HELP Conference: Thayer's Pillsbury knocks brands, PKF's Woodworth surprised by lack of Airbnb interest

BOSTON--The first day of the Hotel Equity & Lender Perspectives Conference (HELP), here at the Seaport Waterfront Hotel, was full of charged opinions from some of the hospitality industry's most outspoken voices.

Lee Pillsbury, co-founder of Thayer Lodging Group, and chairman and CEO of the company until May 2014 when it was sold to Brookfield Asset Management, set the tone when he discussed what he called the hotel value chain. A past career with Marriott not withstanding, Pillsbury, to be sure, is not as high on brands as he used to be.

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"Brands aren't as strong as they were," Pillsbury said. "They are not adding as much to the value chain. They are great at competing, but poor as collaborators. There is no reason why third parties, like Expedia, should exist except for lack of collaboration."

He continued his salvo: "Brands are becoming less valuable and less relevant to hotel owners and customers. Loyalty is diminishing as a differentiator. Millennials are less inclined to develop brand loyalty."

Citing data, Pillsbury said 62 percent of customers are brand agnostic when searching online for hotels. "Baby boomers have the money, millennials have the volume," he said.

Pillsbury isn't all down on the industry. He talked up combining big data with predictive analytics as one way to drive higher RevPAR and revenue. However, he said that legacy brands don’t have the integrated systems to track and supply data in a manner that will allow revenue management companies to help them. "How quickly will it change?" Pillsbury asked, decrying such newfangled disruptors as tripBAM, which tracks hotel rates and pings customers when that rate drops, allowing them to cancel an existing reservation and rebook that lower rate.

Meanwhile, as an asset class, Pillsbury said hotels were the slowest to recover, making them currently a great value for buyers, and for sellers looking to recycle out. 

Perspectives From 30,000 Feet
A panel on the state of the hotel industry touched on a variety of issues, one of which was Airbnb. Mark Woodworth of PKF Hospitality expressed disbelief that more people within the industry showed a lack of real interest in the home-sharing site, which he believes is a threat. 

In New York City, 76 percent of Airbnb rates go for around $200 per night, which is comparable to a hotel room rate. Scarier was this from Woodworth: "Increases in Airbnb supply negatively impact hotel ADR growth."

Numbers wise, the hotel industry continues to match or break records. According to PwC's Warren Marr, demand continues to grow; in fact, this year will mark a 25-year high in occupancy. Rates, however, have not kept up at the same robust rate; that may change, according to Marr. "Strong recovery in group demand is expected to set the stage for solid rate growth in 2015," he said.

In regard to transactions, HVS' Anne Lloyd-Jones said volume is strong but not as strong as peak; however, values are back and above 2007 peak. "Cap rates remain highest of any asset class," she said. "It's driving capital to the hotel sector."

In regards to financing, Lloyd-Jones said CMBS has returned to the market and is "half of the financing source now."

She added that the next two years will see a pickup in development as hotel values have now become higher than construction costs.

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