The second day of Hotel Optimization Part 4—a virtual conference sponsored by Questex Hospitality (parent company of Hotel Management and the International Hotel Investment Forum) and AAHOA—examined the latest trends in lending, hygiene, revenue and technology.
The Lending Landscape
Moderator Patrick Whyte, editor-in-chief of Hospitality Insights, started the first panel of the day with a look at the lending landscape, which Lori Tirado, managing director, head of business development at Access Point Financial, said has “evolved a lot” over the last 18 months.
“It's easier today from a sense that people are now willing to look at hotels,” Tirado said. While many lenders shut down their hotel platforms (commercial mortgage-backed securities lenders have effectively closed on a lot of banks that were overexposed with hotels), more lenders are cautiously getting back in the space as the economy continues to open up. “A lender’s willingness to move forward on a hotel deal is going to depend largely on their appetite, the specific market and strength and overall experience of the sponsor,” she added. If a deal is cash flowing based on a trailing-12-months statement, a traditional lender might be willing to look at it. “But they are few and far between, and will be much more conservative and with pricing generally wider than what we've seen pre-COVID.”
AAHOA Vice-Chairman Vinay Patel agreed, noting that banks are not lining up like they did 18 months ago. “The terms are a lot different, loan to values are a lot different, interest rates are a lot different,” he said. “Looking ahead over the next 12 months, you don't know which direction it's going to go. It's obviously going in a positive direction, but how much positive?”
Scott Melby, an associate at Driftwood Capital, estimated the market currently has 125 players looking to invest in hospitality. “People are getting priced out of multifamily [development] with the interest rates and cap rates that are being associated there,” he said. Offices are a question mark, he continued, while retail is largely unchanged. “With the continued positive news that we're getting with the hotel and the overall broader recovery, lenders are starting to dip their toe back in the market.”
“If anyone's underwriting 25 percent occupancy, they're not doing deals,” said Nick Baer, VP of business development at Stonehill Strategic Capital. The company, he said, treats underwriting differently whether it's senior debt, mezzanine debt or perpetual bonds. “We're only offering prep for partnerships that we feel comfortable with, and with senior [debt] we can feel a bit more lax in some of the underwriting standards.”
Hygiene at the Forefront
The day’s second panel examined how cleaning protocols and standards have evolved.
Fouad Malouf, SVP of franchise operations at Red Roof, said travelers will continue to demand enhanced cleaning, and hoteliers will have to continue to meet those expectations. At the same time, Red Roof, like most other companies, reduced housekeeping services to every three or four days unless guests requested otherwise, and that policy likely will continue. “Our guests may demand differently, and we'll just have to adapt and evolve accordingly.”
Drew Allison, SVP of operations at Island Hospitality Management, pointed out the ongoing labor crunch, and suggested that staff shortages may determine a hotel’s ability to clean stayover rooms. “This pandemic gives us an opportunity to get our guests used to that,” he said, noting that travelers got used to paying for checked bags and meals on planes, and could get accustomed to less-frequent housekeeping as well.
Heidi Wilcox, president and CEO of First Call Hospitality, agreed that reduced room cleaning for stayovers should remain the norm for the time being. “We are working with brands, so we have to make sure that we apply and meet their expectations,” she said. “However, the staffing issue is a priority and we have to make sure all of our checked-out rooms are taken care of as well.”
Taking Advantage of Revenue Streams
The third panel of the day brought several management companies to discuss best practices and strategies in terms of distribution and pricing.
Olympia Hotel Management started organizing a 14-day forecast that the team updated every day, said Lori McNaught, the company’s senior director of revenue management. While the forecast initially helped support staffing challenges as they adjusted to fluctuating occupancy, the team ultimately found the system helped their sales and revenue management process. “We were able to see in real time, every day, who was booking, who was still staying at hotels [and] where the leads were coming from. And then we were able to share that across our entire portfolio and get synergy to help other topics.”
Cassie Bond, VP of revenue strategy, Chesapeake Hospitality, said her company’s revenues went to zero “overnight” at most of its hotels. “And when your title has ‘revenue’ in it, that can be pretty alarming,” she said. The company decided to focus on cash flow and top-line revenue—which was challenging because many properties in the portfolio cater to group business. The team found success in marketing suites to leisure travelers as corporate demand dried up. “We were able to get solid ADRs for them, so we changed our whole marketing approach. We put [the suites] out on social media. We changed our pricing patterns with them. We taught our systems to leverage these suites first, and it was really successful across our hotels,” she said.
Throughout the downturn, McNeill Hotel Co. kept an eye on what was bringing travelers to each region and property, said Jennifer Driscoll, VP of revenue management at the company. “And then we would sit down and talk about that as a team.” The team started holding weekly phone calls with GMs and representatives of the sales teams and revenue teams. “And we talked about the best practices—what's working in your area? What have you done to find business? How can we replicate that more?” The conversations proved helpful, and the company plans to continue holding the calls as business returns to normal.
Technology Transformation
The day’s final panel examined how hotels have taken to new technology, and what high-tech trends will have staying power.
Jeff Edwards, SVP of property, owner and enterprise products and platforms at IHG Hotels & Resorts, said 75 percent of the company’s applications are cloud-based, including Concerto, which supports its guest reservation system. “That really enabled us to pivot—as we all had to do as the pandemic took hold,” Edwards said. “Having that platform really helped us roll out capabilities quickly.” As digital check-in became critical, the team was faced with rolling the capability out to 4,000 hotels in the Americas alone. “‘Quick’ and ‘4,000 hotels’ [don’t] usually go in the same sentence,” he noted. But having cloud-based systems made it possible to reach a number of properties in the portfolio, with 3,500 getting the technology within 90 days. “Digital check-in is here to stay,” he added. “Certainly guests like it and they'll continue to use it. But I think having that platform in place and our ability to pivot quickly really made a lot of difference for us.”
Rami Zeidan, founder and CEO of Life House, said his company’s approach has been to automate anything that doesn’t add value to the guest experience, from accounting and finance to revenue management and even certain human resources and administrative functions. “And so we were a little bit ahead on those fronts. Our [profit and loss statements] have higher margins from the get-go.” During the pandemic, the company launched an Apple TV application for in-room fitness. “We partnered with local yoga studios to record exercises directly in those rooms and then just upload them into our [content-management system], so we're able to actually give curated workouts given their different room types, which scales pretty well across our portfolio.”
Dream Hotel Group launched Alfred, a “COVID-conscious” tuxedo-clad delivery robot, at the Dream Hollywood in Los Angeles. The robot can call an elevator, ring a guestroom doorbell and greet guests by name as it brings towels or toothbrushes. “It’s been wildly successful,” said David Kuperberg, the company’s chief development officer. “We're actually in the process of ordering a second one.” The robot handles the more “mundane” delivery tasks that rarely result in tips for employees. “So nobody's upset about it, and they can really focus on the guest experience.” When guests order a bottle of champagne, however, a human being brings it to the room. “That's a special experience and a robot just can't do that.”