Send a summary and link to this article To Email Your Name Your Email Bot Test To pass the Bot Test, please type the white text that you see in the gray box. This helps us prevent spammers from abusing the system.

Printable Version

Psychological Malaise is Phantom Menace of Hotel Biz Some hoteliers are very focused on being depressed about the current hotel industry operating environment. Here’s why they’re wrong. Thursday, October 04, 2012 Glenn Haussman

bookmark this We are on Twitter @hotelinteractiv

The psychological malaise for many hoteliers is just not breaking. And it seems no matter what the evidence shows, these folks simply don’t want to throw out their funk and get back their spunk. It seems as if many hoteliers have been permanently altered by the trauma of the 2008 downturn and are not bouncing back.  Kind of like how we all felt after seeing Star Wars Episode I: The Phantom Menace. But more on that later.

With nearly 2.5 years of monthly improvements, there is no doubt the hotel industry has returned to vibrancy. But in our opinion the true potential of how good things can get will never be achieved unless people put themselves in the right mindset to get aggressive, raise rates, make some deals and stop feeling bad about things they cannot control.

In the 15 years I have been in this business I have never seen such an oddball phenomenon where people are allowing future uncertainty to affect their present day actions. And at The Lodging Conference this week too many folks are worried about things out of their control. Essentially the economy will either improve or not improve, but sitting around and complaining sure won’t help these folks create healthy businesses.

This week I have been hearing a lot about how nothing can get done until the Presidential election because of the incredible uncertainty there. Whatever! This is likely a permanent cycle of inanity where we keep thinking the government will do something right if we just get in some new people, but they never do. We saw it at the midterm elections of 2010 and the general election of 2008. The government has a great way of not accomplishing anything and hoteliers cannot wait for the government. There is opportunity being missed every single day folks wait on the sidelines.

According to Vail Brown, Vice President, Global Business Development & Marketing, STR, in 2012 the hotel industry has sold more rooms on a monthly and annualized basis than ever before. “Despite all negative news we hear in the press, the first 8 months have been very strong,” she said.

Hmmmm. More rooms sold than ever before? That sounds to me like the perfect opportunity to push pricing and get some more dollars every night. Even adding a dollar or two will help bottom lines significantly and not turn away consumers.

If that’s not good enough for you, how about this statistic? Room revenue is expected to be $78 billion this year, an all-time high and a 7.7 percent increase from last year, according to STR. Again facts are being ignored for irrational gut reactions resembling Post-Traumatic Stress Disorder rather than a rational reaction to the current operating environment.

Perhaps Bruce Ford, Senior Vice President with Lodging Econometrics has more insight. “People are more interested in pausing than acting. There is business constipation and it’s easy from the economics outside the hotel industry to do that. But the hotel industry economy is very good,” said Ford.

Ford also noted that distressed hotels and those that need renovations are declining. Renovated hotels, in fact, are seeing record numbers. Another sign things are good; “If you have a hotel you are feeling better today than a year ago and next year at this time you will feel even better,” said Ford.

The real issue seems to be on the deal side of the business. There are just not a lot of transactions taking place. So while that can be interpreted by some as a negative it can also be seen as a positive as emboldened hotel owners are feeling the recovery at their hotels. They’re selling more rooms. They’re making timely payments to banks and feeling that real estate valuations are on the uptick so why sell now. If they continue to wait, many owners feel, the yields will be that much higher. During the hotel industry down-cycle in the early 1990s those that bought distressed properties on the cheap made tremendous profits when they sold those hotels. So it makes sense that owners don’t want to make a mistake and sell too early. Therefore missing out on a potential rise in valuations. They figure they’ll cash in later.

Our advice is to look at the numbers and give yourself a break. While hotel folks continue to be despondent the industry is not back at peak numbers I say this: Setting all your benchmarks against the strongest year ever in the hotel business only sets you up for unrealistic expectations that can never be met. Of course you are sad. It’s like comparing the original Star Wars trilogy to the new ones. Nothing can compare to those original three films in our minds and no matter how awesome we thought Episode 1 would be, there was no way it could match our expectations. The fact that Episode I made more money than the original at the box office is ignored and we just talk about how it is a bad film.

The present day hotel industry is not a bad film. So don’t keep thinking today’s hotel environment is like the Phantom Menace, set your sights to realistic expectations, get off the sidelines and go make some money!