Speaking during the LodgingStream online conference, sources said while things are bleak there are still things hoteliers can be doing for the long-term health of their businesses.
REPORT FROM THE U.S.—How hoteliers handle the ongoing downturn will influence how much of a bounce back they enjoy during the recovery, according to sources.
Speaking during “The big comeback” session at the recent LodgingStream online conference, organized by Long Live Lodging, Crestpoint Companies President and CEO Kal Patel said his focus has been on keeping properties open, retaining employees where possible and finding alternative demand.
Being proactive in communicating has been successful, he said.
“We contacted local health departments and emergency management and let them know we’re here for the community,” he said. “We got responses at many of our hotels where we housed people from homeless shelters or folks who were involved in domestic violence.”
He said his approach was similar for employees.
“The best thing is to communicate with folks,” he said. “We started that with phone calls, then I went to each hotel to assure them we’re not going to shut down the building. That’s the first thing they asked when I visited every hotel.”
Staying open does not mean business as usual, though, with Patel noting his company has “downsized” its employee base, leaning on management staff to do more. The company has started to bring back some employees using Paycheck Protection Program funds and finding alternative uses of their time while demand is low.
“We’re hiring them back to do deep cleaning and preventative maintenance,” he said. “We want to get ready so when we see the recovery, we’ll be the choice of most guests traveling.”
He said returning employees are also spending more time on cross-training different disciplines.
Brian Waldman, EVP of investments for Peachtree Hotel Group, agreed scaling operations while keeping properties open will ultimately be a helpful approach. So far, his company has only shuttered two properties, one that is undergoing a major renovation and the other that is part of “a cluster of three hotels in the same location” he said.
“We’ve basically consolidated business from that one hotel to the other hotels,” he said.
Another group hoteliers need to be communicative with are lenders, Waldman said. He’s on both sides of that coin, as Peachtree oversees hotel management and development along with having a lending arm in Stonehill Strategic Capital.
“But when you’re working with lenders, be reasonable,” he said. “If you’re reasonable, then most lenders will be reasonable with you. If someone comes to (Stonehill) with a reasonable request (for forbearance or relief), we’re likely to work with them. But there’s another subset that are trying to (take) advantage of the situations and exaggerating things, saying they should pay no debt service for five years.”
Chad Sorensen, managing director and COO of CHMWarnick, agreed, saying his company advises clients to not go too far with their requests.
“We’re still trying to navigate those waters and understand what markets look like,” he said.
How to assist the recovery
Sorensen said there are several things hoteliers need to be doing to assist themselves for the ultimate recovery, including identifying what services can be appropriately scaled back to trim operating costs.
“I think we are, as an industry, going to see a scaled recovery, so we’re focusing on that and how do we provide the right minimalist services for the customer as we work toward building the business back,” he said. “There are a lot of pieces to that, and it’s important to put those plans to paper.”
It’s important to note, however, that best practices for handling this situation haven’t been developed yet given how unprecedented the situation is, he said.
“We’re learning every day, and it comes down to leadership,” Sorensen said. “Our clients are looking to us as the experts even though we haven’t seen this before. We need to play the role as the proactive ones in the room as everyone else is being reactive.”
Chris Henry, CEO of Majestic Hospitality, said hoteliers need to take stock of how drastically the employment and labor landscape has changed in a short amount of time.
“There are some deep, systemic questions we need to think about in this crisis,” he said.
But ultimately, he said there are still labor challenges that face the industry, and ongoing anti-immigration sentiment could ultimately put onerous restrictions on the potential labor pool.
“I think, long term, immigration has helped build our country—not just our industry but many industries,” he said. “And it’s not just the line-level jobs but management and more senior jobs. Can we still get good talent? New immigration (restrictions) target green card holders and applicants, not just illegal immigrants. We have to ask, ‘is this a solution to a long-term problem?’”
For the time being at least, it seems the select-service model is going to be the dominant one across the industry, panelists said.
Waldman said the fact that his company focuses on mostly select service and compact full service has been an advantage as it’s more “scalable” from a staffing perspective.
Sorensen said that is going to be attractive across the industry.
“In the full-service space, the reality is it looks like a select-service hotel in a full-service box,” he said. “I think consumers understand that.”
Hoteliers need to think big picture in their reactions to the crisis, Henry said, and that includes how they take advantage of things like government stimulus and aid. He pointed to cases of larger companies using things like PPP funds and the negative backlash that followed.
“Getting consumer confidence is going to make or break this industry going forward,” he said. “Both hotel operators, owners and brands need to be transparent about PPP money, and not use it for some kind of leveraged stock buyback on the side.”
Kate Burda, CEO and founder of Kate Burda & Co., said hoteliers need to be careful with their messaging to the public. She noted that consumer sentiment on hotel companies selling gift cards for future stays “falls flat.”
“For consumers, that feels like a pitch,” she said. “What’s successful is communications about their communities and interweaving your hotel in that story.”
Burda also stressed that hoteliers shouldn’t repeat the same mistakes of past downturns from a revenue management perspective.
After the last downturn, the industry “didn’t return successful,” she said. “Hotels used third-party (online travel agencies) and within revenue management, decreased rates to create demand. Revenue managers don’t create demand. They only manage established demand.”