Despite a number of factors potentially impacting hotel profitability from rising operating costs to macro-economic issues, a trio of hotel owners and operators indicated there’s plenty of runway ahead for growth as we approach ’22 and beyond during a panel discussion at BITAC Owners Live 2021.
Taking place last month at the Grand Hyatt Baha Mar in The Bahamas, the executives took part in a panel discussion entitled “Recovering ROI: Owners Detail Keys To Profitability Following Downturn.” Some of the key issues discussed during the panel included rising gas prices, inflation, labor challenges and the ongoing impact of the pandemic.
Lisa Sawyer, President, Budget Host—an economy brand with some 140 locations—suggested the traveling public is now more resilient when it comes to COVID-related restrictions in explaining her bullish outlook.
“I’m optimistic, I don’t think we’re going to go through another great big shut down. I think that the tide has kind of turned on this where travelers are ready to be out there, and international travel to the U.S. recently reopened. I just think the push is going to be there to keep moving forward,” she said.
Jeffrey Wefel, President/COO, Titanium Partners—a commercial real estate investment firm with a focus on hotels—acknowledged the impact of inflation while also touting the potential upside of the pent-up demand.
“There are two sides to inflation, there’s the push and the pull side. The pull side would be all this pent-up demand from our consumers. You know they want to get out and they want to travel. I firmly believe that’s going to happen and if you look at savings rates for the majority of people it’s gone up almost in all classes of income. So I’m hopeful that there is I guess a repeat of the roaring ‘20s, where everyone comes out and they just want to live life and they’re not going to wait. That would be fantastic for our industry,” he said.
Heidi Wilcox, President/CEO, First Call Hospitality, a third-party operator of branded hotels, however, pointed out that any surge in demand is likely to create issues in terms of “how do we staff hotels?”
Wilcox continued, “We have to go back to the basics. We have to talk about culture and that this is a career so that we can get people back in and start up that career path again, because we’ve lost so many people in the last 18 months,” she said.
“I think with the challenge in hiring employees and retaining really good talent where it’s appropriate there’s an opportunity to staff your hotel, but you have to pay for it. If you do that and you’re willing to charge the rates that you need to support that I feel like that’s a strategic way to move out of this,” said Wefel.
Wefel later elaborated on the correlation between rates and rising wages as a long-term strategy.
“Even if we didn’t make our RevPAR index, I would rather see the rates where they need to be and the housekeeping wages where they need to be so that when the guests come in they’re satisfied and they feel comfortable. Then I think over time you’re going to gain market share from that,” he added.
Sawyer added that “housekeeping is the challenge” when it comes to labor right now.
“A lot of my managers are saying ‘we’re trying to have everybody do any job right now.’ But sadly some people have reduced their inventory because they don’t have the housekeeping. They don’t want the bad reviews,” she said.
Wilcox emphasized the importance of keeping close tabs on reviews. “We’ve actually employed a company to help us with those reviews to keep us on track and make sure we’re responding appropriately and in a timely manner. We have weekly meetings with that company so we understand some of the issues that are coming up and actually prepare, plan and see how we can better facilitate that guest experience or make sure we’re responding to all the positive reviews as well. Positive reviews keep that rate up and we are adamantly trying to keep that rate up,” she said.
“Reviews are the name of the game. If you’re high in your market you’re going to be the place where someone wants to book, so the power of that is kind of unbelievable,” added Sawyer.
Wilcox, meanwhile, cited a handful of operating costs that could potentially impact profitability in the near future.
“Real estate taxes are a concern moving forward, on top of all the other aspects that we have going on with supply chains, etc. Even utilities have started to see a steeper increase and then insurance [costs] due to the storms of the last 18 months have spiked as well from 5% to 10% depending on the state you’re in,” she said.
Rising gas prices also present a challenge, particularly when it comes to drive-to destinations. While acknowledging the situation bears watching, Sawyer suggested the impact is minimal, at least thus far.
“We have a lot on the highways so it’s always a concern. One summer years ago we had a spike in gas prices and I remember the reality of it was if you took a week-long road trip it added about 80 more dollars to your trip so it’s not a make or break. If you market it correctly it’s not the end of the road trip. I still think from what I’m reading road travel is still expected to have a good year, flying is back, but not back full speed. I think there is a point where it does hurt though when it gets so high,” she said.