There are plenty of ways that online travel agencies influence where guests’ book their hotel rooms. Sites like Expedia present hotels according to internal formulas of customer ratings through the OTA’s own systems. According to the Wall Street Journal, other factors that sway search results include hotels paying larger commissions than others, and the quality of property images provided. The problem comes when OTAs claim to help consumers comparison shop with information that isn’t entirely objective. Given how much OTAs have been outpacing traditional brand distribution channels in terms of bookings, Best Western CEO David Kong sees parity agreements as necessary, though problematic, especially with the 75 percent online market share that Priceline and Expedia currently possess in North America. Although with the changes happening in Europe, Kong suggests taking a more nuanced approach to parity agreements. Read more here.
When hospitality financial experts met at ALIS at the end of January, many of them were echoing the same sentiments—in order to best manage financial risk, investors should be preparing for the worst-case scenario. While the lodging industry is currently in a good place, hoteliers must be conscious of the fact that the cycle will eventually end, and they should invest in properties that can sustain growth or simply maintain revenue during less flush economic times. To read more, click here.
Turbulent global financial markets, oil price volatility, and a slowdown in job growth last month are fueling concerns about the strength of the U.S. economy, leaving many hoteliers concerned about what the next cycle will bring. Hotel owners will face tighter financing constraints during 2016 as lenders adapt to more challenging debt capital market conditions, according to Fitch Ratings. Lenders can no longer rely on rising hotel fundamentals to offset poor credit decisions, so sponsor quality will distinguish hotel debt capital access for the balance of this upcycle. New regulatory requirements will continue to temper hotel development growth at the margin, but Fitch expects alternative capital sources to step in and fill the void. To read more, click here.
Due to recent legislation regarding minimum wage and overtime regulations, the hospitality sector is under close watch by the Department of Labor and the National Labor Relations Board. Through working closely with the AH&LA, these entities discovered something surprising—many of those in upper-management positions started their careers in hourly, entry-level jobs. With the hotel industry growing, and employment rates in this sector rising, hospitality offers employees a wealth of opportunities for personal career growth. To read more, click here.
Baltimore is spending more than $350,000 to put some of the city’s chronically homeless in hotels and serve others in a new shelter, according to The Baltimore Sun. The city will pay approximately $65 a night for homeless people to stay in hotels on an emergency basis, while outreach workers seek more permanent accommodations. The new approach is designed to help more of the city’s roughly 3,000 homeless people by removing barriers that keep them on the streets. To read more, click here.
There’s a rising concern that China’s pools of potential bad debt will drag down global economies for some time to come. While there has been plenty of toxic debt that companies and individuals have kicked around since the financial crisis of 2008, the loans from government-owned banks to government-owned enterprises in China possibly pose a new risk because of their unknown size and unique risk profile. According to The New York Times, analysts currently estimate China’s troubled credit to exceed $5 trillion. In many cases, the Chinese government (at the local or state level) has ownership stakes in both the lending institutions and the borrowing ones, which means the credit risks from a potential toxic debt hangover aren’t diversified enough to create a soft landing. Chinese banks began a lending pull back at the end of last year, which means that the Chinese economy could slow down even more than it already has. The potential result may be continued volatility in the global financial markets. To read more, click here.