Hotel Leaders Look For The Silver Linings

Most hotel industry companies and executives are still unsure when the business will fully rebound. In the meantime, the smart ones are looking for opportunities to exploit in the current environment. To uncover those opportunities, as well as the challenges that lie ahead, Lodging Hospitality convened a roundtable of top brand company executives during the recent Americas Lodging Investment Summit. Editor Ed Watkins moderated the session, which covered a wide range of provocative topics:

What’s your outlook for 2010?

David Pepper, senior vice president, global development, Choice Hotels International: 2010 should be a lot better than 2009, and we’ll start to see positive RevPAR results around mid-year. The key indicators will be summer travel and how fast leisure travel comes back.

Tom Magnuson, CEO, Magnuson Hotels: From the vantage point of independents, we’re seeing a recovery that’s well underway. We represent about 1,100 independents and we’re on track to hit about 2,000 by year-end. Throughout last year, with aggressive revenue management and expanded distribution, our independents outpaced all of STR’s market segments. We saw a 34-percent increase in reservations volume over the previous year, but most importantly same stores have seen a 24-percent reservations increase over the past year.

Gus Stamoutsos, executive vice president, franchise development, North America, Wyndham Hotel Group: Thank God 2009 is over, and 2010 looks promising. We’re seeing good signs already that we’ll come out of this market with RevPARs going up throughout all segments.

Jim Anhut, chief development officer, the Americas, InterContinental Hotels Group: 2010 is a year to be realistic, not overly optimistic. Our focus is on revenue generation, not so much on cost cutting. One thing we’ve discussed internally is what we can do to drive revenue. There’s a lot of good happening as a result of what occurred in 2009. We’re congealing as an industry behind some really big issues. So if the question is revenue generation, it’s not just about InterContinental Hotels Group or any other company; it’s about what we can do to increase the size of the pie for the U.S. and the Americas. There are a lot of good people in Washington, DC rallying around issues and initiatives that will benefit all of us.

Are there any silver linings that can come out of such a bad situation?

David Wilner, vice president, franchise development, La Quinta: There are a number of silver linings, especially for the market segments in which La Quinta operates. Our segment has the opportunity to capture more business travelers who are trading down and may not have otherwise stayed in our segment. Now it’s our job to keep them loyal to our segment. We may be able to penetrate a customer base we haven’t been reaching before.

Ron Pohl, vice president, brand management, Best Western International: We’re seeing consumer confidence trending very positive. On a three-month trend, occupancies continue to improve. While at the end of the day, it will be rate that will get us there, I’m optimistic for 2010 because we’ll see growth.

Pepper: When times are bad, people get together to talk. The franchisor/franchisee relationship has changed a lot and has grown a lot closer in this downturn. From Choice’s perspective, we went through our little disagreement with Expedia, and I’m amazed at the amount of openness in talking with our franchisees and with AAHOA and other industry groups that came together to discuss these issues openly. So I think the franchisor/franchisee relationship has grown a lot closer as we’ve all hunkered down together to come up with solutions on how to come out of this downturn in a better position.

Paul Sacco, senior vice president, development, Starwood Hotels & Resorts: This environment should remind us of the importance of long-term partnerships. In good cycles, we get in the mode of growth and new deals, but over the years you look at the long-term partners you have and it reminds you with whom you’ve made it through both the good times and the bad.

Anhut: There’s never been a time in the history of our company when IHG and the IAHI (International Association of Holiday Inns) have been closer than they are today.

As branding companies, what can you do help members or franchisees in distress?

Stamoutsos: We are not banks, but what we’re doing is working with the franchisees to understand their issues. Each situation is different and there is not a broad way to apply to every case. But what we do is sit down with franchisees, look at their situations, look at the timing of their contractual agreements and work with them to create win-win outcomes. The key is to take each situation and apply an individual approach. The most important thing is to listen and work with them to build relationships today that will create even stronger relationships down the road.

Magnuson: We’re throwing out lifelines like never before. Two years ago, we introduced a branding platform in which we offer no activation fee for any hotel and fees are only tied to contribution. No branding fees. Any hotel that meets our branding standards is welcome. We offer brand rebates each six months, which is the equivalent of a volume discount. The more contribution you receive the lower your fees go. We’re implementing these on a unilateral basis.

Wilner: In 2009, the approach was cost cutting. In 2010, it’s more about meeting with our franchisees and partners to see how we can drive revenues. At the end of the day, it’s about putting heads in beds. We’re not going to cost our way out of this downturn. It’s meeting with your franchisees, looking at their markets to see how their performing within their competitive sets and then helping them find ways to market their hotels better.

Pohl: Best Western is unique in the fact that we have 2,200 members so we work with owners on a daily basis. What we did to assist last year, and we’re doing it again this year, is conduct 50 regional interactive workshops around the country to assist them in sales, marketing, revenue management and the cost-cutting side of the operation. They also shared best practices. We also looked at the current brand standards to see if they make sense at this time and if we can extend some deadlines. And as long as they weren’t guest-impact items, we felt very positive and the members felt we were working with them to get through this tough time.

Sacco: One part of this business is taking care of your existing portfolio, and we’re finding that our owners are still looking to do conversions or deals that might have been under development that still could open so they’re looking at ways to make the numbers work. All of us as brand companies are becoming return-on-invested capital-minded for our owners. It influences how we write property improvement plans on new deals and how we look at standards for existing deals. And we focus on those things that most differentiate our brands and most impact the guests.

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