The theme for this month’s Americas Lodging Investment Summit here is “Going Up?”, and while the idea reflects the positive performance metrics the U.S. lodging industry delivered in 2013, the question mark suggests that the industry’s increasingly higher occupancy, average daily rate and revenue per available room numbers posted in the past few years aren’t necessarily a sure-fire thing going forward.ALIS last year attracted more than 2,400 owners, developers, hotel company executives and other attendees to the L.A. Live complex, site of this year’s conference as well.
When asked to describe their sense of the industry’s prospects going into 2014, a sampling of scheduled speakers at this year’s ALIS offered responses ranging from cautious to unqualified optimism.
David Kong, president and CEO of Best Western International, cited “a lot of good news,” including the state of the national economy, with “many positive indicators, really for the first time since the downturn. Corporate profits are showing modest growth, the stock market is up considerably and industry metrics are moving in the right direction,” he said.
Russell Urban, Destination Hotels & Resorts’ EVP for business development and acquisitions, used a familiar baseball metaphor for where the industry stands right now in relation to the traditional up-and-down cycle. “We’re in the fifth inning of a very long game. We’ve seen some sustained growth over the past couple of years and are likely to see some great things over the next few years. We don’t think we’re nearing the peak,” he said.
Dolce Hotels & Resorts’ CFO Debra Bates concurred. “We think the industry recovery is going to continue with the hotel business in line with what we expect for the national economy. That’s all seemingly good news,” she said.
Meanwhile, AH&LA president and CEO Katherine Lugar takes hope from a recent show of at least modest bipartisanship in Washington that would allow Congress to move forward in 2014 on resolving issues critical to the industry. “There are four issues on the policy front we’re actively engaged in,” she said, naming comprehensive immigration reform, health care compliance,the National Labor Relations Board and travel and tourism legislation.
Yet, when pressed, these industry figures also cite underlying concerns about the state of the business. These concerns co-exist alongside their general optimism and, if unaddressed, could shorten, if not end, the industry’s current up-cycle. Kong calls them “contingencies,” which, he said, “is why we have a contingency plan as well as budget and business plans.”
Kong cited two, the first being supply growth. “While for the industry as a whole supply growth may be under control, the midmarket—where we operate—is starting to see increased levels of new supply that may well outstrip demand growth,” he said.
Second is the lag in room rate growth. Pricing power has not returned. “Despite the economic recovery, owners and managers have only raised rates modestly. They seem to lack the confidence to raise rates to the level they should be. [Also],, consumers continue to look for deals. Internet booking and the increasing power of the OTAs have compounded the problem,” Kong said.
Going into 2014, Kong, Urban and Bates agree that two trends, already evident in 2013, will exert even greater influence this year: the impact of social media and the importance of revenue management. “I can’t imagine anyone not paying attention to social media in 2014. It’s the future. We’ve invested in the technology to make it easy for our general managers to respond everyday to the comments their hotels receive, whether positive or negative,” Kong said.