LODGING recently hosted “Prioritizing Profitability,” a virtual roundtable featuring a handful of prominent owner/operator executives, each of whom discussed a wide range of key hospitality issues from the importance of driving rate and leveraging scale to managing labor and supply chain challenges. The participants also offered their overall outlook for lodging industry performance going forward.
Find the full video coverage here.
Jason Reader, EVP, operations, Remington Hotels, touted a new consumer mindset on travel following the pandemic as a “long-term positive for our industry” as he expressed optimism.
“Even though we’ve got these economic headwinds, this may be one of the first times where we see a recession, but our industry is still stabilized. Whereas typically when a recession comes our business goes down, this could be different now. I think there are a lot of positives to look forward to in our business,” he said.
Martin Schellenberg, VP, enterprise sales, Entegra—a procurement services company—shared a similar sentiment.
“I also like to think of the glass as half full as opposed to half empty. We’ve seen tons of innovations over the course of the last two years. We’ve seen a lot of great things coming out of what started off as a big catastrophe with COVID-19. I can see on a daily basis how volumes are picking up, so I have a very positive outlook for the future,” he said.
Steve Batta, EVP, operations, Highgate, reinforced the positive message despite some of the macroeconomic challenges.
“Everything that you read in the paper and watch on the news looks like things are going to be terrible, but yet we do not see that in pace [of business], and we do not see that in our future. We’re bullish and optimistic that this is going to continue to keep moving forward and up. We’re looking forward to 2024; we think that that is going to be a breakout year. We’re seeing great pushes right now with group coming back, and we definitely see international [travel] clawing back,” he said.
Richard Jones, COO, Hospitality Ventures Management Group, shared a similar outlook.
“Our pace is strong, our optimism is high. The fundamentals look strong as far as you could reasonably see into the future. I think that the mindset shift and the cultural shift of the desire to travel, and the intent to travel, is just a human need. It’s a right and it’s going to continue,” he said.
Jones subsequently shifted his focus to profitability. “I think everybody’s realizing the same thing that we’ve realized with a new level of rate performance. We’ve learned things about what the customer is really willing to pay,” he added.
The panelists further elaborated on the importance of rate. Simon Mendy, divisional president, select-service, Aimbridge Hospitality, explained how technology and data have helped operators manage pricing. “One of the things that we pay attention to when there is demand is a natural flex for the revenue management team to actually push rate, and we use a lot of intelligence and machine learning that takes care of that,” he said. Mendy further emphasized the importance of holding rate particularly during slowdowns.
“Where there is the temptation to drop rate to buy demand, that is where you’ve really got to be very strategic to make sure that the team is not falling into that trap. Because when you do, you actually sacrifice RevPAR and you sacrifice profitability,” he said.
Batta, for his part, was in full agreement.
“I don’t think that lowering rate necessarily turns into more occupancy. It can, but I think that holding rate based on the product and the brand and the services for that hotel is extremely important. If you start chasing to the bottom nothing good comes out of that. We have hotels that have invested after COVID and reopened with different levels of food & beverage and so forth. That variance deserves to have a rate to support that, so holding rate is definitely part of our strategy,” he said.
Reader insisted that recent rates “were above any former high,” while adding that costs have never been higher either. “It’s really being bullish to say, ‘We’re in unprecedented times,’ which means we do things differently. You can’t just go by what we’ve done before,” he noted.
Kerry Ranson, president, operations, Raines, pointed out that shifting travel patterns— particularly as it relates to the current ‘bleisure’ trend (see sidebar)—need to be considered as well.
“Understanding the critical mix has become important. We all have had rate opportunities and have continued to drive them. Now it’s about the importance of understanding weekday versus weekend. What may have previously been thought of as a weekday, like a Thursday for instance, is now really a shoulder date. So you need to price that differently and understand where do I have opportunity from a demand perspective,” he said.
Meanwhile, panelists were asked about how scale can play into the profitability equation when it comes to procurement.
“With scale comes advantages and those advantages are expected from our team internally and our community of owners [should] be able to really leverage it. We are very focused on our partnerships and expanding our partnership base so that we have more access to supplies,” said Mendy. He later emphasized the importance of “educating our team” to make sure they’re ordering the right product at the right price. “When we do that, that’s when you really start to see your scale and procurement capabilities all translating into profitability.”
Schellenberg acknowledged the importance of scale, but maintained there are other variables as well.
“Having the volume is one thing, but putting it to action is a whole other story. It is vital in today’s day and age to leverage the right technology to enable your teams. You can have billions of dollars of volume, but if you don’t really funnel it through the right relationships with the right partners and the right contracts, then your volume might not be as helpful as you think it is,” he concluded.
‘Bleisure’ Trend Helps Fill In Gaps For Hoteliers
While roundtable participants largely credited their ability to drive rate as a key driver of profitability, the group also widely acknowledged the impact of the ‘bleisure’ trend in helping to drive demand and ultimately boost the bottom line. Jason Reader, EVP, operations, Remington Hotels, pointed out that the trend of guests combining business and leisure into one trip has helped fill in some gaps for hoteliers.
“It’s the new business transient. Before, business travel was your bread and butter. You didn’t have to worry about Tuesdays and Wednesdays; it was the other parts of the week. Now, it’s almost reversed itself. If we look at why we’ve been able to recover the way we have, I would argue that the ‘bleisure’ component has been a huge piece of replacing the business travel that hasn’t quite come back,” he said.
Reader further added that Thursday and Sunday nights used to be a “struggle” and that has changed for the better. “If a group wanted to come and stay on Sunday night, the answer was ‘yes.’ You didn’t even need to hear what the rate was,” he joked.
Steve Batta, EVP, operations, Highgate, also noted the company is “seeing more of these quick-hit, three-day weekends” while highlighting some of the changes.
“It used to be all the suits left on Thursday and then all of the bags came in on Friday; now it’s much more of a blend. You’re also seeing that double occupancy because they’re bringing their spouses and significant others with them. You’re seeing much more spend per occupied room because of that. The hotels had to change their mindset as well, making sure that the guests are getting what they actually are coming for, which is that work-life balance and being able to experience things in smaller bites rather than coming in for a whole week and experiencing everything at once,” he commented.
Simon Mendy, divisional president, select-service, Aimbridge Hospitality, elaborated on the impact as well.
“It’s been tremendous. That has continued to be a driver in our ability to drive demand and also a continuum in the rate-harvesting opportunity we have,” he said.
