The Lodging Conference: Labor, trade and hotel supply top list of concerns

Pictured from left: Liam Brown, president, franchising, owner services and MxM select brands, North America, for Marriott International; Eric Danziger, CEO of Trump Hotel Group; Dave Johnson, chairman and CEO of Aimbridge Hospitality; David Kong, president and CEO of Best Western Hotels & Resorts; Katherine Lugar, president & CEO of the American Hotel & Lodging Association; and Jon Mehlman, president & CEO of Hospitality Investors Trust. (Uncertainty is back on the menu at this year's Lodging Conference, but usual suspects Airbnb and online travel agencies are taking a back seat this time around.)

PHOENIX—Uncertainty was back on the menu at The Lodging Conference this year, although usual suspects Airbnb and online travel agencies were not the plat du jour this time, with industry insiders instead pointing to the mounting need for skilled workers and voicing concerns about economic trade.

Labor issues remain a perennial concern for hospitality as the industry struggles to attract employees and fill hundreds of thousands of vacant positions. As of April, the U.S. unemployment rate dropped to 3.9 percent, a far cry from the high of 10 percent in October 2009. While this may be great news for America's workers, Eric Danziger, CEO of Trump Hotel Group, said the industry has failed to create positions that are attractive for U.S. workers, including hours, pay and benefits that they might desire.

Danziger said that currently, hotels are training skilled employees and then losing them to other professions willing to pay more. Meanwhile, he lamented the industry's preoccupation with investing in new technology, and not its employees.

"We talk about new technology at all of these conferences, but we can turn it all off if we don't solve the labor issue," Danziger said. "We have to make this an appealing business, otherwise we will have the best technology on the planet and nobody to operate it. We must figure out how to get and keep great people who like to provide genuine, sincere hospitality."

Uncertainty associated with trade remains one of the most serious threats facing the U.S. economy in 2018 and into 2019. Photo credit: The Economic Outlook Group

It's possible that low unemployment has done more to damage hotel staffing numbers in recent years than any other source. Jon Mehlman, president and CEO of Hospitality Investors Trust, said that in 2009 at the height of the Great Recession there were roughly 300,000 open positions in hospitality. As of 2017, with the economy surging, that number of open positions has swelled to more than 800,000.

"We are having challenging conversations about our budget," Mehlman said. "We are focusing on overtime hours, on margin compression, and that can be a challenge for select-service providers."

Bernard Baumohl, chief global economist at The Economic Outlook Group, had a different perspective. He said that interest rates and inflation continue to not only creep higher year after year, they also are managing to keep pace with the average U.S. worker's wage growth. Currently, Baumohl said, wages are increasing at a rate of 2.5 percent year over year, which is the same percentage the average U.S. citizen's cost of living increases. Katherine Lugar, president and CEO of the American Hotel & Lodging Association, said the wage-increase discussion most likely will take place at the state and local level, rarely making an appearance in Washington.

"We think lawmakers will be looking into changes in overtime laws, primarily," Lugar said. "This is key. We are in the business of people taking care of people, and that starts with taking care of our own people."

Baumohl pointed to the other major fear facing the industry: trade tariffs and their impact on hotel development. He expressed fear that increased tariffs will lead to a global trade war, with the American people set to be the losers in the short term as product prices rise and international relations become bruised.

"If we do see a trade war, there will be a contraction in global world trade that will slow growth in the U.S. and around the world," Baumohl said. "We have a strong economy now, but we are seeing evidence of it going in the other direction. There is an avalanche of new supply coming into the market."

Inflation continues to keep pace with wage growth, leading to worker discontent. Photo credit: The Economic Outlook Group

Dave Johnson, chairman and CEO of Aimbridge Hospitality, said trade wars continue to be a concern for hotel developers and operators. "Canada and Europe have already caved, but China is not a good partner," he said. "We need each other, though, and hopefully cooler heads will prevail."

David Kong, president and CEO of Best Western Hotels & Resorts, said he is concerned the U.S. economy is approaching a recession aggravated by overbuilding, and said a trade war would only hasten a recession's appearance by inflating costs.

"I do worry about costs escalating for hotels," Kong said. "We heard about inflation earlier in the day, and we will spend more money soon in marketing and sales just holding on to our current business."

Danziger said hospitality's three main pillars of people, product and profit need to be upheld in order for the industry to remain stable over the next few years. He pointed to hotels spending money trying to guess what guests want even though their preferences are already known, arguing that this money might be better spent on associates.

"People are the key," Danziger said. "We need great people doing great work, and we have to provide the environment, training and support to attract the talent that wants to do this as a career."