4 tips to prepare for the inevitable end to the good times

Last week’s Lodging Conference brought with it lots of great news. As the CEO’s love to say, “The fundamentals are all in a good place.” And overall, everyone’s vibe was pretty positive. The overall cheerful mood much different than prior to the summer, when the air was peppered with more uncertainty.

Back in June, during the NYU Hospitality Investment Conference, walking around on the 8th floor of the Marriott Marquis, many folks were shaking their heads as if it were the end of the line. Yet, now, people seem more buoyant than ever. You know, the way they should have felt from 2013 to 2015.

The sheer positivity is great, albeit a bit strange. With every passing day we’re hurtling closer to the downturn in the cycle. Now, I don’t want to be a Debbie Downer, but I do want to take a few moments to help folks start thinking about that day when everything won’t be coming up roses. Here are four ways to prepare:

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1. Shift the conversation

The industry, myself included, have been pushing the good times so much, it’s easy to come away with the notion that doing the same thing in the future, will create the same results as the past. That’s simply not true. The operating environment is changing and we need to start thinking more strategically about the challenges the industry will be thinking about come late January when we all convene in Los Angeles for ALIS.

RevPAR growth is slowing and costs, especially customer acquisition and labor, are increasing. "The double whammy will squeeze NOI,” said Aik Hong Tan, principal at hotel management company Greenwood Hospitality Group. “There is not enough discussion on strategies to address these challenges. Smart operators are implementing initiatives to defend market share, mitigate cost increases and get better ROI on technology.”

Good point. And one where we should be putting more of a heightened focus on.

2. Revenue management

What are you doing to make sure you are putting up the right rates or, for that matter, getting the right mix of business? Technology is moving quickly and revenue management strategies from just a few years ago may no longer be effective. Now is the time to rethink this critical strategy and put resources behind a comprehensive plan that will ensure you can keep rates lofty as demand starts to abate.

According to STR, occupancy fell 0.2 percent to 66.9 percent in August 2016. While demand is expected to continue to rise, when new supply additions are added in occupancy is sure to dip. That in turn will make traditional pricing more difficult. A forward-thinking revenue management strategy will help placate some of those issues.

3. Build creatively

Think about how to add properties to the portfolio that are differentiated, not the same old, same old. A more independent-focused mindset will work here when combined with a dash of creativity. Take Coral Hospitality, for example. I spoke with CEO Lee Weeks and I am a fan of his approach. They co-manage the Margaritaville Resort in Hollywood, Fla., and it’s been a smash since day one. It’s a very defined brand with a massive following spawned by folks wanting to live the Jimmy Buffett lifestyle. They’re also working on a four- to five-diamond level project in Marathon, Fla., in the Florida Keys. It’ll have both a marina and a golf course and because of its unique location should also do very well in both up times and down.

4. Political interference

With economists predicting the economy will take a dip no matter which presidential candidate inherits the Oval Office, at least in the short term, it’s time to prepare. Additionally, the Fed is likely going to raise interest rates in December. They haven’t until now in an amazing case of presidential political pandering, but they’re boxed in a corner and are going to have to make a move.

Plus, both sides of the aisle seem more interested in slinging insults than getting anything productive done. So Washington is sure to be an impediment to success. I wish I had some great advice here to help you deal with this scenario; sadly, the only thing certain about government is the lack of certainty.

What are the issues you are most concerned about on a go forward basis? Email me at [email protected] or on Twitter and Instagram @TravelingGlenn and let me know your opinions.

Glenn Haussman is editor-at-large for HOTEL MANAGEMENT. His views expressed are not necessarily those of HOTEL MANAGEMENT, its parent company Questex Media Group, and/or its subsidiaries.

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