The year has come and gone, and it will remembered as one of uncertain optimsim. Things may be looking up for 2018 as pro-business reforms, such as changes to the tax code, begin to effect change on the industry, but looking back on 2017 we see an industry already in action. Hotels took time this year to adapt to the changing business landscape through partnerships, changes in strategy and a renewed focus on technology.
Here are the five biggest storylines that took place in 2017...
1. OTA Partnerships and Home-Sharing Legitimization
The hotel industry forfeited control of the online booking landscape to online travel agencies during the 1990s, and booking a hotel room has never been the same since. Expedia, the largest OTA in North America, went through a number of changes this year, with former COO Mark Okerstrom stepping into the role of CEO in September as former Expedia boss Dara Khosrowshahi transitioned to become CEO of Uber. Okerstrom brings his energetic personality to his new role, and at the company’s recent partner conference in Las Vegas Expedia’s new CEO was spreading a message about collaboration, partnership and good will with the hotel industry.
And with good reason. Expedia obviously needs hotels to be successful in order for it to remain successful, but beyond that this year saw a number of hotel companies sign partnerships with the OTA in order to boost their bookings and beat back high commissions costs. The first hotel company to do so was Red Lion (now RLH Corporation), who by partnering with Expedia added expanded benefits to its Hello Rewards loyalty program, as well as Expedia+ and Hotel.com Rewards.
This move made sense for Red Lion, which bills itself as a forward-thinking company that places a greater emphasis on technology than many of its peers. After Red Lion, Marriott also signed a deal to work with Expedia to market vacation packages for Vacations by Marriott. This month, G6 Hospitality signed a loyalty program deal with Expedia, and Omni Hotels & Resorts unveiled its new Vacations by Omni program, which it is offering through a collaboration with Expedia.
In June, Hyatt threatened to split off from Expedia over contract disagreements, but by August the hotel company and the OTA had come to an agreement. This tactic from Hyatt helped secure it better terms behind the scenes, but it also served to reiterate Expedia’s importance in the hospitality space. Meanwhile, a report from Kalibri Labs outlined the effectiveness of the industry’s ongoing push for direct bookings. While effective, most hotels still rely on Expedia to fill rooms, but when asked if he blamed hotels to push direct, Okerstrom said it would be hypocritical to do so.
“We are trying to do the same thing,” he said.
While Expedia busies itself making friends out of its competition, Airbnb isn’t having as much luck. The company repeatedly asserts that it is not a threat to the traditional hotel space, but much of its claims have fallen on deaf ears. After all, 2017 was the first year where Airbnb made a profit, with Q3 2017 so far recorded as the strongest quarter in the company’s history, and Airbnb is expected to end the year with bookings up more than 50 percent over 2016.
If there is a silver lining, it’s that the city of Seattle passed a series of regulations for the home-sharing market in mid December that have been praised by hotel associations and welcomed by Airbnb. These regulations could act as a guideline for future cities, though they don’t go into effect until 2019.
2. Women in Hospitality
Just two days before the New York Times’s coverage on Harvey Weinstein’s history of sexual abuse went live—triggering what quickly became known as the “Weinstein effect” and the #MeToo movement—Hotel Management posted a list of 30 influential women in the hospitality industry. This story celebrated the triumphs of a wide range of women, from EVPs to COOs to AGMs, and emphasized their accomplishments in a wide range of fields.
Selecting 30 trailblazing women in hospitality was no easy task. The hospitality industry, not unlike other industries, historically has had a scarcity of influential women among its ranks—those who are turned to for leadership, for direction, for prudent input. Today, women make up a greater proportion of executive-level roles, making the task of selecting just 30 women for this list much more challenging.
It is widely held that men and women behave differently in leadership roles. In a 2001 paper that appeared in the Journal of Social Issues, entitled “The Leadership Styles of Men and Women,” the authors allude to agentic and communal characteristics. The former are ascribed more strongly to men than women, and are described as assertive, controlling and confident. Meanwhile, communal traits are more strongly ascribed to women and are characterized as affectionate, kind and concerned with the welfare of others. This was reflected in our interviews with the 30 women we named as our influencers: Many of them, when asked about their positions as leaders, said that they were still members of a team, and viewed collaboration as a major part of their style.
In November, Hotel Management hosted a roundtable that brought 12 of these trailblazers together in one room, where they discussed the challenges they had faced in their professional careers and the sacrifices they had made in order to achieve success. By supporting one another, they suggested, women in hospitality could help prevent these abuses from taking place in the future, and could bring more women to C-Suite positions. (Look for coverage of this roundtable in the January issue of Hotel Management Magazine, and online soon.)
Last year, a paper analyzed 21,980 firms from 91 countries. It suggested that the presence of women in corporate leadership positions may actually improve firm performance. The paper, “Is Gender Diversity Profitable? Evidence from a Global Survey,” also called the relative small size of women in corporate leadership positions an emerging political issue. The study also pointed out that diversity in general probably leads to higher performance.
3. Rising Costs and Hidden Fees
Another trend this year for hotels to take note of is rising costs and growing difficulty when it comes time to push rate. Customer acquisition costs, in particular, are rapidly rising within the hospitality industry as more third parties begin to manifest themselves in the space. Of particular note, Cindy Estis Green, CEO & co-founder of Kalibri Labs, said earlier this year that customer acquisition costs in hospitality average 15 to 25 percent of guest-paid revenue, and many hotels spend as much as 35 percent of guest-paid revenue seeking out new guests.
At a time when hotels are struggling to push rate, these numbers are a bitter pill to swallow. Green went on to predict the cost of guest acquisition will rise precipitously in the future if measures aren't taken to regain control of the customer acquisition process. Increases in supply have also stalled the growth of rates, particularly in larger markets such as New York City. In this year’s second quarter, Manhattan’s average daily rate fell 1.5 percent for the quarter and 2 percent year to date. By the third quarter it fell again by 2.3 percent.
It’s difficult for individual hoteliers to affect immediate change on something so vast as a supply pipeline, but they can control costs within their property’s four walls. At Hotel Management’s Hotel ROI event in Chicago, panelists recommended operators put every available square foot of their hotel to work in earning revenue, and eliminate dead space wherever possible. Also, operators are encouraged to embrace revenue management technology and invest in quality workers, as mistakes and poor judgement will cost a hotel much more than a high pay check.
Operators are also growing more wise on purchasing decisions, particularly for caseloads and furniture. Other initiatives to save on costs include technology investments, such as energy management and digital check-in, and hiring restaurant professionals to manage restaurant purchasing can help cut down on food waste.
Lastly, resort fees once again stealing headlines as Wyndham Worldwide Corporation finds itself tangled in a lawsuit over notifying consumers of hidden fees. Wyndham is joined by Marriott International, which is being investigated by 46 state attorney generals and the D.C. attorney general for its resort fee practices. It’s unclear if anything will come of these investigations—the controversy over hidden fees rises to the public consciousness at least once every year, it seems—but hotels should do what they can to ensure all fees are clearly disclosed in the meantime.
4. Design Disruption
Whether you call them disruptors or game-changers, the hotel industry is subject to constant shifts in how rooms are designed as 2017 aptly demonstrated.
Small guestrooms have become increasingly popular as millennials seek out communal spaces for socializing. One of the main brands pushing small guestrooms into the future is Marriott’s Moxy brand, which even Vicki Poulos, Moxy’s senior brand director, acknowledges is “polarizing” among guests. “It’s defined by attitude,” she said. “Some people love the concept and they get it. Others don’t. The brand isn’t for everyone.” Moxy guestrooms only cover 183 square feet on average, and use a “pegboard” to hang furniture until needed, freeing up space.
Hilton’s Tru brand is also leading the small-room revolution, and Brittney Weiss, design manager, global design services, Hilton, said that owners and developers are responding to the changes. At least part of the brand’s appeal, she suggested, lies in its ROI. “It’s cheaper to produce per key,” she said.
Stonehill Taylor principal of design Michael Suomi agreed, noting that fitting rooms onto a floor adds to the bottom line and can increase both occupancy and cash flow. “Construction costs have continued to rise,” he said. “The consumer price index has risen modestly, but construction prices have gone beyond.” By shrinking a room’s square footage by 30 percent to 50 percent, a hotel can add 30 percent to 50 percent more rooms to the overall count, and make 30 percent to 50 percent more each night. “The math works out well for big cities,” he said.
“Hotel design, in general, is becoming more streamlined and less cluttered to reinforce the sense of cleanliness that guests are demanding,” said David Breeding, VP of architecture and design for the Americas at InterContinental Hotels Group. IHG announced its new midscale Avid brand in September, with streamlined guestrooms that do not have a closet or drawers. “For example, we created what we call a ‘working wall,’ where a central mounted beam along the back wall connects elements including a full-length mirror, a vertical lamp, a mounted TV screen, hooks for hanging items and plugs with USB ports.” The guestroom’s desk has also been redesigned as a ledge mounted against the wall with open space beneath for additional storage.
Outdoor elements are becoming increasingly popular in interior design, from upholstery to wood finishes and—of course—living plants used as decor. Incorporating nature into hospitality design is nothing new, but now there’s a name for it—and, thanks to several studies, plenty of data to encourage the growth of biophilic design.
Adding large plants, running water, wood and stone and other natural elements to a hotel’s lobby can have a quick return on investment. Bill Browning, founder of environmental consultancy group Terrapin Bright Green, and his team watched how people used six Manhattan hotel lobbies both with and without biophilic design. Those that incorporated nature into the design saw a 36-percent user rate—both active and passive—while conventional hotels saw 25 percent. What’s more, upon talking to the people using the lobby, Browning’s team found that some of the active users were not guests at all, but had come to use the hotels’ coffeeshops and other revenue-generating services. “The hotels increased their [revenue per available room] without selling more rooms,” he said.
5. Safety Under Duress
Unfortunately, disasters and how hotels responded to them also figured heavily in the latter half of this year’s news. On Oct. 1, 2017, a lone gunman opened fire on a crowd of concertgoers from a guestroom on the 32nd floor of the Mandalay Bay hotel in Las Vegas. The attack left 58 people dead and 546 injured. The event is just one more act of terror that brings the topic of safety in hotels back to public debate as the concepts of guest convenience and traveler safety are often at odds. Travelers want to be able to skip the front desk using mobile phones, but they also want to be reassured that an armed gunman will be barred from checking in alongside them.
It begs the question, will we see metal detectors and other similar security measures come to hotels in 2018? Is that something guests would even desire?
Our thoughts & prayers are with the victims of last night's tragic events. We’re grateful for the immediate actions of our first responders. pic.twitter.com/Arf8edj1iZ— Mandalay Bay Resort (@MandalayBay) October 2, 2017
Measures such as these would be incredibly expensive, but they also may become necessary. Following the tragedy, the casino hotel’s ownership, MGM Resorts, was inundated with multiple lawsuits from victims claiming the company is legally liable for the shooting. Shooter Stephen Paddock managed to deliver at least 10 suitcases filled with firearms and ammunition to his guestroom over the three days he was checked into the Mandalay Bay hotel, and guests assert that hotel staff should have noticed his activities as out of the ordinary, despite the fact that housekeeping is barred from entering a hotel guestroom without a guest's permission, and guest bags cannot be searched by any means.
MGM has already been found liable for a 2010 assault on a California couple at one of the company’s properties, something that may prompt the company to respond with greater security measures for the future. Before we skip right to installing hardware in front of the check-in desk, experts are already sharing safety and security tips for hotels to amplify awareness and ease guests’ minds. Hotels are being urged to develop local relationships, maintain open communication with staff and guests and remain flexible during times of crisis.
Flexibility paid a large part in the industry’s success in the face of other catastrophes this year—notably, two massive hurricanes that tore through the Caribbean, Florida, southern Texas and parts of Mexico. A number of hotels in affected regions lowered rates, welcomed pets and worked with their local communities to aid relief efforts and act as an oasis of safety during the storms.
The hurricanes did have a negative effect on third-quarter hotel operations, as expected—even Expedia felt some of the burn—but the good news is hotels in Florida and Texas are beginning to recover in the wake of the storms.
This year was a learning experience in catastrophe, and the biggest takeaway was the importance of quality staff during times of need. At this year’s Expedia Partner Conference, Mario Ribera, VP of Latin America market management at Expedia, said customer reviews during this period were 8 percent higher on average then they were before the storms, all because of the proactive efforts of hotel staff.
“We filtered for the word ‘hurricane,’ but the word that came up most in these reviews was ‘staff.’ Your staff,” Ribera said. “What we saw next to these reviews were great compliments. It was staff that made a great difference during this period.”