STR Strategy Officer Elizabeth Randall-Winkle Talks Slowdown Strategies

As chief strategy officer at STR, Elizabeth Randall-Winkle is responsible for the development and execution of the organization’s strategic initiatives. Randall-Winkle reviewed for LODGING some of what STR’s data suggests lies ahead for the industry, and offered ideas for getting ahead of challenges—including a possible slowdown—and behind a strategy to face them. She also touched on how the U.S. hotel industry can better tap into the enormous potential of international tourism.

What’s 2019 looking like now?

For the first four months of 2019, demand was exceptionally strong—it was up 2.4 percent; yet in three out of four of those months, ADR growth was a relatively weak 2 percent, something not seen in the expansion cycle since 2011. However, because we think the fundamentals are still there for 2019, we expect the second half of year to be stronger than first half, and for growth to continue in 2020, just at a lower growth rate than in previous years. While growth is likely to slow, and at one point may turn negative, there’s no reason to panic. It there is a recession, it would likely be mild and short-lived.

What should hoteliers be doing to prepare for a possible slowdown?

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One of the challenges about where we sit today is that in recent memory, recessions have all have been sudden and violent and led by something external to the industry. The good news is the kind of mild recession that may occur is not likely to be as impactful or prolonged as “black swan events” such as 9/11, the financial crisis, and the Iraq war.

With more information at our disposal to guide our decisions, facing this type of event is mostly about proper planning and executing a strategy. Some things companies are doing is looking at their ability to use free cash where they can to pay off debt and focus on operational efficiency, support relationships with current guests, and secure future guests.

Booking group travel will be more competitive in this situation, so it’s important to be able to choose the right groups at the right price and otherwise secure those block bookings to enable competitive pricing for the less predictable transient business.

Do you see any other trends that may be related to this slowdown?

It seems likely that the pipeline acceleration that is now occurring will decrease occupancy. Supply growth in the top 25 markets includes 10 percent more rooms under construction and another 10 percent under contract. Already there is compression—even declines—due to new supply in limited service, upscale, upper-midscale, and midscale sectors.

Given the increasing supply, what can the American hotel industry as a whole do to increase demand?

My own belief is that we need to think of ourselves not so much as the hospitality industry but as part of a larger industry—that is, travel and tourism, whose growth numbers are phenomenal. The World Tourism Organization forecasted 1 billion international arrivals by 2020, and annual growth of 3 to 4 percent. Therefore, the U.S. travel industry should work to make international travel that includes the U.S. more attractive. Just as it’s easy now to hop from one EU country to another and to get around using public transportation, anything we can do to make the journey to the U.S. and movement within it easier and more efficient will have a positive impact. To increase access to international travelers, it is important that the U.S is perceived as a great travel destination, one that welcomes guests and ensures a fantastic travel experience.

This is no small thing, but factors such as an easier travel document application process that would enable travelers to include the U.S. as a stop on a larger trip, as well as infrastructure and transportation modifications that would benefit residents as well as visitors, could dramatically increase the U.S. share of international tourism. Therefore, we should be lobbying at our local, state, and federal levels to move forward on needed improvements.

 


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