While hoteliers would like to see a return to a robust demand environment sooner rather than later, asset management experts said it will be important to embrace cost-cutting measures to ensure a return to profitability.
REPORT FROM THE U.S.—Every dollar owners spend must go further as hotels look to bounce back from a prolonged crisis, sources said.
Speaking during the “Asset management—bottomline strategies” session of the CHRIS+HOLA Connect conference, Rob Smith, EVP of operations, full service and resorts, for Aimbridge Hospitality, said his company is focused on saving as much money as possible.
Smith said Aimbridge’s efforts around cost containment, which are aided by its massive scale, focus on everything from procurement to curbing costs imposed by brands.
“We need to make sure as we reopen these properties that we keep the owners in mind and that we are very careful as we add back certain brand standards and certain value creations that have been added over the years and with how we re-engage our staff levels,” he said. “We need to make sure that we take this as a white paper, so that we can reopen and return to profitability even before we return on the top line.”
How brands handle capital expenditure requirements and property improvement plans going forward will be key, Smith said. He noted his company has been “strongly encouraging” ownership groups that are struggling with liquidity to do improvements right now because “there’s not a better time to renovate than right now.”
“I don’t think we’ll see wholesale changes in the capital approach for the long term, but one of the things we found in the Caribbean is as owners pared down operations and either closed or substantially closed, their utility bills did not reduce or go away,” he said. “I think you’re going to see a lot of (return on investment) projects to address utility concerns going forward.”
Even in a period of low demand, Roland Mouly, principal for Hospitality Advisors, said owners are aware of what can be done to drive the top line, and much like cost-cutting, that could be dependent on working with brands. He said it’s important in this environment to make sure hotels are working with the right brands.
He anticipates there could be a flight to the top brands with the strongest distribution platforms even from more medium-tier brands that were doing fine before the pandemic.
“With all this fighting for the same top line and trying to drive revenue from all sources, this is going to be an interesting situation,” he said. “And some distribution sources, like the (online travel agencies), might become very important for the next 12 months because groups, incentive and conventions business is not going to be the focus.”
Hotels have had to pivot to find revenue where they can. Rick Pastorino, CEO and principal of RevPAR International, said that its more vital in regions like the Caribbean, which have been hit hard by the travel slowdowns related to the pandemic and are likely to have a longer path to recovery due to a dependence on international air travel. He said a property he works with in the Caribbean has had some success in pivoting to new types of demand.
“Once the island lifted the restrictions on movement, even on the island with their residents, we promoted staycations, and had some very good success with ... the local population,” he said. “The other thing that one of the hotels did was offer rooms for isolation from expats and others coming back to the island for whatever reason and having to stay there for a two-week period.”
When more typical airlift will return is an open-ended question, Pastorino said. He said islands in the Caribbean will have to focus on easing the process of traveling and helping make the process for travelers to safely and comfortably get to resorts and hotels simpler.
“We're encouraging the hotel staff, and ownership if they're local, to be working with the local government and the local tourism departments just to make sure that everybody's on the same page relative to not overburdening the guests,” he said. “Because depending on how the protocols are put into place and what the requirements are, it could dissuade a lot of people from even attempting to come to that country or to that island versus another one that may be easier and with less friction to get in and out.”