maintaining year-over-year revenue level is the goal in a lot of markets. Certainly a great sales effort combined with thorough revenue management so we ensure we sell into occupancy need dates as well as continue to drive rate.”
Potash: “As occupancy has peaked in many markets, we are budgeting relatively flat occupancy growth with ADR growth of 2% to 3%.”
What changes have you noticed as far as what guests want and need, and how do you plan to deliver on that in 2017?
Gracey: “I’ve noticed that as the hospitality industry continues to evolve, guests are seeking a more complete experience through the duration of their stay and are increasingly looking to travel outside of the normal attractions and dive into the local offerings. Rather than dining at famed restaurants and engaging in standard activities for that destination, there’s been an emergence in creating authentic memories by venturing ‘off the beaten path.’ We are encouraging our associates to tell the local story and share their sense of place for guests to achieve that experience they’re here for.”
Green: “Other than the increased focus on the experience being hyper-local and experiential, I believe guests still want the basics done right. Transactional ease from booking to departure, surety of performance from a hotel that is exceptionally clean, well-maintained, and professionally managed, lightning-fast internet, a great night’s sleep and, of course, unique and interesting food and beverage. At Chesapeake, we focus on the exceptional delivery of the basics—establish a strong framework of systems and controls, create an extraordinary culture and your people will take care of your guests.”
Habeeb: “Technology continues to drive guests’ expectations. That is the case on every front, from the way that consumers buy our products to the way that we can use technology to deliver the guest experience. We can expect this will be a trend that will continue for the foreseeable future. We can’t even conceive today the breadth of technologies that have not yet even been invented and how they will drive guest behavior. Think about all of the innovations of the last five or ten years and how our lives are so different today because of them.”
Kinseth: “Service, points, product and reliable technology—we will continue to deliver these with great new hotels or well-renovated hotel product in partnership with the best brands.”
Potash: “Travelers are increasingly independently minded and look to technology to remove perceived impediments. This includes ease of use with technology, such as seamless Wi-Fi with the ability to stream content, ample electric outlets to charge multiple devices or mobile entry and the ability to bypass the front desk. It is crucial to work with the brands to ensure compliance while gaining buy-in from owners who will need to pay for the capital investment.”