PHOENIX—The view from the C-suite is one of unsureness. At least they are confident of that.
The overriding sentiment within the hospitality industry is that the current cycle has hit its latter stages, so, then, "What do we do now?" asked Naveen Kakarla, president and CEO of HHM.
One thing is certain, according to Kirk Kinsell, president and CEO of Loews Hotels & Resorts, "Whether you are in an up or down cycle, it's still always about the quality of your offering—the product. It’s about about pace and judging where you are."
"RevPAR growth is thinner," said Jim Amorosia, president and CEO of G6 Hospitality. "You are going to see opportunity where independent hotels will start looking for brands."
In judging the current state of the industry, Kakarla said he looks at four things: 1) consumer spending; 2) corporate spending, which is "where some of the stress has been," he said; 3) unemployment; and 4) GDP.
For Amorosia, who leads economy brands, it's the unemployment rate that he is vigilant of. "We try to ascertain if there will be a contraction or expansion in disposable income," he said. "When there is an expansion, we look at what you can do from a ROI standpoint. When there is a contraction, rather than looking at compression of costs, look at what you can do for the same amount of money for a ROI. Certainly, the horizon is not as clear."
What is intelligible is that operating fundamentals are slowing, which has a trickle-down effect, explained Best Western Hotels & Resorts president and CEO David Kong. "If you don’t have growth in occupancy," Kong said, "how can you have pricing power? That’s a leading indicator."
Kong went on to say that the only thing currently driving development is low interest rates, since construction costs are high and escalating.
Kong was more adamant on the topic of Airbnb, which he said is taking away affordable housing. "Commercial operators using these platforms is troublesome," he said.
Kong compared the advent of Airbnb to the rise of the online travel agencies in the early 2000s. "Don’t we all wish we did something to control OTAs back then?" he said. "There share is like 25 percent today. Look at the costs we are incurring."
Lessons on Loyalty
On the idea of loyalty programs, there were competing ideas. On the one hand, a proponent in Kong. "The loyalty program is crucial when trying to fight OTAs," he said.
In the economy space, however, Amorosia is not convinced. "We don’t have a loyalty program," he said. "The cost of those programs, which is embedded in the room cost, don’t really gain on the market. The key to loyalty is, when you get the guest through the door, how do you recognize them and thank them? Not only make their stay better, but give them opportunity to come back in the future. That can be done at a low cost."
"There is no question that loyalty programs are valuable," said Kakarla, adding that the notion of instant gratification in loyalty programs is a growing trend that is good. "They are great at knowing customers and driving repeat stays."
On the global front, Magnuson Hotels CEO Tom Magnuson said there is worry in the UK. "Brexit has put a chill on things. It's wait and see," he said.
The last word went to Best Western's Kong, who made a comment on the current election. "Whoever the next president is, he or she should have a cabinet position devoted to travel."