CEO: Hotel fundamentals ‘the best I’ve ever seen’
 
CEO: Hotel fundamentals ‘the best I’ve ever seen’
07 JUNE 2011 6:51 AM

Hilton’s Chris Nassetta was emphatic in his assessment of the underlying principles of supply and demand in the global hotel industry during the “CEOs Check In” panel that opened the NYU Hospitality Investment Conference.

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NEW YORK—Industry fundamentals are as good as they’ve ever been. Hoteliers just need a little time before they start taking advantage.

That was the word from a select handful of CEOs from some of the biggest brand companies in the industry during the opening session of the 33rd annual New York University International Hospitality Industry Investment Conference.

“When’s the last time we’ve seen the dearth of supply in the U.S. like this?” asked Hilton Worldwide’s Chris Nassetta. “… The fundamentals (of supply and demand) are the best I’ve ever seen in my career. … In the end, the laws of economics are alive and well.”

Rates, however, have not been as robust. When asked why their respective hotel companies weren’t keeping pace with historic spikes in demand, the chiefs agreed it’s a simple matter of business cycle dynamics.

“This is a very natural transition in the cycle,” said Frits van Paasschen of Starwood Hotels & Resorts Worldwide. Hotels fill up, occupancy is starting to drive rates, and rates will begin to account for a larger portion of increases in revenue per available room, he added.

Group business—much of which was booked during the depths of the downturn—is slowing the pace of progress certainly, but even that business is beginning to show improvement, Nassetta said.

The panel’s consensus: Rates will continue to recover throughout the remainder of 2011 and into 2012.

There was a fair amount of consensus on a number of topics in the otherwise chippy interaction between the competitors:

Global growth
The company heads were noticeably agitated when moderator Lalia Rach, clinical professor at the NYU Tisch Center of Hospitality, called their respective product offerings “North American” brands.

“I don’t think of us as a U.S. company,” said Carlson’s Hubert Joly. Though based in Minneapolis, the company is conducting most of its development internationally, he said.

Nassetta shared a similar sentiment: “I spend most of my life these days out of the U.S. … We just happen to be based here, but the future of our company and the growth of our enterprise and our brands is going to be driven by the emerging growth in international markets.”

More than 50% of IHG’s pipeline is outside of the U.S.

Likewise, only two hotels in Four Seasons Hotels and Resorts’ pipeline of approximately 60 are in the U.S., said Kathleen Taylor.

Any expansion effort must take into account the needs and preferences of the local culture, she added.

“Business happens locally on the ground,” said Richard Solomons, who will assume the role of CEO for InterContinental Hotels Group on 1 July. He emphasized the importance of learning the intricacies of different markets when developing a brand presence—something that’s crucial in this ever-shrinking world.

In China—a country that received the lion’s share of attention during the discussion—IHG is working to develop a Chinese-specific brand for the Chinese people.

The other executives expressed no such plans, although each underscored the importance of tweaking the standard brand offerings to match the needs of the Chinese traveler.

Online travel agencies
With the tides of demand turning in favor of the hotel industry, the panel was much less contentious toward online travel agencies.

“The OTAs are just one more distribution channel,” Nassetta said.

When they’re managed effectively—great. When they aren’t—that’s when they become a problem, the CEOs agreed.

“They’re not going to go away. … when it’s incremental business, great,” Solomons said.

Diversity
Moderator Rach didn’t pull any punches when she pointed out the obvious lack of diversity in the top ranks of the global hotel industry. Pointing to her own panel as an example, she counted only one woman—Kathleen Taylor—compared to four white men.

Joly, Nassetta and Solomons pointed toward the continued progress their respective companies are making to rectify the issue. Joly, who admitted the efforts are still a work in progress, said nearly 50% of the Carlson’s “managers” are female. Solomons and Nassetta espoused the benefit of a diverse set of viewpoints in the upper ranks. “If you get the right combo of people with diverse ways of approaching the world and problems, you just end up with a better result,” the latter said.

But Taylor didn’t soften her assessment.

“I think we’ve got a long way to go,” she said, placing a fair amount of emphasis on the word “long.”

Women enter the hotel industry with vigor, but as they progress in their careers it becomes increasingly challenging to advance, she said.

“Some parts of how we think about our organizations are going to have to start to shift. … It’s not only women. … We have to make sure this industry is one that young people find attractive. There’s going to be a lot of competition for talent as we see the demographics shift,” Taylor said.

“It crosses gender lines. It crosses cultural lines. These are things we really have to think about longer term as we continue to build and expand globally,” she added.

The issue crosses national lines as well, van Paasschen said. As the industry becomes increasingly global, teams from the property level on up to the board of directors need to reflect that diversity.

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