Hotel Management, with parent company Questex Hospitality Group and AAHOA, this week presented the third Hotel Optimization virtual event—four panels of industry insiders discussing the present and future of the industry, and sharing advice for moving forward.
AAHOA President and CEO Cecil Staton greeted attendees by acknowledging the challenges the industry has been facing. “But there is light at the end of the tunnel,” he added, noting not only the new COVID-19 vaccines on the market but the Biden administration’s goal to vaccinate 100 million people in 100 days. “It's our goal to help you position your business for success and return to profitability.”
Stick or Twist
As the pandemic drags on, many investors are unable to pay their loans and banks are struggling to continue extending credit.
Bank balance sheets are in better shape now than they were during the early stages of the great financial crisis, said Sarang Peruri, COO, Oxford Capital Group and partner, Oxford Hotels & Resorts, although banks are being “extremely selective” in what debt they take on. “It has to be the markets that they like with the sponsorship they like.”
Read about June's Hotel Optimization Day 1, Day 2 and Day 3. Read about the September panels here and here and here.
Brian Waldman, EVP of investments at Peachtree Hotel Group, said the company’s Stonehill debt fund is seeing strong activity in what he calls “runway capital,” where a good borrower has a good asset that isn’t overleveraged—but the buyer lacks the cash liquidity reserves needed to keep the asset going. “We can come in in a preferred position and provide some additional ‘runway capital’ to get to the other side of this,” he said.
A Crowded Market
But what is appealing to a lender in this market? Half of HEI Hotels’ portfolio is core branded hotels while the other half is in the soft brand and independent space, said Rachel Moniz, EVP of operations. “There are still customers buying in their lanes, if you will,” she said. Brand contribution is “relatively high” at 55 to 60 percent of the contribution—“but it's all leisure,” she said. “Consumers are more attracted to the soft-branded hotels that are in markets that maybe aren't as rigid in terms of the restrictions, or the hotels have some kind of activation that's more appealing.” Core hotels, meanwhile, are more dependent on business travel and group guests, she said, which likely will require a longer recovery period.
As hotels launched new brands in recent years, there was concern that an already competitive market was becoming more competitive, especially as developers signed up for new products like Hilton’s Tru and IHG’s Avid, said Biran Patel, chairman of AAHOA and partner at BHP Investments Co. Now, he said, the sheer number of brands under the different umbrellas is causing consumer confusion—“and then there's no major differentiators at times,” he said. “As we're navigating the road to recovery through this pandemic, we're going to see more of an impact of all these brands that have come up and development that's happened.” As a solution, he suggested downgrading properties, taking underperforming midscale assets into the upper-economy segment instead.
Technology—Are You With IT
The day’s second panel examined how hoteliers can use technology to lower their bottom line.
“Our industry has to adapt,” said Neal Patel, treasurer at AAHOA and managing partner for Blue Chip Hotels. Hoteliers have until recently been able to pick and choose which technologies they want to incorporate and take their time as they decide, but during a pandemic, he said, the decisions have to be made faster and many of these technologies are now mandatory. While brand standards are driving some decisions, he emphasized that hotel owners now are taking the initiative on their own. “We know that these are unprecedented times and we have to step up and get the guests’ confidence back. At the same time, you have to make sure customer service stays the same or better than before. And that's what we're focusing on.”
Scott Strickland, chief information officer at Wyndham Hotels & Resorts, said his corporation has two distinct customers: the guest and the franchisee. “The perfect world is when a technology investment benefits both of them,” he said. In a time of crisis, guests want cleanliness, flexibility and safety in their stays. “The franchisee is looking for safety, as well—for their staff [and] for themselves because many of our franchisees suddenly became owner-operators.” While they may have been more remote in the past, he explained, desperate times call for business professionals to step up, so owners are rolling up their sleeves to run their assets. “They're invested,” he said.
As demand spiked over 2020, Strickland said, Wyndham accelerated some initiatives that it had not planned to work on until this year or next. For example, while the company was already invested in boosting its mobile platform, it pushed the rollout of contactless payments “immediately,” he said. The next update of the Wyndham app will include both Google Pay and Apple Pay capabilities for guests. “That'll be great, because it's one less interaction point for everybody that's involved there,” Strickland said.
The Next Generation
Brian Kirkland, chief technology officer at Choice Hotels International, expects 5G to be an “interesting driver” for where guest expectations go in the future, affecting on-property networks and guest devices alike. “There's a lot of evolution happening that's powered by the cloud, and the cloud is making it possible for some extremely advanced technologies to become mainstream—things that weren't possible before,” he said. “We didn't have enough staff to go off and build machine learning and AI capabilities and virtual assistants and all these capabilities.”
Patel agreed, and suggested 5G technology will help lower costs at hotels. “We may not even need Wi-Fi going forward,” he suggested. “Everyone has a cell phone, and 5G is much faster than what we're currently offering [so] no one's going to be using our hotel Wi-Fi and we'll be saving huge costs.” Patel also sees good value in technology that helps hoteliers manage their teams. “You input all your employees on there, and it automatically schedules them and automatically texts them [their schedule]. And if someone cannot make it, [the program will] automatically replace them, and text the next person in line.”
Five years from now, Patel said, traditional cable will no longer be needed in hotel rooms as streaming services dominate both at-home and in-room entertainment. “That is the future, and that is a low-cost technology, and the [return on investment] is going to be so much higher when you see the savings on it.”
Property-level technology was Wyndham’s top investment in both 2020 and will be again in 2021, Strickland said, noting that the sector is consuming roughly 40 percent of the company’s total capital IT budget for both of those years.
Check back tomorrow for coverage of the next two Hotel Optimization panels.