The doom of COVID was a thing of the past at this year’s Lodging Conference. While attendees and staff remained cautious and safe, it surely was business as usual. Industry leaders gathered at the JW Marriott Desert Ridge in Phoenix to not only talk shop, but to reunite with old friends.
The consensus seemed to be that while hospitality still faces some hurdles, it’s turning to new ways to conquer those struggles, and is more hopeful than ever.
LEFT TO RIGHT: Michael J. Deitemeyer, Greg Juceam and Justin Knight
“Everybody uses the word optimism,” Brad LeBlanc, SVP/chief development officer, Best Western Hotels & Resorts, told Hotel Business. “I see a vision to the future—it’s positive, there’s momentum. If you’re a developer and you have a site, don’t sell it. Most are looking at it thinking, ‘What do I do with it? Is inflation going to price me out? Is the cost of goods going to price me out? Are shipping delays or is construction a risk?’”
LeBlanc believes that the answer to all these concerns is undoubtedly “no.”
“The astute ones are saying now is the time to pour in,” he said. “We’ve seen it before. Cycle after cycle, we will be in a different world in 18 months. The developers out there that are opportunistic are jumping on that saying, ‘You know what, there are sites available that would have taken years for entitlement, now I’m going to grab it. Now there are opportunities to buy or acquire a hotel [and]reposition it to a different platform. I’m going to jump into that opportunity.’”
LeBlanc believes hospitality owners have always been creative and will innovate their way through any difficult stretch.
“Smart people are figuring it out through technology, work scheduling, etc.,” he said. “I see this as just a little blip on our radar before we smooth out and move on to greener pastures.”
Harry Javer welcomes attendees back to The Lodging Conference.
During the keynote discussion on day one, “A View From the Top” moderated by Chip Rogers, president/CEO, AHLA, executives expanded on some of these solutions to common pain points.
“I think we have incredibly interesting dynamics for our industry right now,” said Justin Knight, CEO, Apple Hospitality REIT Inc. “We’re at a point now where we’re relatively close to where we need to be from a staffing standpoint. We still struggle with labor but in different ways than we were struggling six months ago, when the biggest challenge was getting people to show up for an interview, or they’d accept the job and wouldn’t show up for their first day of work. But, we’re moving past that now.”
Michael J. Deitemeyer, president/CEO, Aimbridge Hospitality, agreed, and noted things that his company is doing to increase employee retention.
“It’s getting better—there are certainly signs,” he said. “In our world, we’re focused on trying to appeal to a broader segment of the population. We’re working on a lot of employee-type programs, scheduling [and]flexibility. We’re also trying to change the profiles of some of the people we hire and broaden it. When you think of economy or more extended-stay hotels, through AI and business analytics and tools, people can focus on just the customer interaction.”
Arash Azarbarzin, CEO, Highgate, mentioned other ways of combating the crisis, like incentives for employees if they refer friends, but his focus specifically was on another industry challenge.
“[Retention] is a much bigger part of our job today than it was two or three years ago, but for me, personally, ESG is going to be a much bigger thing for us to look at,” he said. “All the experts said when we’re done with this crisis…[ESG] should be a focus for all of us.”
Attendees gather at the JW Marriott Desert Ridge in Phoenix.
Gilda Perez-Alvarado, global CEO, JLL Hotels & Hospitality, brought up other concerns, which focused largely on owners, but also guests.
“We’re playing a very dangerous game with workforce dynamics and the negative impact it’s having on the most valuable investment markets in the United States—in New York, San Francisco, Los Angeles,” she said. “The worst part is there are no free market dynamics right now. All the currents are basically against each other. The lack of cooperation from labor unions with owners who provide these jobs…that’s a big area of concern. Something’s got to give, and we’re nowhere on immigration, so we’re stuck.”
Mit Shah, CEO, Noble Investment Group, remains optimistic that 2023 will bring full recovery, adding, “It might not be the first part of next year, but as we get to the second half or middle of next year.”
Greg Juceam, president/CEO, Extended Stay America, agreed, with confidence in his segment, but he’s also bullish about the industry as a whole. He believes the industry will fully recover by the second half of 2023—possibly by the end of Q3 or maybe Q4.
“We’ve all tried to help each other and do our part, but the hardest part is that the goal post keeps moving,” he said.
Day two’s keynote, “From the CEO Perspective” moderated by Rachel Humphrey, founder, Women in Hospitality Leadership Alliance, continued this discussion, while also raising some other areas of focus like diversity and inclusion; data and tech challenges; short-term rentals; and buying and selling.
Venus Williams, founder/owner, V Starr, talks about female leadership in hospitality.
It all begins with leadership, however, noted Tyler Morse, chairman/ CEO, MCR | Morse Development, with a mindset that may deviate from the norm.
“I think leaders make tough decisions…when everybody else is going left, you should be going right,” Morse said. “The pandemic was obviously brutal for the business but there were some good opportunities that came out of the pandemic. I think that in the third week of the pandemic when times were brutal, we looked at each other as a leadership team and said now is when we should be buying hotels. They were terrific investments because everyone else was going left and we went right.”
Rob Palleschi, CEO, G6 Hospitality, believes that leading with honesty and integrity is key, remaining as clear and transparent with team members as possible.
“I don’t think teams expect us to have all the answers, but they expect the information as quickly and as honestly as we can provide it,” he said. “It was true before the pandemic and is true today.”
He added that on top of this, leaders need to set an example and celebrate diversity, equity and inclusion (DE&I), as it’s the foundation of the business.
“We’re in the hospitality and service business, and [DE&I] has to be ingrained in everything we do,” Palleschi said. “Our big focus now is to keep improving. Everyone needs to stay focused on it, and we need to deliver on it. We’ve been talking about it—about milestones and great things we’re going to do—but, at some point, somebody’s going to start tracking it and asking us questions, so we have better deliver on it. There’s no industry that’s better poised to lead in this than us.”
Laura Lee Blake, president/CEO, AAHOA, noted that 60% of all hotels in the U.S. are minority-owned, making AAHOA a prime example of the DE&I effort.
“We got together with our female directors and thought we needed to launch a women’s initiative,” she said. “We were encouraged by the number of women working in hotels and now seeking to own hotels. That whole trend is clearly developing. In terms of next step, [we must]celebrate what women are doing. In the end, the ultimate goal with DE&I is to make sure there’s opportunities through these efforts, and we recognize individuals for their talents and the work they’ve done. AAHOA is the perfect example of how minority-owned businesses became the majority in this industry because of hard work and not because of special benefits.”
The conversation then turned to data and technology, and how the industry can not only improve on these areas but use them to its advantage to tackle issues like labor and service.
“The data will set you free,” Morse said. “The hotel industry as it relates to technology and data is basically a stone tavern filled with pigeons. None of the systems talk to one another, there’s no data correlation, everybody produces financial statements, but you don’t know the underlying metrics that drive those. You can’t peel those off the systems that are on-property. It’s embarrassing as an industry that we are where we are.”
The holy grail, Morse said, is having the systems talk to one another, so hotels can get actual data that they can act on tomorrow—not only for revenue, but profits and costs of various revenue streams. To Morse, this will allow hoteliers to focus on what is good business vs. what isn’t.
Keith Pierce, EVP/president, franchise & development, Sonesta, pointed out that the data tells the story of the labor crisis in the industry.
“Here we sit at 3.7% unemployment, extremely low, yet we have 9,000 positions of which 7,500 are filled,” Pierce noted. “We’re at a cost and run rate of 1,500 open positions day in and day out, and we can’t fill those positions. Clearly something is wrong. [We are] having an extremely difficult time getting people to come to this industry. The data tells you that we need to do a better job of making this industry an industry to be with and stay with. Ultimately that’s going to take some creativity.”
Morse believes technology can surely help manage the crisis, but that immigration reform and workplace flexibility can as well.
“As an industry, we have 50% turnover, and we need to get comfortable with that and just own it and develop processes around that turnover, whether it’s more part-time people or visa programs. [We must utilize] technology around onboarding team members and getting them up to speed quickly. That’s why products we all use within the hotel need to have a five-minute learning time. We need to get away from over-complicated tech.”
Joseph Berger, president/CEO, BRE Hotels & Resorts, also believes in these creative solutions, specifically for F&B and housekeeping staff.
“I think we need to really think what technology we can put in our kitchens to help our culinary team where, instead of running a kitchen of eight, you can run it with six,” he suggested. “Also, what standards need to change in housekeeping so that the guest still gets a great product, but instead of the housekeeper doing 15 rooms, maybe they’re doing 30 rooms. As an industry, I think our call to action is thinking through the staffing shortage and what technology we can put in place, and what standards we can change that are going to affect the customer. But without it, we’re going to keep struggling.”
As for buying and selling, there seems to be a continued optimism about 2023 and 2024, but not without some caution.
“We’re in a world right now where there’s a ton of liquidity chasing hotel assets,” Berger said. “It makes buying hotels difficult because it’s quite competitive. Today, you really have to have conviction on where you can take an asset, where you can reposition an asset and where it’s going to be when you try to exit.”
Greg Friedman, managing principal/CEO, Peachtree Hotel Group, agreed that there’s a lot of liquidity in the market but, from his standpoint, the debt markets are driving and tightening up the transaction market.
“Personally, I think the market is getting tougher when you look at the hospitality space,” he said. “[If] you look outside the hospitality space, there’s less debt capital available. You look at the rise of interest rates, and index rates continue to move up. To me, it’s putting pressure on the market. There’s not a lot of trades happening right now. Personally, I think it’s going to be an interesting market as you go into 2023 because there’s going to be a lot of debt maturity. I do think it’s going to put pressure on pricing, and I think there’s going to be a better opportunity to buy assets next year.”
Another area of concern is the popularity of short-term rentals. Especially, as hotel rates continue to rise, the threat of these accommodations worsens.
The execs advised hoteliers to advocate for a balanced playing field and to continue to invest in state associations and in AAHOA and AHLA.
“One of the trends I’ve been watching is the homelessness crisis in the country and, as this continues, it’s impacting so many of our hotels,” Blake said. “They’re taking hotels and trying to turn them into affordable housing centers or even homeless shelters, and a lot of that is because of this interaction with short-term rentals. Most people think short-term rentals and think maybe it’s a mom and pop renting their home one week out of the year. We don’t care about that. It’s the big companies that are coming in and buying an entire neighborhood. It’s depleting the affordable housing supply. There’s no regulation. It opens up human trafficking, and it’s impacting communities. It goes way beyond the hotel industry.”
Pierce mentioned short-term rentals’ direct relationship to labor and the guest experience, with rates skyrocketing without service to match.
“We’re asking for a higher rate and, yes, we have a business model that allows us to increase or decrease our rate unlike other business models, so we can mitigate some of these cost pressures,” Pierce said. “But, at the same time, it feels like we’re delivering less and less services to the guest. At some point, I think that elasticity is going to break. It’s going to be a challenge to manage. Sooner or later, the guest will push back.”
Morse offered another creative solution: moving toward an a la carte pricing model and unbundling hotel services.
“This entire industry just keeps giving away more stuff for free,” he said. “Instead of giving away more stuff for free, we should charge individually and take advantage of the price elasticity of demand. This is how we compete with Airbnb. I personally think they will never make much progress with business travelers. There’s an unknown component to what you’re getting. When you stay at a brand, you have consistency—you know what you’re getting. If you charge individually, the asset makes more money rather than competing ourselves into oblivion on rates. Break the product into various components.”
Optimism surely was the common thread at this year’s conference, with most leaders agreeing that ’23 and ’24 will show the best numbers. And, while challenges continue to linger, so does the innate desire to travel.
“Human beings always refer to the mean,” Morse said. “If you recall, all of the screaming ‘fire’ in a crowded theater in mid-2020 has not come to pass. The industry is back and then some. People like traveling. You can’t be fearful. You have to be strong and plow ahead.”
