PHOENIX—Every year, The Lodging Conference hosts industry leaders from across the country to discuss issues impacting lodging as a whole. Not surprisingly, given the current environment, many of the same topics as last year made their way onto the main stage and took hold of the ongoing conversation.
“Right now, everybody’s happy—hotel owners, lenders, industry leaders—and why not?” said Harry Javer, founder and producer of The Lodging Conference. “The economy is very strong. We had a great first quarter. We had a better second quarter.”
Held at the Arizona Biltmore, a Waldorf Astoria Resort, for the last time, The Lodging Conference welcomed more than 1,900 attendees to the annual event, where leaders this year conversed on a variety of trending topics, including technology, short-term rentals, labor and brand proliferation.
Too much tech?
With regard to technology, guests are demanding more from properties. Jon Mehlman, president and CEO of Hospitality Investors Trust, a publicly registered non-traded REIT, said owners in the select-service segment are in the “free business” (i.e., these owners provide free parking, free points, free workout facilities, free breakfast, etc., for guests). Despite these complimentary amenities, guests want more technology from brands: more USB ports, more power outlets, more coffeemakers. These additional technology costs are significantly impacting CapEx reserves at hotels, he said.
Even though guests are demanding more technology from properties, brands, on the other hand, are continuing to use technology to their advantage—to win over guests in competitive market segments. “I do think the brands try to ‘out tech’ each other, which ends up costing owners a lot of money,” said Dave Johnson, chairman and CEO of Aimbridge Hospitality, one of the top management companies in the industry. “I think we’ve had more failures in technology in our industry than we’ve had successes.” Hotels under Aimbridge’s management aren’t seeing a huge rise in technology demand from guests.
While there are the brand requirements from hotel groups, Magnuson Hotels has its own view on how hotel companies should work with its owners on enhancing technology at properties: “We will never impose costs on our franchises from a technology perspective,” said Thomas Magnuson, CEO and co-founder of Magnuson.
When brands implement new technology requirements, owners become concerned with infrastructure. Because of this, brands need to be really clear on the ROI of whatever they’re planning to implement.
“You’ve got to make sure you’ve got a scalable system that has a long life that you can build upon and that’s flexible,” said Ken Greene, president, Americas, Radisson Hotel Group. “Just like any brand standard, there should be a return on investment for an owner. If it doesn’t make more revenue or decrease expenses, we have no business doing it as a brand.”
Technology subculture has also made its way into the lodging industry. For example, brands have adopted WeWork-like shared workspaces.
“The concept of bringing people together in a collective workspace is a concept that many of the brands have now picked up on,” said Eric Danziger, CEO of Trump Hotel Group.
Short-term rentals
For the lodging industry, leading the fight to curb short-term rentals is the American Hotel & Lodging Association (AHLA). In part because of the association’s continued efforts on the issue, policymakers have been taking action on short-term rental legislation in major cities across the country, including San Diego, Boston and New York City.
“When you look at the top markets around the country, most of those top markets have now taken regulatory action, and I think that’s the right thing to do,” said Katherine Lugar, president and CEO at AHLA, who’ll be departing from the association later on this year.
Other major markets will be taking up short-term rental legislation in the coming months, she added.
AAHOA wants to make sure Airbnb is competing on the same level playing field as hoteliers, too. “As hoteliers, we’re regulated,” said HP Patel, chairman of AAHOA.
Labor issues
The industry’s labor shortage is still a top concern among hospitality executives. “The real issue is that there are too many jobs that haven’t been filled in the hospitality space,” Mehlman said. “In 2009, there were 300,000 job openings for hospitality, and now, in [2018], there’s 850,000.” The industry’s growing labor problem has yet to be solved, and until there’s movement with labor challenges, other areas will be impacted.
“We’ve talked a lot about technology systems and all that,” said Danziger. “We could just kind of turn all those off if we don’t solve the labor issue.”
Industry leaders also need to find better ways to make the hospitality business more appealing to newer talent, “otherwise we’ll be sitting here having the best technology on the planet and nobody to execute it,” Danziger said.
With regard to recruiting new faces to the industry, there’s some movement. “The AHLA’s foundation has been keenly focused over decades but really over the last couple of years on new, innovative workforce development programs,” Lugar said. The AHLA is trying to do its part by encouraging youth training programs. Back in June, the association celebrated the first graduating class of 27 youth—all from Los Angeles—who received training in a hospitality industry program. As part of the training program, each youth earned the AHLA Certified Guest Service Professional designation.
“I think the number one, two, three, four, five job of every hotel company is to figure out how to get and keep great people who like to provide genuine, sincere hospitality,” Danziger said.
Brand proliferation
As everyone knows, brands aren’t going anywhere anytime soon, but the debate on whether brands nowadays positively impact the bottom line continues to thrive. With regard to driving profitability to properties, one of the key drivers is distribution—which is where brands play a big role financially, said Liam Brown, president of franchising, owner services and MxM select brands, North America for Marriott International.
Of course, some executives believe there are too many brands, but other leaders disagree. They point to changing consumer behavior as brand proliferation’s key driver.
“I’d like someone in the audience to tell me how many brands there are of Tide, the laundry detergent?” asked David Kong, president/CEO of Best Western Hotels & Resorts. “How many varieties do you think Tide sells? 30? 40? 56 varieties. Why does Tide need to sell 56 varieties? Well, because they know nowadays people want things customized their way, right?”
Not everybody agreed with Best Western’s top executive on the Tide analogy, though. “It’s great that Procter & Gamble wants to break up their market share among 12 bottles of Tide, but that bottle of Tide didn’t invest in themselves,” Greene said. “They didn’t build their bottle of Tide—our owners did.”
Unlike the American multinational consumer goods corporation, many hotel chains don’t own properties.
“Our bottle of Tide is somebody that invests their hard-earned capital,” he said. “They have their own thoughts. They want to have a voice at the table. I really do believe that bottle of Tide, that owner, can walk with their feet, and the more consolidation you’ve got, the more likely that that owner is losing market share. They’re not a bottle of Tide.”
Shelf space
When it comes to amassing scale at a hotel company, there are two sides to the same coin—brand proliferation and brand mergers and acquisitions. Not surprisingly, brand consolidation worked its way into the conversation at The Lodging Conference.
“Don’t underestimate the value and the opportunity for organizations to get shelf space,” said Greg Mount, president and CEO of RLH Corporation. “Just because you’re the biggest out there, doesn’t guarantee you shelf space. Shelf space is where it’s going to be going forward—and understanding how to use it.”
The latter is what’s key to successful acquisitions—no matter the size, Mount added.
“Google has 90% of the search traffic in the world,” he said. “To put that into perspective: If Google wants to put you out of business, they can, so as big as some of these acquisitions have been, it’s still about understanding how to leverage that and where those consumers are going.”
Greene noted the importance of a business being able to scale, but also pointed out: Sometimes too much scale isn’t the best thing for a company.
“I think a brand on every shelf is important,” he said. “I think having a lot of brands on that same shelf under the same family of brands becomes problematic.” HB