Bouncing Back
BITAC Panel Reveals Owner’s Outlook Is Positive As Industry Heads To Back Half Of ‘21
As travel continues to open up throughout the country, many owners are adjusting their forecasts upward for the remainder of 2021 having seen considerable traction in leisure business in recent months as well as a marked increase in advanced bookings going forward.
Speaking during last week’s BITAC Owner’s Virtual Connect 2021, a handful of owners and operators weighed in on their recovery prospects as well as other key issues in a panel discussion entitled “Bouncing Back? What Can Owners Expect For The Second Half Of 2021 And Beyond.”
Panelists referenced a couple of meaningful travel trends that figure to help hoteliers.
Gregory Winey, CEO & President, Northpointe Hospitality Management—which owns, operates and develops hotels primarily on the Southeast—acknowledged that TSA numbers are on the rise since last year’s low point in March when there were roughly 85,000 passengers a day, in sharp contrast to the previous 2.1 million daily average.
He put the downturn, and the recovery, in context for the industry and Northpointe.
“This thing was an absolute cliff dive in March and we’re taking an elevator back pretty quick. Having been in the industry for over 30 years, I’ve never seen where we’ve lost so much but gained so much so quick,” said Winey.
“My forecasting right now would put us somewhere in the middle of this year really getting back to a normal level, call it 2019, and then exceeding that. We’re seeing rates hold, which is really critical and I think the reason for that is people are trying to figure out how to pay for the escalation of labor costs,” he added.
Kristie Dickinson, EVP, CHM Warnick, which provides third-party asset management and owner advisory services and has a portfolio of more than 70 properties—drew comparisons to the cruise industry. She referenced Carnival Corp’s recent earnings call in which they reported that cumulative advanced bookings for the first half of 2022 had exceeded the same period in 2019. Furthermore, Dickinson pointed out that was accomplished with little to no advertising or marketing dollars.
“I think that this really points to the level of pent-up demand out there and [particularly] in the cruise segment. If you would have asked me a year ago it was questionable as to whether or not cruising would even come back. So clearly there’s an appetite to get back out. We’re seeing it strong on the leisure side and exceeding expectations for some properties at this time,” she said.
Michael Nixon, chief development officer & president, Expotel Hospitality—a New Orleans-based third-party management firm—cited his company’s progress.
“For the first four months of [2021] we’re roughly over budget by 15 to 18 percent depending on the property. I feel like that trend is increasing, every month is a little bit better. In terms of looking forward for the rest of ‘21, I think that we’ll probably wind up somewhere in the neighborhood of 25 to 30 percent above budget. Relative to 2019—which is everybody’s benchmark—somewhere maybe 20 percent below,” he said.
Micajah Sturdivant, president, MMI Hotel Group—a 65-year-old owner/operator with a heavy focus on third-party management—also has seen things going in the right direction.
“We started the year projecting to be within 2 percent of our 2019 numbers, which was great. Fortunately, we have been forecasting upwards,” he said.
While leisure business has picked up, it goes without saying that group business is a key element to any meaningful recovery. Sturdivant noted the lack of group business has been something of a mixed blessing for some of its properties.
“We have seen a significant rise in overall ADR [average daily rate] simply put because to some extent the group business is not there. It’s being back-filled by retail transient leisure at a much higher rate,” he said.
Sturdivant further added hotels will have to develop a strategy for when true corporate and association business starts coming back in a significant way.
“Are they going to be ready to reset? How are these properties’ sales teams going to be prepared to renegotiate in really a whole new paradigm when the retail rate has grown as much as it as it has? So that’s going to be I think the really big kind of unknown for the latter part of this year and 2022 and beyond,” he said.
Nixon reinforced the point maintaining that it depends largely on the type of property and its current occupancy levels as to how to strategize for group business.
“When you talk about some of our bigger boxes taking groups is a smart way to shrink the size of the hotel. Then in the coastal or leisure properties you generally curtail your group business anyway, especially on weekends. However, midweek where we would easily take a group maybe we’re a little bit more hesitant or at least not discounting the rates heavily because the ADRs are just killing it on the beach,” he said.
“It’s really about the booking pace. It’s been an extraordinarily small window but it’s getting longer, which is helpful for us to make those strategic decisions. But a bird in the hand right now is not a bad thing,” said Winey, noting the company would prefer not to wait to get that business on the books.
Meanwhile, a recent HAMA (Hotel Asset Managers Association) study of roughly 100 members indicated that some 30 percent of survey respondents were considering a brand or management change as part of their recovery strategy. Dickinson weighed in on what’s driving that trend.
“I think that certainly for everyone this has been a period of reset and owners are pretty much evaluating every aspect of their hotel investments and what the best strategy is to go forward. So naturally brand and management are going to be part of that equation.
“We’re seeing some owners evaluating a switch from brand managed to franchised if they’re able. Particularly for the smaller full-service hotels and below they’re taking a hard look at the cost value equation of a brand. With changes to [brand] resources at the corporate and regional level in light of COVID, perhaps in the short run they’re not getting as much bang for their buck and they’re exploring a third-party management arrangement as possibly being more cost-effective,” she noted.
Sturdivant acknowledged that this could represent an opportunity for a third-party management company as he detailed a series of discussions the company hosted on LinkedIn entitled ‘Mother May I?’
“What is that relationship about as you’re trying to take a step forward on behalf of your properties? I do really think it’s how often was management on property? How well did the corporate team really know what was happening in your properties, etc.? These times bring light to any deficiencies that may be out there. It also is a time to really think about the character and culture of the company and the team members. What was their allegiance to the property?” he asked.
