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Adapting to the 'New Normal'

Experts are predicting your hotel guest has permanently changed. Here's how some hoteliers are adapting to this operating environment.

Tuesday, June 02, 2009
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Dolce International
Hilton Worldwide
Crescent Hotels and Resorts
Wyndham Hotel Group

During a recession, as the truism goes, bar sales go up. But could a properly priced beer drive room sales at full-service hotels, too?

That's the belief of Michael George, president and CEO Crescent Hotels & Resorts, which owns, operates and manages hotels for institutional investors. In his experience, bar business is up "substantially," especially at full-service hotels that also have a nice atmosphere and an attractive staff.

"One of the simplest things we did to drive cash flow was to properly set our beer prices," he said. "Properly priced Bud moves rooms."

Thomas Edward Middleton, Jr., a senior vice president at Hilton Hotels Corporation, said guests are eating more meals outside their hotels and that the F&B spend across the Hilton brand is down as much as 50 percent. Hilton's ideas to recapture guest F&B spend include bringing in celebrity chefs, well-known concepts and menus that feature fresh, simple and healthy foods. They also are outsourcing.

"It’s always amazed me, in the hotel business all companies struggle with F&B," he said. "The best thing we’ve come up with is third-party leases. It’s very difficult to lose with third-party leases."

But George argued that food and beverage outlets should not be considered an "evil necessity" to outsource. He said Crescent operates all of its own F&B outlets and they add a crucial edge over select-service hotels.

"From a food component, the point of being full service is to be convenient at a good price," he said. "Put the focus on it. The guests are looking for it.”

George's bar strategy is one way that full-service hotels are -- or should be -- redefining themselves and taking aim at both luxury and select service hotels. A panel of executives affiliated with full-service hotels discussed their segment during a panel this week at the 31st Annual New York University International Hospitality Industry Investment Conference at the Waldorf-Astoria hotel.

"We see the market here in the U.S. is ripe for the upscale segment to define itself," said Fredrik Korallus, executive vice president and COO Radisson Hotels and Resorts. "We see it as a segment that needs a lot of focus and attention."

Many full-service hotels have endured RevPAR declines of 20 to 30 percent, according to the panelists. All areas are affected, like F&B, design, banquets and meetings, to style about the health trends, natural food. “What’s being eaten is good burgers, good sandwiches, good pasta priced right," said Korallus.

Wyndham Hotels and Resorts President Jeff Wagoner said the key is to be flexible and match the right food concept for every hotel. One hotel recently was asked to implement a "grab and go" feature, which normally is the hallmark of select-service properties. This particular hotel was not in a commercial area that would attract walk-by traffic from the neighborhood and its restaurant was suffering.

"You don’t want to force it and have restaurant where you’re not going to have profit," Wagoner said.

Banquets and meetings, though, can be a good source of profit for full-service hotels -- if they could only book them.

Dolce Resorts, whose 25 hotels specialize in conference centers and meetings, has seen clients downsize, according to CFO Debra Bates. Some will book day meetings instead of overnight meetings. Corporate customers are booking less than they think they need and then showing up with more people, she said. "They don’t want to take contractual risk."

Middleton reported more cancellations, even a week or two before the event. Other groups who might have had a closing-night banquet are now making do with cocktails and hors d’oeuvres. He believes the key to drawing in customers will be value. The least-affected Hilton brand has been Embassy Suites, he said, because it offers more room, a free breakfast and a manager's cocktail hour. He said incentives such as free admission to a health club will sell guests on the brand: "Whatever it is that increases perception of value goes a long way in this environment."

Bates also predicted greater segmentation in the future, especially as her company continues to go after the luxury market share.

"The old full service generic hotel direction is a wave of the past, like Top 40 radio," she said. "We’re in the iPod generation. Everything is customized and focused on the future. We have to be in tune with our consumer and how they’re changing. The chains that understand that and innovate as times change are the ones that will succeed."

Korallus said style and design will be the focus of his effort to revitalize Radisson. Compared with European hotels, the interior design of many U.S. full-service hotels is "a very bland landscape," he said. Radisson plans on using relevant, purposeful design to create a point of distinction.

"There will be a bigger focus on style and design," he said. "We looked at hotels that had been renovated inside and outside of our brand and said, 'Why are they ugly?' Ugly costs just as much as attractive. There is an opportunity to be more daring in style and design. Style and design is not for the sake of making me happy. It's about making you happy as a consumer."
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RE: Adapting to the 'New Normal' article link
Not sure I agree with all these spiffs. Beer, give me a break as it would never tempt me to stay at one hotel vs another. Seems to me comfort of the guest should take high priority at least that is what I look for. Exeptional service, great comfortable robe, great fluffy towels, cool sheets, superb electronics should be most important. Anyway I am likely too prejudiced.

Gene Faul

CEO, Cypress
Posted by: Mr. Gene Faul
Email: ichief@AOL.COM
6/3/2009

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