PHOENIX—At 25, The Lodging Conference has a new look, a new home and what feels like a record-breaking number of attendees making the annual trek here to Phoenix, where they were greeted at the opening night’s reception by very non-traditional thunderstorms, lighting and a bit of hail.
Maybe the ghosts at the Arizona Biltmore were unhappy.
Not so the event’s producer and president of The Conference Board, Harry Javer, who co-founded TLC with the late Morris Lasky, who passed away in 2015. Since then, Javer has been pushing the envelope on attracting greater numbers of attendees, the success of which necessitated the move out of its traditional home at the comparatively intimate Waldorf Astoria resort to the expansive JW Marriott Phoenix Desert Ridge.
And while storm clouds impacted the start of this year’s TLC, the mood inside—as the industry heads toward 11 years of continued positive growth—remained upbeat and largely optimistic, although there were some expressions of concern for an as-yet-to-arrive downturn in the cycle.
“Nobody really knows. Nobody has a crystal ball. We certainly didn’t know in 2007 [what would happen in 2008]. So my advice is: Just enjoy it while it lasts,” said Javer.
Regarding a paradigm shift, speaker Bernard Baumohl, chief global economist for The Economic Outlook Group, noted, “What you need is a confluence of negative events of such a magnitude that it would ultimately derail the economy. And we just don’t see it.”
Presenting their perspective on where the industry stands during the “View from the Top” session, moderated by Top Ten Hospitality Advisors’ Don Landry, was a quartet of industry players: Best Western Hotels & Resorts CEO David Kong, Accor CEO/North and Central America region Heather McCrory, Hospitality Investors Trust CEO Jon Mehlman, and MCR CEO/Managing Partner Tyler Morse.
In looking at what is impacting the industry, the so-called trade wars between the United States and China and other geopolitical events were cited.
“If I think about the trade wars and Brexit and all these other events around the world, they can all have an impact on the economy, which can ultimately affect our industry,” said Kong. “But I’m not too concerned about all that because if you look at the stock market it’s actually very buoyant; it’s approaching an all-time high as we speak. So, the economy seems to be okay. I’m much more concerned about the overbuilding situation…we have a lot of new hotels coming up and that’s putting a lot of pressure on occupancy to begin with.” He added other concerns, such as labor, are in the mix.
“What we need to do at this point is help the hotels broaden their customer base so we have better protection when the downturn [comes]…we’re helping hotels through renovation so if they have a quality product they can better weather a downturn,” said Kong, noting training toward better efficiency also is among supports being offered owners. “In short, we’re trying to find ways to increase the revenue and decrease costs at the hotels, and at the same time plan for a softening of the industry.”
Mehlman felt the industry “is at an inflection point in the capital markets as well as in the REIT business. We are in a single-night business…we change our prices every day, and for the first time in about 25 years, we can’t correspondingly shift the rising expenses into our rate. Normally you can push that $2 or $3 into your rate and get it back; it’s not happening.”
He observed austerity on expense management could be a catalyst. “We preach it every day,” said Mehlman.
Morse suggested hotels should not be owned by public companies. ”It’s crazy; it’s the most volatile asset class in the real estate space. It’s one-day leases. Everybody checks out at eight in the morning and you don’t know whether they’re going to come back, at the end of the day. A storm rolls through; RevPAR gets crushed.”
Preparation a Plus
Sometimes being prepared can make all the difference and McCrory was asked what type of tools Accor has in place to help with planning and associate retention should a slowdown occur.
“Obviously, service levels are key and that’s what you want to drive, but your labor can be managed around that and I think Unifocus (Accor's labor-management system) is a great management system that allows you to do that and manage it on a weekly basis…our visibility into the future is less and less now with everything that’s going on, but you still can predict what’s happening and I think on a weekly basis a labor-management system really helps you with that.” She added the company also put in an app that’s attached to the Unifocus system to better engage young associates and managers.
Asked about dealing with “bad behavior” or potentially negative situations created by outside contractors, particularly in the area of labor, Morse emphasized, “If you want to control your destiny, you can’t outsource your destiny to somebody else…When you talk about labor and service levels and managing labor costs…I’m fascinated by a industry that promotes a race to the bottom in terms of service levels. The industry as a whole wrecks its own margins on a regular basis by continually adding services regardless of the product type. This industry is not comfortable in its own skin with the product that it’s currently putting out. My best example is texting; everybody wants to text their guest now. It costs a fortune to text your guests all the time…we can’t just keep layering on new products in a flat RevPAR environment.”