Rising labor costs a key concern at Hunter Conference

On day two of the Hunter Hotel Investment Conference, CBRE's R. Mark Woodworth discussed the historic trends around low unemployment and recessions. Photo credit: Chuck Dobrosielski

ATLANTA—Day two of the 31st annual Hunter Hotel Investment Conference here found executives focused on hospitality’s economic future, hotel technology, work culture and other industry concerns. Among the issues recurring at several sessions were the nation's low unemployment rate and the increased labor costs that the business is experiencing as a direct result.

The Numbers Game

Jan Freitag, SVP/lodging insights for STR, and R. Mark Woodworth, senior managing director at CBRE Hotels Americas Research, presented a data-driven look at the industry's future. Apparently riffing off the "cautious optimism" being expressed at the conference, Freitag predicted slow and continued growth in the future, but took the time to point out some figures indicating less-rosy possibilities.

Panelists sit next to each other on stage
[From left] Pat Pacious, John Murray, Elie Maalouf, Robert Burg and Kirk Kinsell discuss hotel trends and strategies during "A View from the Top" panel. Photo credit: Chuck Dobrosielski

With supply and demand at record highs, Freitag saw no issue with the industry’s ability to plan, finance and build hotels. Instead, he saw the greatest challenge rising from the 1 million open positions in accommodations and foodservice. With employers competing to fill these vacancies, wages will increase, he said.

Virtual Event

Hotel Optimization Part 3 | January 27, 2021

With 2020 behind us and widespread vaccine distribution on the horizon, the second half of the new year is looking up, but for Q1 (and most likely well into Q2) we’re very much still in the thick of what has undeniably been the lowest point of the pandemic. What can you be doing now to power through and set yourself up for a prosperous 2021 and beyond? Join us at Part 3 of Hotel Optimization – A Virtual Event on January 27 from 10am – 1:05pm ET for expert panels focused on getting you back to profitability.

While the conference thus far mostly has associated low unemployment with high wage costs, Woodworth identified the dynamic as a possible signal of a downturn. He categorized the current economy as in a high-pressure period, which historically has been followed by a recession, offering the possibility that a downturn could be around the corner.

Still, Woodworth did not forecast impending disaster. He cautioned there’s no way of knowing how far into the high-pressure period the economy is right now and acknowledged the possibility the similarities between the current period and historical ones may be caused by nothing more than a coincidence.

Overall, the analysts generally predicted slow and steady growth in the near term, with a small blip of a downtick in 2021. “It just means that we’re in a plateau; we’re not going to fall down the mountain on the other side,” said Freitag.

A View From the Top

The conference's "A View from the Top" panel of leading hospitality executives was moderated by Panther Ridge Partners principal Kirk Kinsell, who wrangled a wide-ranging discussion on topics that included staff turnover, brand saturation, franchising, artificial intelligence and competition with online travel agencies.

While much of the discussion about the low unemployment rate previously had revolved around the increasing cost of labor, IHG's CEO for the Americas, Elie Maalouf, saw another, more positive, consequence. “We should want low unemployment forever,” he said. “That means people have jobs. When people have jobs, they travel, they spend.” The important thing, he explained, is to manage the short-term effects of low unemployment, like rising wages, so that in the longer term the hotel industry can reap the benefits of a larger traveling base.

Looking ahead five to 10 years, Maalouf defined the most enduring challenge as: “How do you develop a culture and a purpose at your organization so people will come to work for you because of your brand, because of your culture, because of your purpose, not just because of your paycheck?”

John Murray, president/CEO and managing trustee of Hospitality Properties Trust, emphasized the high cost of turnover. To combat this, he recommended “programs not just to bring in new talent and to train new talent, but to establish that culture [so] that they want to stay.”

Robert Burg, president/COO of Aimbridge Hospitality, felt the best way to limit the effects of low unemployment is to reduce turnover and keep passionate, motivated employees working with the company. “That does come from having a culture. A culture being diverse, a culture being a great place to work, but most importantly, really, a path within the organization. We’re not going to fix this by raising wages.”

Choice Hotels International's President/CEO Pat Pacious agreed culture and talent retention are essential. To demonstrate this point, he described a visit he made to a Comfort Inn where the owner had had the property for 32 years and whose staff included employees who had worked there for more than 10, in some cases 20, years. “That’s a hotel that’s outperforming brands that are at the next chain-scale level up. But it’s all because he, as an owner, is taking care of his people and retaining them long term.”

Keynote Address

Thomas J. Baltimore Jr., the president/CEO and chairman of the board for Park Hotels & Resorts, received the 10th Annual Hunter Conference Award for Excellence and Inspiration and delivered the conference’s keynote address.

Echoing other executives at the conference, he said he believes the next few years look good despite the current elongated business cycle, while acknowledging the concerns around rising labor costs, property taxes and insurance prices.

[From left] Mit Shah, founder/CEO of Noble Investment Group; Thomas J. Baltimore Jr., president/CEO and chairman of the board for Park Hotels & Resorts; Lee Hunter, COO/Hunter Hotel Advisors; and Teague Hunter, president/Hunter Hotel Advisors; stand next to a portrait of Baltimore.

Baltimore added he welcomes the challenge that Airbnb presents, but emphasized the need for a level playing field. He also keyed in on sustainability, asking what it would look like within the industry, what changes would it involve and does it increase efficiency?

His also issued a call to action centered around the hotel industry’s need to include more women in positions of senior and executive-level management, as well as hopes for more female executives at the C-suite level. He noted more women would be likely to join a company with a female leader. “Women will want to join, to say: ‘She’s there, she’s a great role model, she’s somebody I can aspire to be,’” suggested Baltimore.

Flying the Flag

Brands were in focus during the "Flying the Flag" breakout session, with revenue management, the importance of scale and consumer trends key discussion points. Panelists included Eric Jacobs, chief development officer/North America-Marriott select brands, Marriott International; Julienne Smith, SVP/development and owner relations for Hyatt Hotels Corporation; Paul Sacco, EVP/president of global development at RLH Corporation; and Mark Williams, SVP/development for Radisson Hotel Group’s eastern North America development group.
The discussion included technology as well, with panelists examining ways it could help combat low staffing and high wage costs. Jacobs, for example, highlighted new types of ovens that allow for a smaller food-and-beverage staff. Sacco took this idea farther and suggested, with food apps like Grubhub and Uber Eats already out there, “Eventually you could see a time where even focused-service or boutique hotels [won't] really even need to offer a food-and-beverage offering because there are so many choices nearby.”

“I do believe, and if you ask owners across this conference, what’s one of the biggest issues of operating a hotel today, I guarantee you, in the first two or three comments it’s going to be labor,” said Jacobs. “We are struggling in this industry [to find] the labor to operate these hotels today. That will drive technology, that will drive innovation, that will drive robotics.”