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Owner’s Outlook

Execs Express Concern Over Costs, But Remain Generally Positive Going Forward

Wednesday, October 17, 2018
Dennis Nessler
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The annual BITAC® Symposium featured a panel of hotel owner/operators, all of whom voiced concerns about escalating costs within the current operating environment while acknowledging that profitability remains largely intact for the foreseeable future.

In a session entitled, “Owner’s Outlook: What’s On The Horizon?” the panelists also commented on issues such as brand proliferation, the ‘me-too’ movement and social media strategies, among other things.

Plato Ghinos, President, Shaner Hotel Group, pointed out that 2 percent RevPAR growth represents the break-even point for owners while weighing in on economic conditions. “As an industry, in general, there’s huge inflationary pressure. We are rooting for 3 percent GDP growth as an industry to keep the economy humming. It is humming, but you never know what tomorrow brings,” he said.

Mike Marshall, President & CEO, Marshall Hotels & Resorts, Inc., is focused on expenses. “The cost side is getting troublesome. It’s really employee costs more than anything that are getting driven up with wage increases. With unemployment being low you’ve got to compete for those employees…Our rates are as high as they’re probably going to get. We might see a little RevPAR growth, but it’s minimal,” he said.

Marshall did, however, provide some further context. “This isn’t going to be as good a year as everyone thought it was going to be, but there were also a lot of prognosticators that said it was going to be a worse year. So we’re still churning ahead; we’re not in a doomed state yet,” he joked.

Kevin Hyland, EVP, Boykin Management Company, LLC, also acknowledged that “costs are a concern” but remained generally bullish. “The hotel environment, in general, is doing great. Fundamentals are good, but there are certain markets that are being affected by ancillary things like red tide or the storms that you’re seeing. Overall, we’re pleased and happy with what the future might hold for at least the next 18 months in the hotel space,” he stated.

Marshall did later project a slowing of hotel transactions. “On the real estate side of things I think we’ve probably finally hit the peak of pricing and are hitting the downward side of that slope. There’s a lot of properties on the market right now, and there’s a lot very expensive properties on the market because of 1031 Exchanges and what-not. It’s also causing people not to sell because they can’t buy anything,” he said.
The executives were asked about their thoughts on the plethora of new hotel brands that have been introduced over the last few years.

“I’m in the business and I don’t understand what half of these brands are, so the traveling public cannot possibly understand what these brands are doing. I think it’s just creating so much confusion. It’s just a brand frenzy to get more dots on the map; there’s only so many corners at an intersection,” said Marshall.

Ghinos agreed. “It’s an arms race…If they do it right I think it’s a great opportunity. The lifestyle brands have evolved to be successful over the last five to seven years. Some of the new brands could make sense, but you can’t have 10 different extended-stay brands within the same big brand [family]; it just doesn’t work,” he said.

Ghinos further added, “the next recession will fix it.”

Meanwhile, sexual harassment has become top of mind for many hotel companies during the so called “me-too” movement. The panelists acknowledged there are plenty of inherent risks with a hotel where guests have access to alcohol and rooms.

According to Hyland, “The environment of a hotel is set up in such a fashion where these type of harassment issues can happen easier than they can in an office building…We’ve really focused on training our employees on all these issues, not just how they interact with their fellow employees, but how they interact with the guest. If they get into situations where they feel uncomfortable or they’ve been harassed just making everyone aware of what the reporting procedures are and how to deal with those situations. I’m not sure it’s any more prevalent than it’s been in the past, I think the microscope is more focused on it,” he said.

“I think, in general, as an industry we’ve done a great job. I wish the conversation would be more on human trafficking and the other issues where unfortunately due to the nature of our business we’re more vulnerable or more of a destination,” said Ghinos.

Marshall noted within the current workplace climate that EEOC (Equal Employment Opportunity Commission) has emerged as a major issue. “We’ve had more EEOC cases this year than we’ve had in the last 5 years. I think a lot of it has to do with the “me-too” movement and everybody thinking they should be getting something for nothing. So it just means training and staying on top of HR issues and being proactive and then fighting the EEOC. We’ve won every case,” he said.

There’s no denying the importance of social media at the property level and the owners acknowledged the increased role it plays.

“It’s changed how we market and sell quite a bit. It’s a double-edged sword in many regards. It gives guests the opportunity to give instant feedback not just to us but everybody within their social network. That’s great if they’re enjoying themselves and you’re giving them the experience that they expected. To the extent something goes wrong that’s out there almost immediately too. We’ve had to hire social marketing people and monitor those posts, enhance those posts and ask people for posts. These are things that no hoteliers had to do six or seven years ago,” he said.

Hyland later added, “People respect other people’s comments on social media whether they’re right or wrong.”

Ghinos offered, “It’s the fastest growing department within our company now. We used to have nobody seven years ago now we have 12 people. The biggest challenge we have is ‘show me the return on investment.’ We’re going through those massive dialogues with the Ecommerce and social media people. It’s a monster really to quantify and measure results, that’s what I’m waiting for. In the meantime, we’re being pressured to do what everybody else does,” he concluded.

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Dennis Nessler    Dennis Nessler
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