Seven hoteliers and the president of AAHOA met in Atlanta during the annual Asian American Hotel Owners Association Convention & Trade Show to discuss current events and the challenges facing hospitality in the coming months, including threats to the franchise model and rising worker wages. AAHOA began life as a small group fighting for the rights of hotel owners suffering from discrimination. Now, 27 years later, AAHOA represents 15,000 members nationwide and is continuing its advocacy on the national level.
The roundtable was comprised of (pictured left to right in photo above) Purvi Panwala of Purvi LLC; Vinay Patel, CEO of Fairbrook Hotels; Imesh Vaidya, CEO of Premier Hospitality; Chip Rogers, president of AAHOA; Jay Patel, CFO of Athena Companies; Rick Patel, CEO of Shoals Hospitality; Tim Muir, VP of franchise sales and development for Choice Hotels International; and David Eisen, editor-in-chief of HOTEL MANAGEMENT. Not pictured is Sumit Dalwadi, president of Dalwadi Hospitality Management.
The roundtable conversation began with a reflection on California’s decision to raise the state’s minimum wage to $15 per hour, which Rogers said was a source of concern. According to him, citizens are buying into the promise of increased wages without considering the side effects, including lost jobs.“What they always fail to tell people is that the real minimum wage is zero because when you get laid off and don’t have a job because of automation, or you get laid off because they have artificially priced you out of the market, your wage then goes to zero,” Rogers said. “They just promise this pie in the sky nonsense of, ‘Well, we’re going to make you wealthy by pretending to raise the minimum wage,’ and it just doesn’t work.”
Issues such as these are reasons Jay Patel said he is thankful for AAHOA for keeping members abreast of changes in laws and the actions of the government. “Especially right now with the hike in labor and wages… we’re aware of it,” he said. “We make sure we get the right politicians in. If we didn’t have this resource, things would get passed and then we’d have to deal with it.”
According to Panwala, joining AAHOA is a comfort for hotel owners because it places them within a support system that is 15,000 members strong. Panwala, a second-generation hotel owner, decided to enter the hospitality industry because of this support system.
“Right off the bat, my first meeting coming here, someone helped me,” Panwala said. “To have that support, it’s priceless.”
Challenges of the Trade
Hoteliers have no shortage of obstacles, regardless of their support system. One of the biggest challenges facing hotels right now is the addition of external supply from outfits such as Airbnb and the lack of regulations these companies have to contend with.
“Airbnb, just in Phoenix alone, had $42.5 million in revenue that could have gone to us,” Vaidya said.
“Even besides market share, the state is not capitalizing on it,” Panwala said. “We’re paying the taxes, and they’re not getting those taxes.”
Dalwadi said this issue heavily affects rates and the way guests perceive rates. “When a guest walks in saying, ‘Oh, your rate’s $90, great,’ well, actually it’s $117. Here’s tax,” Dalwadi said. “That’s not fair. Airbnb, they don’t have to take care of that, so you’ve got savings there.”
Rick Patel added the Affordable Care Act to the list of worries hoteliers face today, saying the law limits growing your bottom line. “If you have 50 or more employees, how do you grow?” he asked.
The conversation turned to lawsuits, with some panelists wondering if there are too many regulations in the industry. Vaidya listed recent issues with the Americans with Disabilities Act, extortion lawsuits and more.
“The playing field is not equal,” Muir said. “It’s one thing to lose roomnights; it’s another thing when you have to comply with ADA. You have to comply with [the] Life Safety [code]. You have to comply with security, and all of the other things.”
According to Muir, if external forces such as Airbnb are held to the same standards as hotels, hospitality will continue to be competitive. However, the fight for this uniformity has just begun, with Jay Patel saying it is easier for the government to look to established hospitality models for taxation.
“Visitors… [are not] just coming to sleep. They’re going to go to restaurants… I don’t see any taxes getting passed on to them. Why is it always hospitality?” he said.
AAHOA members are also feeling constricted by the power of online travel agencies. Vinay Patel said hoteliers feel handcuffed at the property level when it comes to rates, especially when brands mandate that rates cannot be different from those being offered by the OTAs.
“I’m not saying brands should lower their rates… but maybe now, today is the opportunity to make it better,” Patel said. “If they [say to Expedia], we’re not going to be able to do the rate parity, maybe 10 percent less or more, at least we’re not contractually obligated with the brand in terms of giving the same price.”
Muir said that the goal of the brands is to get customers to book directly, sidestepping the OTAs, but the marketing budgets behind OTAs are a major obstacle to this strategy’s success.
“Most of the consumers are confused,” Muir said. “They think they can get it [cheaper] from a third-party website. Educate them. It’s a long haul, but you’ve got to start somewhere.”
However, all parties at the table said they are thankful for OTAs—they simply want a bigger slice of the bookings pie. “It’s [about] a right mixture of it,” Jay Patel said. “Do I want 80 percent OTA [bookings] and only 20 percent direct bookings? I should be banking 50/50 or something like that.”
Vaidya applauded hotel companies that have made the effort to pull travelers away from OTAs by incentivizing the use of technology for guests though direct bookings and direct app support. “If you want to check in on your phone, if you want to use your phone as a key, you have to book through [brand.com]. You have to incentivize the guests,” he said.
Brands as Tools
Panwala, who operates two independent hotels, chose to go without a brand because she didn’t need the resources to renovate the properties to the level she wanted. However, she still considers brands powerful tools. “They give you resources. They give you buying power,” Panwala said. “They have the power that we wouldn’t have as an individual.”
Jay Patel named brand membership programs as just one tool these organizations wield. “That is one of the main reasons for brands, which one’s going to bring you more business, and which brand is the right fit at the right location,” he said.
“The other thing is the brands bring consistency and standards,” Rick Patel said. “Brands that, again, help you out with the OTAs, but [also] produce rates. As a brand, they can fill a bed.”
Vaidya said the biggest negative to the level of consistency that brands bring with them, beyond property improvement plans, is that a number of brands have gone to single sources or limited numbers of sources for purchasing. When a price increase hits a budget and a brand is only dealing with one purchaser, it negatively impacts PIPs.
“It’s also affecting a lot of new construction that’s going up,” Vaidya said. “Because you build a budget, and then they put out a concept that’s not completely defined, and you find out as you’re building that [it] changed now. It affects construction budgets.”
The AH&LA Experience
AAHOA and the American Hotel & Lodging Association have grown over time to share many of the same goals, which is evidenced by the fact that Vinay Patel used to be involved with the AH&LA and now works with AAHOA. According to Patel, the organizations both share an interest in curbing factors impacting hotels such as drive-by lawsuits, but the organizations differ on issues such as small business financing.
“One of the objectives of AH&LA is legislation,” Vinay Patel said. “We do a joint advocacy day with AH&LA and AAHOA. We are very similar in terms of the issues and things we go after, but I think the difference would be that AAHOA is looking through the viewpoint of the owner compared to that of a businessperson.”
One thing is clear: Both of those organizations are going to have to work together if they want to change the direction of legislation.
According to Muir, this is especially true of minimum wage increases, which if they continue to pass will lead to a more automated hotel experience. Panwala, disagreed, saying the personal touch will never leave hotels, but Dalwadi insisted that the wage will have an adverse effect.
“A person should be there, but if it’s at $15 an hour, and the minimum wage keeps going up, we’re going to use less humans and more kiosks,” he said.