It seems every day we wake up to news that feels compelling yet also disturbing. The past several years have created a distorted reality for businesses and consumers alike that is different from anything we have seen in recent history. Add in the potential risk of global sociopolitical instability and it becomes clear that as the hospitality industry recovers, the path will be inconsistent and unpredictable. Distorted reality likely is our new normal.
The current state of U.S. consumers shows the rising cost of living as many Americans dip into their savings to weather the storm. Inflation rose 9 percent in June from 8.6 percent in May, demonstrating that inflation likely has yet to peak. This, in turn, may affect how consumers spend their hard-earned wages. Many are delaying large purchases, and any money saved during COVID was likely spent as pent-up demand led to travel to see loved ones or simply get out of the house.
On the flip side, the New York Times reported that U.S. job growth and its acceleration in July across nearly all industries had restored nationwide employment to its pre-pandemic level, despite widespread expectations of a slowdown as the Federal Reserve raises interest rates to fight inflation.
In the hospitality industry, average daily rate is higher than ever and hoteliers are willing to forgo full occupancy. Who can blame them? Hotels still struggling with staffing issues appreciate the breathing room with fewer rooms to clean and prepare.
From a company transaction perspective, we’ve seen a market shift that rewards value instead of growth. Factors such as multiple compression, when a company’s earnings increase but its stock price doesn’t move in response, impact the market, particularly the big brands. High inflation, rising interest rates and the increasing cost of capital are all signs of a slowing economy and a potential recession. On a brighter note, layoffs due to a slowing economy may mean more talent will be available at better rates.
Indicators are both up and down—leaving us in uncharted territory.
Meetings and Events Return but are Different from Before
If you have traveled recently, you likely have witnessed the increase in airport traffic. Whether for leisure or business, people are back on the road. Convention centers and meeting venues have reopened as the drive for face-to-face meetings continues, albeit different than usual. Many events are smaller, may have regional components and often focus more on the attendee experience. Yet, variant coronavirus strains continue to unsettle an already cautious traveler.
The American Hotel & Lodging Association recently reported that 2022 is the year of the “new” traveler. Bleisure travel, the blending of business and leisure travel, exploded during the pandemic. In return, a profound shift in consumer attitudes and behaviors significantly impacts hotel operations.
The report says that hotels across the country are continuing to dig out from the past two years, representing a collective loss of $111.8 billion in room revenue alone. A partial recovery in 2022 will not be enough to allow hotels to completely pay back lenders, fully rehire staff, invest in delayed property improvements and refill business cash reserves. A global head of asset management for a large ownership group summed up his sentiment by saying, “the hospitality industry is operating in the best of times, yet the worst of times.”
Second quarter earnings calls from leading brands indicate ongoing trends. Shorter booking windows continue and revenue is up based on price versus occupancy. A new business segment also is starting to appear. As companies embrace a hybrid work model and release commercial real estate space, they need a place to bring their teams together. Meeting planners and hoteliers are working together to determine how to best meet the evolving needs of groups.
That being said, history has shown us that the industry should be doing worse and travel should be declining as inflation and other external pressures continue to rise. And while business travel isn’t expected to recover completely in the short term, the need to enjoy the company of others, engage in face-to-face meetings and come together at industry events is stronger than ever.
Follow the Data to See Through the Distortion
As we make our way through today’s distorted reality, it will become critical to turn to data patterns to better understand the way forward. Data trends for the meeting and events industry are an excellent marker to determine the industry’s health. We know that meetings and events bring greater profit for many brands, especially with leisure travel declining as summer winds down and we head into fall.
Leaner teams continue to make it difficult for on-the-ground sales personnel to devote themselves to selling activities and it has become challenging to staff sales positions with experienced candidates. Today, hoteliers must not only be nimble and patient but also need to accept the fact that the days of single segment sellers, or sellers who book and walk away, are behind us. Hotels need utility players who can hunt, close, service and then retain business—and they need to be able to do it across multiple market segments.
Buying behaviors are also evolving. To be successful, sales teams, regardless of size, will require easy-to-use tools that allow them to make informed decisions. The most successful sellers are using data to track market and account changes so they can respond quickly. Ultimately, the right tools and actionable data insights in the hands of the right sellers will allow asset managers and owners to increase productivity and enable growth.
Leveraging data to gain insight and better understand how your competitors and prospects have changed will be vital to succeeding today and into the future. Keeping an eye on these trends can also inform asset value and when and where to place the most value. Providing access to reliable data will make sales teams smarter, faster and more efficient because it will help them focus and provide them with a clear path to where and how to spend their time.
Having data at their fingertips also will allow sales staff to start building relationships with local companies that have, or are looking to, downsize their brick-and-mortar footprint. Today’s meeting reality includes a need for flexible space—space for training, working sessions and social events. Hoteliers that leverage data to respond to these needs will come out ahead of the competition.
Finally, large brands are learning that building solutions on their own can be expensive and difficult to maintain over the long haul. Working with data partners to ensure a property is running smoothly and efficiently is vital.
Moving Forward with Optimism
It’s a never-before-seen environment that we are facing. However, one thing is sure—the hospitality industry is resilient and adaptable. Our philosophy of serving others drives us and keeps us focused on the guest, delivering a well-deserved positive experience.
So, as we have done before, we move forward with grace and commitment, a need to plan and a willingness to change the plan. Agile execution enabled by actionable insights derived from data will help the industry maneuver through this distorted reality.
Jeff Bzdawka is CEO of Knowland.