With live conferences on hold for now, Questex Hospitality Group (parent company of Hotel Management and the International Hotel Investment Forum) and AAHOA are partnering to present a three-day virtual event to share insights on optimizing hotel operations and ownership.
The first day of Hotel Optimization began with a statement from AAHOA President and CEO Cecil P. Staton, detailing how the industry is facing its greatest challenge in a generation. “The COVID-19 pandemic is putting hotels under a financial stress greater than what we witnessed after 9/11 and the 2008 financial crisis,” he said. “But we're a resilient industry, and we will come out of this crisis stronger than before.” Virtual meetings are a good way to stay connected during the crisis, he added. “But hospitality is not a virtual industry.”
Strength from Within
The first session, moderated by Hotel Management Senior Managing Editor Elaine Simon, focused on how hoteliers connect and communicate with their employees, especially as the industry returns and workers must make tough decisions about their careers and their safety.
The panelists—Chris Mumford, founder, Cervus Leadership Consulting; Jerry Cataldo, president and CEO, Hostmark Hospitality Group; and Vinay Patel, treasurer of AAHOA and founder, president and CEO of Fairbrook Hotels—all agreed that clear and accurate communication is the key to maintaining positive relationships between workers and management. “It's hard enough to navigate these unprecedented waters,” said Cataldo. “But if you're sitting there as an employee … without an idea of what's happening with their hotel with their positions, with protection, [personal protective equipment]—all kinds of questions and uncertainties that they have, it's even more stressful.”
Patel has visited the hotels in his portfolio and talked with GMs over Zoom and via text messages. “I'll say, ‘Hey, how's everything going? What's going on?’ And it just gives them a comfort level,” he said. More than providing comfort, he added, regular communication ensures that each hotel’s team knows what is happening from the corporate level on down, mitigating the spread of rumors. “The level of engagement that each of the property GMs has with their staff is absolutely critical,” he added. Likewise, owners cannot lie to managers or anyone else on the hotel team about what their situation is. “The ownership community, as a whole, should be transparent and truthful [about] what’s going on,” he said. “[Let] the staff know, ‘This is our situation, this is where we're at and this is what we're doing now.’”
In hotels and in offices alike, Mumford said, information would regularly be passed by people chatting in the hallways or the staff kitchens. “Now you've got to find other means of doing that same communication,” he said. Hostmark invested in an employee communication platform just before the pandemic, Cataldo noted, “so that's one channel that we use” in addition to Zoom.
“It’s difficult to project what’s the short-term normal versus what will be an opportunity to get back to close to what we saw before,” Cataldo said. “And that’s going to affect our teams and our staffing and how we do business.”
The second panel, sponsored by Crescit Capital Strategies, focused on finding financial strength in the downturn. Moderated by Jeff Diener, partner in the real estate department at DLA Piper, the panel examined how hotels are keeping the money flowing in and out in a simultaneous lockdown and financial recession. Tim Helliwell, international corporate banking director at British banking firm Barclays, cited the U.K.’s answer to the U.S.’ Paycheck Protection Plan, the Coronavirus Business Interruption Loan, as a popular measure for small and medium enterprises. This option provides up to £5 million for businesses that had been making up to £55 million in revenue for up to six years. “It is 80 percent guaranteed by the government, and I think, unlike the PPP scheme, here's no restrictions on how those funds are used,” he said. “So the loan can be used for general corporate purposes.” Also unlike the Paycheck Protection Program, this loan does not become a grant under certain circumstances.
Not surprisingly, new financings are very challenging for lenders, said Joe Iacono, CEO, Crescit Capital Strategies. “Very simply, they're trying to determine how to underwrite and what the appropriate level of operations and cash flow [are] to underwrite to make a loan. And given the sheer drop in occupancy, the uncertainty around the future, it's difficult for a lender to grapple with that.” Capital is available to owners to provide additional cash flow for the properties, he acknowledged, “but it's clearly not what it was, and it's much more challenging and there's less capital available.” Private lenders, meanwhile, borrowed money from banks to lend money to borrowers, but as their ability to access financing has become more difficult, they are no longer lending money. “So that leaves you with either banks [or] insurance companies, which have grown more conservative, understandably, as they grapple with how to underwrite,” he said. On the private side, borrowers are left with unlevered opportunistic capital—“which comes at a much higher price.”
Commercial mortgage-backed securities are a different matter, Iacono said. “The sheer volume of requests coming in to the servicers is daunting. They're not prepared.” One “very large special servicer” told Iacono at the beginning of the pandemic that the company had only two people dedicated to special servicing. “So, clearly a problem,” he said. "So that's one issue with regard to the CMBS. The second issue is these are extremely opaque and complex transactions that these loans have been included in, and there are multiple decision-makers that have to be contended with along the way, whether you see them as a borrower or not. They impact the ability of your special servicer or servicer to react to your request.”
Frank Croston, founding partner, Hamilton Hotel Partners, cautioned of more distress to come for European hotels because of deferred tax payments. ”As that unwinds, combined with the banks arguably wanting some greater servicing of their loans in a recovering market—but still a fragile market—we predict that's when the liquidity crunch will start to manifest itself and become a distress crunch,” he said.
Mark Kerrutt, hospitality VP, Ascentium, encouraged hoteliers to take advantage of reduced occupancy to renovate and upgrade their properties. “If you could borrow the money, you should do it. Finish the renovation. Get your hotels up to par, so when you're ready to open ... you're there and you can get better [average daily rates].” Still, he acknowledged, hiring workers in a downturn can be challenging.
Building Trust to Restart
The final panel, moderated by Katherine Doggrell, editor-in-chief EMEA, Questex Hospitality Group, and sponsored by NeoSan Labs, examined how hoteliers can make their employees feel safe with up-to-date procedures and policies—and what the record levels of unemployment across the sector will mean for shaping teams going forward.
The most important thing, said Biran Patel, vice chairman of AAHOA and partner in BHP Investment Co.—echoing comments from the first panel—is keeping open lines of communication between the workers and leadership. “[Keep] them informed of everything that we're learning as owners and management companies,” he said. At the same time, management must take all the precautionary measures recommended by the Centers for Disease Control and Prevention and other agencies.
Keeping a safe distance while working in a hotel can be a challenge, and workers will need to be honest with leadership about how they feel before arriving. “If you feel sick, we're not asking you to come in,” said Mark Ricketts, president and COO, McNeill Hotel Co., noting that the company tried using thermometers to catch fevers of arriving staff. “But you have unreliable readings, so we're somewhat dependent upon the associate and that he or she is being honest with us.”
The workers, Ricketts added, may be anxious about coming to work, particularly if they have families but don’t have child care available at home. So far, he said, McNeill hasn’t had to make “a hard decision” about any particular employee because it currently has enough staff to meet demand—but he implied that may change in the future. “We'll cross that bridge, I guess, when we get to it.”
Joel Carver, CEO, Carver Cos., suggested the industry would see three types of workers as hotels reopen. “We have people that are there and they're ready to go and they're taking every precaution they can,” he said. “We have some folks that are going to come back with limited concerns, but sort of soldier through. And I think we're going to have a level of people who don't come back at all because they may make the decision that this is just not the right industry for them. And I think we are seeing that already.”
The employment situation may be shaky for a time, and Patel noted the U.S. had experienced record-low unemployment not so long ago. “As things reopen, people who were already in the industry are wanting to come back, some still feel, I think, that they make more money through unemployment,” he said. “I'm glad that the government stepped in and said, ‘Hey, if there's a job back for you, then you're not eligible for unemployment.’ I think that will help employers out here in the near future, even though the pool of [potential] employees is becoming larger because somebody's laid off or furloughed. We can choose the quality of individual we want to rehire or bring new individuals on.”
A poll sponsored by NeoSan Labs gauged attendees feelings on cleaning products.
With regard to cleanliness and safety, which of the following do you prefer:
- Disinfecting with major brand products: 38%
- Disinfecting and verification testing with major brand products: 48%
- Cleaning and disinfecting with military grade, hospital grade products: 28%
- Cleaning, disinfecting, and verification testing with military grade, hospital grade products: 43%
Breaks during Day 1 of Hotel Optimization were sponsored by Ascentium Capital and AVIXA.