NY Times: For the Hotel Industry, Recovery is a Long Way Off

For the Hotel Industry, Recovery is a Long Way Off

http://www.nytimes.com/2009/11/24/business/24road.html

Great article by Joe Sharkey from the NY Times, first paragraph really says it all and I can't help but agree 100%

In these uncertain economic times, I am wary when I hear someone proclaiming, “We have finally bottomed out.” After all, who knows how long we may stay on the bottom?

So that’s why I urge caution in evaluating small recent indicators that might mean better times ahead for the hotel industry.

On Monday, for example, the hotel investment services firm Jones Lang LaSalle Hotels released a survey showing that investors saw some signs of improvement for hotels, but not for at least a year.

For business travelers that means hotels will remain a buyers’ market, especially as they continue to discount rates. But because hotels have cut spending on staff, maintenance and renovations, it means the general quality of the hotel experience could continue to decline.

Every couple of months, I like to take the temperature of the hotel business because, like most business travelers, I generally like the way domestic hotels steadily improved services for about a decade. On Monday, I spoke with two experts at New York University Tisch Center for Hospitality, Tourism and Sports Management. Both say the hotel industry needs to think differently about how it does business, even after it gets back to a firmer financial footing.

Hotel operators, who recall past cycles when booming growth came after business downturns “have to get over the idea that things are going to get back to the way they were,” said Lalia Rach, the dean of the hospitality program at the Tisch Center.

She sees a number of hurdles once hotels start to recover, including improving person-to-person service, which has slipped as many hotels laid off staff and added extra work for those still on the job.

“They’ve cut so much labor that there is perhaps the question, ‘Do they really still have a customer service attitude?’ ” she said. “Do people still understand they’re in the hospitality industry?”

While traveling last week, Ms. Rach said she made it a point to observe airline workers and found them dispirited, reflecting the deteriorating condition of the airline business. “Going through O’Hare, I was struck by the realization that the airlines just didn’t care, and the workers share that attitude. There used to be a smidgen of concern for customer service, but not any more. And that’s a concern I have for the hotel industry.”

As demand improves, hotels will try to raise room rates to previous levels, she said, “but then all of these things will come back to haunt them.

“Will customers be asking, ‘You really want me to pay this kind of money — for that kind of service?’ The American consumer now really understands the quality-value price equation, and I’m not sure that has sunk into the hotel industry. That is the new normal.”

Bjorn Hanson, a clinical associate professor at the Tisch Center, said that average domestic hotel occupancy this year would be about 55 percent.

Average national occupancy has dipped below 60 percent only twice before since the 1920s, he said, during the Great Depression, and in the aftermath of the 2001 terrorist attacks.

He said that “occupancy in 2010 will almost certainly be up a little bit,” mostly because of continuing heavy discounting. Average room rates, he said, are likely to be slightly lower next year.

It has been a year since the hotel industry felt the sudden blows from the recession after a period of record prosperity.

This year, Mr. Hanson said, revenue per available room, the crucial measure of hotel performance, will be off 16 to 17 percent for all hotels — a far steeper drop than any analysts were predicting earlier this year.

For luxury hotels, the numbers are far worse.

Mostly because of the economy, but partly because of public resentment of conspicuous corporate spending, five-star hotels took the biggest hit as company travel managers cracked down on spending and luxury meetings and conference planners either canceled events or went more downscale.

For luxury hotels, per-room revenue will probably show a drop of 25 percent this year, he said.

No one expects that to change drastically anytime soon, either. Until a year ago, “there was a sense at some executive levels that there was no limit to opulence” on the road, Ms. Rach said.

The limits have arrived.

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FelCor Reports Third Quarter Results - Continues to Accomplish 2009 Goals

FelCor Reports Third Quarter Results - Continues to Accomplish 2009 Goals

Felcor Loding - FCH continues to impress as they are some of the victors in the Hotel Industry Trade-Down sell-off. With a portfolio primarily consisting of Embassy Suites Hotels, Doubletree, Hilton, Sheraton/Westin, Holiday Inn, and Crown Plazas.

Felcor Lodging is positioned perfectly in the current market for Hotels. As perfect as something can be in the Hotel Industry these days. With continued declining RevPAR's 13 months in, and no end in sight, these upscale hotels have nestled themselves in the perfect mix. They have been making huge leaps in Market Share (RevPAR Index) and flow-through by cutting expenses only 11.6%. I say only as I believe this is where Felcor can make even further gains, as my belief is, that many companies cut MORE than 11.6% in expenses, and as the market begins to recover this will only hamper the others as it will take longer for them to recover and give Felcor the edge as the market regains balance.

Another key factor helping Felcor is that by being a Upscale not luxury hotels, they have the flexibility to pick off higher rated "Trade-Down" business who was previously staying with higher rated business and is looking for a similar product but at cheaper rates. (Which are still higher than traditional Upscale rates) And the flexibility to continue to dominate the mid-range corporate business.

Some highlights from their Third Quarter Results:

Even though RevPAR decreased 17.8 percent for the third quarter at their 85 consolidated hotels. Market share increased approximately two percent for the third quarter.

“Once the economy begins to improve, we expect the lodging industry will lag behind the broader recovery. As such, there has not yet been a widespread improvement in demand trends and the shift of the customer mix continues to pressure rates." Richard A. Smith, FelCor’s President and Chief Executive Officer.

"We will continue to benefit from our high-quality portfolio, the renovations we completed in 2008 and the redevelopment of the San Francisco Marriott Union Square. As a result, we expect our hotels will continue to gain market share from their competitive sets and RevPAR at our portfolio to outperform our peer group and the upper-upscale segment."

Best of luck to Felcor with those RevPAR gains!

4 ways to rev up your RevPAR (RevPAR Guru)

4 ways to rev up your RevPAR (from RevPAR Guru CEO & Founder Jean Francois Mourier)

There are few things more important to hoteliers right now than finding ways to increase bookings. This is evident everywhere, from large chains advertising across-the-board rate discounts to boutique properties launching campaigns designed to put heads in beds. Here is a list of four highly effective tactics.

By Jean Francois Mourier

Hotels’ occupancy and RevPAR, always key metrics for the industry, are in desperate need of revitalization.

We’ve compiled a short list of four highly effective tactics that can help hotels increase both RevPAR and occupancy through the fastest-growing (and most important) sales channel currently available to them - the online channel.

1. Re-evaluate your Compset

The time-honored Smith Travel Research compset, once the only way to define a hotel’s competitors in a geographic area, has become outdated. Online Travel Agencies (OTAs) have changed the way consumers shop for hotels, so it stands to reason that the definitions of a property’s competitors should change as well. Smart travelers will compare price and star ratings to obtain a quick assessment of what they can get for their money within their location, regardless of location. Hoteliers should do the same. By being objective and realistic, looking outside the traditional or STR-dictated compset, widening the vicinity or sub-region of the hotel, comparing guest reviews, and generally expanding the amount of hotels considered competitors, a hotelier can get a more realistic sense of what their compset actually is. Soliciting an outside objective opinion of what the hotel’s compset seems to be, as well as ranging ½ star up and down in quality rating, can help complete this exercise.

2. Hands Off!

Manually manipulating hotels rates and yield is, by definition, limited. The world of electronic sales moves too quickly for sales teams and revenue managers to optimally match rates to supply and demand fluctuations. Human operators lack the capability to yield at night or during weekends when it matters most. One of the worst things a hotel can do in an era of transparent pricing is to keep rates the same, so hotels need to take the appropriate steps to yield rates in a way that doesn’t leave money on the table. The booking window is shrinking even more as consumers turn to mobile bookings, so automation becomes the ultimate yield-empowering tool. Automated revenue management systems can integrate distribution simultaneously with rate decisions so a hotel doesn’t have to compromise on rates and occupancy.

3. The Power of Page Position

Just as with search engine optimization (SEO), the order in which a hotel appears on the pages of an OTA is critical to bookings. Whether a hotel is listed at the top of the first page, or in the middle, or at the top of page 2 can mean the difference between successful occupancies and disappointing vacancies. Today, travelers use OTAs as hotel search engines- using it the way that they would use Google to see what hotel options exist in a particular destination- so a hotel’s position on these sites corresponds directly with occupancy and sales. Hoteliers must anticipate their competitors’ rapid rate changes to ensure the property does not fall off page 3 or 4, which, to online consumers, might as well mean that the property doesn’t exist. To gain maximum market share, hoteliers should calculate optimal pricing positioning by star rating, guest reviews and location. A multiple-page positioning approach can benefit a hotel’s prospects for OTA-driven bookings.

4. Monitor & Control Inventory

Hotels routinely allocate rooms to their OTA channels, but what happens if that allocation falls short of demand? What if those rooms run out on nights or weekends, when the revenue management staff is off the clock? A good hotel will take a page from big box retailers and keep their inventory out on the shelves (or available to the public through OTAs) instead of in the back storage room.

Hoteliers should allocate resources in their budgets for real-time dynamic rate optimization with automatic room inventory control. These powerful tools will ensure proper room inventories on all electronic channels day and night giving the hotel a proactive attitude versus a reactive stance. Continuously monitoring the pace of bookings and having automated GDS and OTA allocation updates can help maximize online bookings.

While these strategies cannot always guarantee profitability for hotels, they can certainly help increase bookings on that most important of sales channels: online. It is through successful electronic sales that many hotels can reach positive RevPAR and high occupancy rates.

These four strategies will most certainly rev up your RevPar, and represent a solid starting point for a comprehensive revenue management strategy that will take your property through the end of this recession and into a more profitable and long-term recovery.

Jean Francois Mourier is CEO & Founder of RevPARguru, a company that has developed an alternative type of revenue management and real-time pricing solution (combined with automated online distribution) to help hotels maximize occupancy and increase their profits.