Phoenix – Perhaps the most fitting description of the mood at this year’s Lodging Conference came from Choice Hotels International’s SVP of Global Development David Pepper: “Last year the theme was ‘cautiously optimistic,’’’ he said to general session attendees. “This year you can take the ‘cautiously’ out.”
Indeed, conference speakers from brands, ownership companies and more agreed that the industry is enjoying a period of high demand, relatively low supply and strong financing scenarios. A lot of the conversation during day one of the conference centered on hotel brands and how guest preferences are driving development trends—an indicator that the financial worries of recent years may be a little less top-of-mind these days.
First, the numbers. Vail Brown, VP of global business development & marketing for STR, shared some highlights of 2014 that put performance into perspective. May revenue per available room growth was 10 percent, the highest May growth on record; June occupancy was 71.7 percent, the highest June occupancy this century; July saw the most rooms sold ever, at 113 million room nights sold, an increase of 5 million compared to July 2012; and in August, rooms revenue clocked in at $90 billion, which was the highest August on record, according to STR.
PKF Hospitality Research’s President Mark Woodworth concurred, showing that 14 of the 55 markets PKF tracks will have their highest occupancies ever in 2014, and 49 of 55 will see occupancies well above long-run averages.
MAKING GUEST PREFERENCES PAY OFF
With positive operating scenarios in place, hoteliers are focusing on guest engagement in a big way, whether it’s through expanding loyalty programs, launching new brands or better understanding their current guests—all while trying to maximize returns and operating efficiency for owners.
Much of this conversation comes back to the current darling of the industry—select-service and so-called “lifestyle” hotels across all segments, particularly those in the upper-midscale to upscale segments.
“Select-service hotels are what are driving the industry,” said IHG CDO Joel Eisemann. “These are the ankle-biters; it’s what the customer wants and it’s where the industry is going.”
Speakers cited Hilton Worldwide’s new Canopy brand launch and Best Western’s Vib launch in addition to other names like AC by Marriott, Tryp by Wyndham and other brands marketed to the high-technology, high-experience guest.
What these brands and others competing in the new lifestyle segment space share, speakers said, was a goal of increasing operating efficiencies while maximizing revenue—all while appealing to guests’ desires for experiential, high-tech stays.
➔ “Select-service hotels are what are driving the industry. These are the ankle-biters; it’s what the customer wants and it’s where the industry is going.”
Joel Eisemann, IHG CDO
“The trend of course is in the larger, vibrant lobby area,” said Tom Corcoran, chairman of FelCor Lodging Trust. “I do get frustrated when people say the big lobby trend is just for millennials; there are plenty of us who enjoy the experience.”
Pepper agreed, pointing to the large, communal lobby trend as “an opportunity to monetize the space.”
“The more people eat and drink, the more money you’re going to make,” he said. “It’s a nicer experience for the guest and it’ll make us money. Now we see this trend in limited-service offerings as well.”
But whether brand growth is via new product offerings or revamped traditional ones, speakers agreed that the big race in today’s hotel industry is to customer engagement and loyalty.
“Brands need to lean into their rewards programs more than ever before,” said Brian King, global brand officer for Marriott endorsed brands at Marriott International. “Distribution used to be the brands’ standalone advantage but that’s not the case now,” he said, citing the growth of third-party booking channels and the transparency of the booking process. “We will continue to see more and more growth in loyalty programs and see brands use them to lock in customers.”
CLOUDS ON THE HORIZON?
While most people remain optimistic about everything from brand growth to group business performance, some worries about pricing tempered the good mood.
“Your concerns going into 2015 depend on what your core business is,” Eisemann said. “If you’re an owner or operator, you’re optimistic. If you’re a private equity fund looking to buy assets, you may have different concerns. The market is pretty frothy because of a lot of capital pursuing deals. I’ve heard about a lot of people who say pricing may be getting to a point where they move to the sidelines.”