Investment

Hotel CEOs: Government still a mess, but industry moving forward in 2013

23 Jan, 2013 By: David Eisen
 


 

The CEO panel, from left: Moderator, PwC's Scott Berman; Sofitel's Robert Gaymer-Jones; Choice's Steve Joyce; ESA's Jim Donald; and Noble Investment's Mit Shah.

LOS ANGELES—A panel of hotel CEOs here at the Americas Lodging Investment Summit were mostly bullish on the state of the industry, but wary of issues mainly out of their control, namely, governmental.

"The government issue is a mess," said Robert Gaymer-Jones, CEO of Sofitel, which will open 10 hotels this year. "Taxation is creating problems for individuals. How to pay for the debt?"

Mit Shah, CEO of Noble Investment Group, was similarly nervous about the role of the U.S. government on the industry. Obamacare, he said, would play a major role. "It's a wait and see truly about healthcare," he said. "Most companies provide healthcare to associates. What does it mean? Everyone is caught up in politics."

Beyond Politics
Notwithstanding what the government does, hotel heads believe the industry is poised to have a solid 2013. "Our outlook for 2013 is bullish," said Jim Donald, the former CEO of Starbucks turned CEO of Extended Stay America. Donald is known for turning around floundering companies and has a job to do now with ESA, which was brought out of bankruptcy in 2010 by a group led by Blackstone Group. "We've spent more than $400 million after the bankruptcy," he noted.

With robust demand a hallmark of 2012, according to Mit Shah, CEO of Noble Investment Group, 2013 should be a year to push rate. "There needs to be courage," he said. "We need to give people the ability to take risk in pricing. That's where the momentum will come from." Shah added that how this is done should be based on a market-by-market basis as "each market is very much its own, with their own demand generators," he said.

With regard to markets, Shah did say he was surprised at the rather dismal performance of Dallas. "It's quite conerning for us," he said, adding that, conversely, Boston "knocked the cover off the ball."

For Choice Hotels International, 2012 was also a great year, according to its president and CEO, Steve Joyce. "We turned the corner in 2012 and we don't know why it shouldn't go forward in 2013," Joyce said. "The leisure customer came back and employment was better. Our customers are sensitive to that. We had a strong summer and it continued into the fall. The end of the year was stronger than anyone thought. Our view, barring the unforeseen, is we should have a good year."

Brand Building
The brands continue to play a huge role in the industry, particularly due to their distribution power. "Our feeling on brands is that the power of the brands' reservation system and its ability to drive customers is really what's critical for us," said Shah. "In a specific market, which brand do we believe, through their channels, has the ability to take the yield of X and turn it into yield of X-plus?"

Inevitaby, talk of the OTAs crept into the conversation and Choice's Joyce, always outspoken about the issue, led the way. "Because Choice was first out of the blocks with a pretty public dispute, what it demonstrated to me was how relatively uniformly the industry felt about that distribution channel," he said. "I think the other big thing we immediately decided was we never wanted to be in a position where we could not walk away from not just Expedia but any distribution channel that was not a friendly one."

"We need to make it as simple as possible to book through your own distribution channels," Gaymer-Jones said. "The more complicated you make it, the more people will go through the OTAs."

Noble's Shah was vehement that the industry had to change how it operated. "It's the time in the industy when we have to challenge how we operate," he said. "Brands need to have a chief cost containment officer. Do we need concierge lounges? Indoor pools? Do we need them? Can't keep adding costs to business."

Tech Talk
There's no doubt that technology is and will continue to play a dramatic role in shaping the hotel industry. "Electronic is closing in on 10 percent of Choice’s business. It was zero five years ago," Joyce said. "You can't bet on one technology. The conclusion we came to is that you have to be in as many as you think make sense. You want to be in every navigational system, too. You want to make sure your hotel comes up."

"It's a matter of keeping up with it and trying to placate each guest that comes in with his/her various needs," Donald said.

Topic : Americas Lodging Investment Summit 2013

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