Notes from The Lodging Conference
Having just returned from the Lodging Conference in Phoenix, allow me to share some of my impressions and notes from interviews.
The general tenure was “cautiously optimistic” and there was a bit of a rally cry to raise rates now. Of course, that is easier said then done when owners are still breathing down operators? necks to fill rooms at any price.
David Kong of Best Western International said the industry has more leverage to raise rates, but maybe is lacking the confidence until the uncertainty about the economy wanes.
Wayne Goldberg of La Quinta chimed in by saying the industry failed to recognize demand changes and take appropriate actions with rates. However, he added, that even better signals are more apparent today and the opportunity to slowly drive rates is at hand. Goldberg doesn?t blame the Internet for rate issues, believing the industry needs to take responsibility for its decisions.
On the development side, Steve ?Undercover Boss? Joyce says we won?t see new development in the U.S. until 2013 or 2014 as the asset class continues to be punished by banks and regulators. However, in one of my interviews, Concord Hospitality CEO Mark Laport told me he is still developing with careful underwriting, especially with construction cost off 25% from the peak. In fact, he has four hotels under construction and with his solid track record he says he has lenders calling him to refinance. From his perspective, the thawing has begun.
Globally, some concern was stated about people developing too far ahead of the market in places like India and China where there is limited transportation and infrastructure, as well as a middle class with income levels not quite where they need to be. Hopefully and most likely, these are long-term holders who have the patience to allow demand to catch up.
During another session an interesting question was asked about the lasting impact of the AIG Effect. Panelists said luxury is recovering well in major markets and has not suffered nearly as much globally. Of course, this dynamic changes market to market, but luxury appears to be doing much better than expected and the AIG Effect is not creating long-term damage. In too many cases, however, catastrophic damage has already been done.
The biggest risk for development appears to be in the tier below luxury?let?s call it first-class, where a lot of product has come or is coming online. Without the ability to raise rates, the cost of building is making it very tough to deliver a bottom line.
A few more notes:
? After appearing on the reality TV show ?Undercover Boss,? Choice International Hotels? Steve Joyce says the experience was more authentic than expected. Going forward, all management will work in a hotel for a day; he will create a frontline advisory board; expand Choice scholarship programs to the franchise community; and he will try to live a cleaner life without a mustache for the first time since graduating high school.
? The Virgin Hotels launch was, perhaps, the biggest news to come out of the conference — even it was a terribly kept secret. While we won?t see a hotel for some 18 months, Virgin’s goal is to cut through the brand clutter as a consumer champion and come at the industry with an outsider?s perspective. Virgin has money to invest in its 4-star concept and wants U.S. gateways first. It will do some JVs, some pure management, some conversions, including offices and mixed-use. The goal is to reach 20 hotels within 10 years. While very light on concept details at this point in time, buzzwords I walked away with include unique, service oriented, technology, communal space, design driven, simplicity, local inspiration, street presence, clubhouse component. If you want to see more, go to www.virginhotels.com.
? We are still waiting to see the first Home2 Suites and it appears not far off with the first scheduled to open in Fayetteville, Arkansas, in December. Four have broken ground with another four to six expected to take shovel to dirt before the end of the year.
? B Hotels made a splashy but sketchy launch with its brand of one hotel and not enough details about the concept, development costs, etc. CEO Ayelet Weinstein wants B to revolve around creating revenue per square foot with customized experiences. There will be 13 room types, fluctuating ambiance during the course of the day, and custom F&B options. The first project managed by Davidson Hotels goes live in Fort Lauderdale, Florida, this December. ?It?s a cruise ship on land where guests design their own experience,? says VP Chris Tompkins, a former cruise director himself.
? Hilton is making a big effort to publicize its management services division, focusing on its insider knowledge for Hilton-flagged hotels and its ability to better mine Hilton enterprise systems to drive the bottom line. SVP Tim Benolken sees the benefits of clustering as a big opportunity to build Hilton?s managed business.
? Affable Janis Canon, who leads the Indigo brand for IHG, says the new focus will be on gateways, including Boston, LA, more in New York City and D.C. Indigo is growing its global footprint, as well, with Madrid and Lisbon signed, three UK projects under construction, as well as Hong Kong, Bangkok and Taipei, among others, coming soon. Shanghai opens on 10/15.