The super psychological psyche-out

DollarPercent
When you look at a percentage point growth, are you getting the real truth?

One of my favorite hack lines from when I first started my writing career 20 years ago (gulp) was the classic riff from the then-recent film Field of Dreams. Used often to refer the Las Vegas boom during that era, seemingly every writer was legally compelled to use the phrase: If you build it, they will come.  

In subsequent years I came to realize that many industry conferences, especially the tent pole ones such as this week’s Hunter Hotel Conference, seem to have a distinct phrase that comes to symbolize the state of thinking for that particular slice of time.

Of course, they don’t always live up to the high hack standard of that classic gem, and some are even clever and cut right to the point. They help create a sense of focus and understanding in a clean and easily relatable fashion.

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During Hunter this year it was, “We’re going to talk our way into a recession.”

It’s a phrase perfectly summarizing the dichotomy of opinion that took shape here during two days of networking, learning and deal making.

On the operations side of the business, the state of hospitality is incredible. All the key indicators such as RevPAR and ADR are still rising and are expected to continue to do so this year and in 2017 too.

But, and this is a big but (don’t snicker), growth is not accelerating as fast as before on a percentage basis. Percentage increases are slowing, and for some reason people read that as it’s all over; let’s panic.

But with an industry already 71 months into an up cycle, according to STR, the truth is completely different than perception. Earlier, in what was then called “the recovery,” the industry saw astounding rates of growth because base numbers were insanely and dreadfully low.  It’s not that hard to see astronomical percentage growth when the state of things have ben anemic.

I’m no mathematician, but I would bet that percentage of growth of, say, RevPAR in 2009 compared to expected RevPar growth for 2016 fails to deliver the truth at first blush. For arguments sake, let’s pretend RevPAR grew 5 percent in 2009 and will do so again in 2016.

The dollar amount represented by a single percentage point increase is more meaningful for 2016 than 2009. The number of dollars representing a single percentage point in 2009 is much lower than the dollars tethered to one point in 2016. That’s because 2016 results will be coming off of years of growth; building upon dollar growth for many years.

Therefore, 5-percent growth in 2016 is much more impressive when counting raw dollars than double digit growth would be in 2009 dollars. So a slowing in percent increases doesn’t necessarily equate to a slowing of the industry, it is just reflective that all things cannot continue to grow at the same percentage rate of growth.

It’s always been puzzling to me that Wall Street punishes companies for not continuing to have the same or better rate of growth quarter after quarter. If Apple, the world’s highest valued company for example, continues to grow at say 10 percent quarterly growth in perpetuity, at some point the value of that company would outstrip the amount of money we have on Earth. Which is not possible.

That’s why I am falling in love with the phrase, “We’re going to talk our way into a recession.”

It’s spot on. People have a herd mentality, and there is a very real danger that misinterpreting what overall industry numbers mean. They can, and will, most definitely knock people out of a positive mindset that could knock them off their game, resulting in an adverse effect on their ability to maximize the good times while they are still legitimately here.

It’s a mental mind game where the players talk themselves into losing. My hunch is that’s probably not the best business strategy. Plus, those overarching industry numbers while great to look at and talk about, probably do not reflect what is going on in the cities and towns in which you have hotels.

So don’t get all up in your head, don’t look at the stats and see doom and gloom when there is still plenty of zoom. After all, if you think it, it will come.

What do you think? How do you see the numbers and how do they make you feel? Drop me a line at [email protected], or on Twitter and Instagram @TravelingGlenn.

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