Hotel Optimization: Maximizing distribution, safety and revenue

As the summer leisure travel season ends with no fall business travel season in line to take its place, Questex Hospitality Group (parent company of Hotel Management and the International Hotel Investment Forum) and AAHOA partnered to present the second day of Hotel Optimization Part 2, a virtual conference with insights from industry insiders on how to survive and even thrive during the pandemic.

AAHOA Chairman Biran Patel welcomed attendees to the event and sympathized with the challenges facing hoteliers worldwide. “The economic fallout from the COVID-19 pandemic is hitting our businesses, our employees and our bottom lines hard,” he said. “We face numerous challenges on the road to recovery, but we are unified as an industry and we'll take them on together.” 

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Being Direct About Distribution

The first panel, moderated by Katherine Doggrell, editor-in-chief EMEA, Questex and sponsored by IDeaS, examined the ever-evolving relationship between hotels and online travel agencies as the push for direct booking becomes a search for whatever business can be achieved. 

Bookings, Patel said, are coming from both brand websites and OTAs. “In this time, where we're somewhat on the road to recovery, we're trying to get business any way we can,” he said. “As hoteliers right now just try to keep the lights on and pay the bills, as the forbearance and the [Paycheck Protection Program] are coming to an end ... [guests are] coming from various angles.” And just as hoteliers are looking for whatever bookings they can achieve, guests are looking for value. “If you're a loyalty member, you might be booking through, but if that's not important to you, then you might [book] through other avenues like OTAs to get the best rate possible.” 

Read about June's Hotel Optimization Day 1Day 2 and Day 3. Read about the Sept. 10 panels here and here.

Patel also noted a “rate race” among hotels as they compete for bookings and wait for further government support to stay afloat. “We're asking the government to give us a second round, because a lot of hotels—especially as [commercial mortgage-backed securities] are coming up—are struggling. And now we're asking even our lending institutions to maybe do interest-only, but how can we pay just interest-only? So we're trying to get any kind of revenue we can.” As such, he said, markets now matter more than a hotel’s flag when it comes to rates.  “Rates are being dropped, regardless of what brand you're in.”

Frank Reeves, CEO of hotel booking engine provider Avvio, recognized a disparity in markets for new bookings. “Excluding city-center properties, we're seeing a staggering increase in hotel website bookings from the domestic market,” he said, estimating more than a 200 percent increase in direct bookings through hotel websites, pacing ahead through next March. “In many cases, the surge in domestic demand has made up for the drop in international demand on the hotel side,” he added. 

Since the pandemic changed the way people travel, Reeves said, the booking journey has changed. “In January, a domestic booker on a hotel site typically [would] engage four to five times within a 24-hour period, from first engagement to making a booking,” he said. “That period has now extended to over eight days, and we have a doubling of the number of interactions on the hotel website.” Guests, he said, have new questions that an OTA might not be able to answer: “Things like cleanliness, what's open, what's not open. If you read about that hotel on TripAdvisor from six months ago, it's not necessarily the same hotel now. So we see a very different level of engagement between the website visitor, the guests and the hotel. But that ultimately is leading to a significant increase in bookings and hotels, sort of stepping away from just hammering everybody with a ‘book direct’ message, and stepping back and leaning into what that brand experience should really be.” 

London-based direct booking platform Triptease Chief Tease Charlie Osmond agreed, and noted a significant uptick in mobile bookings, as many as triple what it was in the not-too-recent past. “People are being more last-minute,” he said, “so perhaps [they’re] more prepared to book on mobile. But I also think it's just one of those shifts we've seen in so many parts of our lives. COVID has forced us to jump forward three or four years in innovation and the way we behave as individuals.” 

Is Your Brand Promise Squeaky Clean?

As the pandemic shuttered hotels in the spring, global operators were quick to offer cleaning protocols to reassure the customer and set themselves apart from their rivals. Moderated by Questex Hospitality Senior Managing Editor Elaine Simon and sponsored by Serta Simmons, the day’s second panel examined what steps hotel companies have taken to keep guests and staff safe.

Fouad Malouf, SVP of franchise operations at Red Roof, said that encouraging hotel employees to participate and get involved in the enhanced protocols not only ensures a safer environment for both employees and guests, but demonstrates the company’s commitment to a safe environment that guests would want to stay in as travel resumes. The company also is sourcing cleaning supplies that have been certified by the Centers for Disease Control and Prevention or the Environmental Protection Agency, he said, making sure that more than just the hard surfaces in a hotel are getting a proper cleaning. 

Tina Burnett, division VP franchise brand performance at G6 Hospitality, said hotels in her company’s portfolio have temporarily suspended housekeeping and other services like morning coffee in the lobby. “And we're fortunate that a lot of our properties are set up for social distancing,” she added, noting that the company’s exterior-corridor properties are suddenly very popular as people look for easier access. As the pandemic drags on, the company has maintained contact with both franchised and corporate hotels to make sure everyone is up to date about what needs to be done to maintain safety.

A lot of the seating in G6 hotels is hard-surface and easier to clean, Burnett added, but the company took the extra step of removing the bed coverlets and switching to triple sheeting. Housekeepers get dedicated bags for bedding to minimize contact between the beds and the laundry. 

AAHOA Vice Chairman Vinay Patel said that while all the brands have different protocols, they are all focused on making sure hotels are clean and safe enough for guests and staff. “As long as everybody's keeping themselves clean—or at least using antiseptic and whatever else they can—that would be the best way to ensure that we can ride out this pandemic.” 

The break in between the second and third panels was sponsored by Orkin.

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Refilling the Coffers

With the latest rounds of government financial support worldwide coming to an end, the day's final panel, moderated by Alphy Johnson, founder, International Hospitality Advisor, examined how hoteliers are keeping their doors open and their teams paid. 

“The first objective to refilling the coffers is the age old rule of [how to fill] holes,” said David Duncan, president and CEO of First Hospitality. “The first rule is stop digging ... As hotels are going through this downturn, stemming losses, recapitalizing and making sure you're not digging a deeper hole is probably the key first step here.” 

The initial loans like the PPP helped businesses in the short term, said Dilip Petigara, CEO of Access Point Financial. “But then as far as I know a lot of that PPP money is gone ... It was intended to fill a finite purpose.” A second round of PPP funding is “probably” needed, he added, echoing sentiments from AAHOA, the American Hotel & Lodging Association and other organizations, and the government may also need to step in to securitize CMBS loans as well. 

While people are waiting for restructurings and potential governmental assistance, Michael Sonnabend, founder and managing partner of PMZ Capital, reminded attendees that capital is still available from the private sector. “Before the pandemic hit in March, the hotel industry was flush with cash,” he said. “This has now shifted to investing in more distressed situations. We're seeing a lot of interest in preferred equity, which helps borrowers get through to the other side over the next couple years.” 

When travel ground to a halt, Petigara recalled, the economy extended-stay properties weathered the storm “a lot better” than the upscale and resort properties. “But we have seen an improvement, particularly the last couple months in the third quarter,” he added. “The upscale and upper-upscale have performed better [and] exceeded about 50 percent occupancy. I think industrywide we're just under 48 percent.” While hotels may be getting closer to a break-even point, he cautioned that the hole of debt service was still there. “You probably need another 15 or so percentage points in the margin there to be able to meet some of that requirement as well.” 

With drive-to destinations and leisure-focused properties outperforming urban business hotels, Sonnabend said lenders will be looking at those assets more aggressively. “They're shying away a little bit from those assets in downtown locations in larger cities that have higher fixed costs [and] often have the union labor to deal with,” he said.