Who doesn’t love a good upswing? Other than stock market shorters I’d say pretty much no one. For the hotel industry the good times in aggregate are astounding and the numbers keep getting better and better. Rates are rising and rooms are filled.
That’s especially true this summer as Americans set off on vacation. Be it the road or in the skies, everyone is seemingly taking time off and focusing on being with friends and family. Sure they may not spending as much per capita, but for the most part people are spending less in restaurants and on specific activities rather than shaving days off their annual getaways.
And anecdotally, in this business it seems as if executives and sales people are traveling more than ever too.
So the question is no longer are we in an upswing but how companies can better leverage the upswing to sell more products or to make their hotels more profitable. That’s the real issues these days as record breaking demand for hotel rooms is making hotel industry insiders happier than they’ve been in half a decade.
At this year’s sold-out BITAC Purchasing & Design East, which kicked off last night at the Westin Diplomat here in Hollywood, FLA, buyers and suppliers are meeting not just to make deals but to also learn how to prosper as we head back into halcyon days.
“We are at or above 2007-08 numbers,” said Richard Bennett, VP Supply & Design Services, with Best Western International. “Things have been great and are getting better.”
Mark Heisler, President and CEO of Janko Hospitality, a management company that operates mostly in the Midwest is seeing everyone’s fortune rising. “Even hotels that aren’t up much are still up. We are seeing it and feeling it although the recovery is different from one market and one brand to another.
But the funny thing about all cycles is each one is different from the last. So we asked BITAC attendees what they thought. One of the cool things about all our BITAC events – of which there will be nine in 2013 – is conference attendees become part of the panel. That is, they can vote in real time on issues affecting the hotel business.
When asked ‘How is this up-cycle different than the other ones’ an amazing 57 percent felt it has been slower to get started but will last longer. Fifteen percent felt the upswing is ‘faster, more dynamic,” while 17 percent see the upswing as ‘slower, and will last shorter.’ In all, five percent see no difference than the last upswing while seven percent said ‘there’s an up-cycle?’
So of course the upswing is keeping hoteliers on their toes and we are all seeing it play out through the unprecedented number of renovations taking place in 2012 as well as last year. Our hunch is those that renovated early are seeing a more profitable upswing than hoteliers that delayed renovations or have yet to renovate. Why? Newer feeling hotels can charge more. And guests are comfortable with paying more for a freshly redone room.
“Renovating during the last downturn gave us the big advantage,” said Heisler.
Attendees were also asked ‘How often should a PIP be undertaken’ with the audience equally split between either five years (42 percent) and ‘whenever a property requires it (43 percent). Twelve percent said seven years, while just one percent said ‘When the carpet is worn off’ and two percent said ‘When guest complaints go through the roof.’
One of the more interesting aspects of the recovery, and a point missed by a lot of industry prognosticators on the convention circuit, is this is not an equal opportunity recovery. Sure, the entire industry is up but that is not reflective of every hotel. And it’s especially untrue for every region of the country. In many ways the recovery is bifurcated where the haves and have nots are pulling further apart. New York City may be getting $300 plus rates for a typical midscale hotel but that’s certainly not the case in many tertiary and secondary markets.
When both buyers and suppliers were asked ‘Which region of the country are you busiest in right now the east coast was clearly the big winner. In all 37 percent felt the northeast was busiest while 34 percent said the southeast. Just 12 percent said west coast while 17 percent said the Midwest.
Finally, banks are lending again. Although don’t expect to see the easy money that was available in the last upswing.
Fifty Three percent feel ‘banks are opening the lending spigot somewhat’ while 29 percent believe it is ‘a little.’ Fourteen percent said ‘not yet’ while three percent said ‘very much so.’