ATLANTA—A decade ago, recalled Plato Ghinos, everyone in the hotel industry wanted two-line phones in their hotel rooms.
“And what a big waste of time that was,” Ghinos, president of the Shaner Hotel Group, said during a breakout session last week at the Hunter Hotel Investment Conference.
Panelists during the session titled “Take Charge of Your Future, Strategies for 2012 and Beyond” discussed what items must be on hoteliers’ checklists today to ensure the two-line phone debacle isn’t repeated.
One to-do item hoteliers should address, if possible, is to bulk up staffing levels, Ghinos said, adding, “It’s a great time to hire.”
Jim Luchars, director at AEW Capital Management LP, said hotels should look into hiring on the sales and marketing side.
The panelists disagreed, however, over whether these new hires will be working in an industry still chugging along toward recovery, or one derailed by gas prices and other macroeconomic roadblocks.
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Plato Ghinos of the Shaner Group |
“I think that there’s enough momentum that we are going to get through this year,” said Bill Fortier, Hilton Worldwide’s senior VP development for the Americas.
Morris E. Lasky, CEO and founder of Lodging Unlimited, took a more pessimistic turn. “It’s not as rosy as it looks as far as I’m concerned,” he said.
Luchars indicated the industry needs to keep a close eye on gas prices. “A spike in gas prices could have a real impact on the business in the next six months,” he said.
Fortier countered, saying increases in gas prices won’t prevent people from traveling, and hotels will benefit from a “huge uptick” in transient business.
“I think this year we’re going to avoid a speed bump,” he said.
Social media
The effective use of social media is another variable hotel executives have to get their arms around, the panelists said.
Panel moderator L.W. “Biff” Hawkey Jr., senior VP of development at Hostmark Hospitality Group, asked Fortier if Hilton would consider doing a deal involving a hotel that has between a 1- and 3-star TripAdvisor rating.
Fortier’s answer: No. “We don’t want 1- to 3-star properties,” he said. “We want 4 or 5 stars.”
A hotel’s social-media standing can have big implications on its ratings, Fortier said.
“In today’s world, one tweet, one email can wreck your hotel’s reputation if you don’t address the problem,” he said. People want to know someone out there is listening, which makes it crucial to respond to social-media issues as soon as possible, he said.
And franchisees shouldn’t be shy in asking for social-media help from the brands, Ghinos added.
Raising rate
Rate has the potential to continue to move upward, the panelists said. It’s important for revenue managers to press down on the gas while the opportunity presents itself, Lasky said.
Every $1 increase in rate adds $250,000 to a typical hotel’s bottom line, Lasky said, adding, “Is (increasing rate) important? You bet it is.”
Ghinos said revenue managers have to be confident in their hotel and brand. “A dollar or two will make a big difference.”
That said, hotels have to come up with a more efficient yield management system, Lasky said. The old system of offering one rate at 3 p.m., a lower rate at 4 p.m. and an even lower rate later on in the day isn’t ideal, he said.
Inflation probably won’t cut into a hotel’s bottom line, Fortier said. In fact, inflation tends to be a friend of the industry. “Inflation (rate) is changing on a daily basis; you can change your rate on a daily basis,” he said.
One important factor in having the ability to raise rate is to ensure a property is physically competitive, Ghinos said.
“You can’t do yield management unless the guest is happy,” Lasky said.
Funding renovation work is easier said than done, Luchars said. “Trying to maintain a full-service property today, with a strong brand, is a real challenge,” he said.
Financing
Locating construction financing also is a challenge, Luchars said. Any new construction financing deal requires “significant” equity and comes with strict underwriting terms. There aren’t many groups that can pull that off, he said.
That said, the overall lending environment looks to be loosening, Ghinos said.
Regional lenders are particularly active, Luchars said.
“I think lending is coming back. It’s (still) difficult. It takes time,” Ghinos said. “As an industry, we are guilty of going crazy for 10 years and then getting beat up for 10 years.”
Tight underwriting isn’t necessarily a negative, Luchars said. “We’re back to where we should have been all along,” he said.
Deals and development
While hotel development appears stymied, there are still opportunities, the panelists said. There are signs that supply is trying to come back, Luchars said.
When it comes to development, the key is finding the gaps in markets, the panelists said.
“If you don’t do it, someone else will,” Lasky said. Often, that gap is in an extended-stay product, Fortier said.
The transactions environment has a robust potential, Lasky said. Special servicers are dumping product on the marketplace. “There are a lot of opportunities,” he said.
Lasky said, however, that his company is not buying anything that comes with a management contract.
“Those who led you into the woods won’t lead you out,” he reasoned.