A record 2,700 people attended the Phoenix Lodging Conference, where many pressing topics remain: labor, slow deal flow, normalization of trends, a soft-landing recession and environmental, social and governance, or ESG, initiatives. However, some of the key topics had a few updates and shifts.

With environmentally conscious travel a key concern of 76% of global travelers, hoteliers are forging efforts to reduce their properties' carbon footprints. But finding a sustainability benchmark is difficult.

Luckily, the topic was bolstered when the American Hotel & Lodging Association, or AHLA, announced at the first general session a partnership with the Hotel Association of Canada, or HAC, to launch the Green Key Global certification program. This program will grant environmental certifications to hotels in the U.S. and Canada. Starting in 2024, hotels can receive an eco-rating based on their water conservation, waste management and energy use. The goal is to encourage hotels to reduce their environmental impact while increasing occupancy and saving costs. This program is expected to be popular with customers and helpful to hotel owners and operators.

There were several discussions throughout the conference about the deals that have transpired this year and an outlook for future deals. The two consistent phrases were, "Cash Flow is King" and "Creative Financing."

The difficulties in financing property improvement plans, or PIPs, and significant increases in insurance costs have made it increasingly challenging to pencil deals. The coined phrase of insurance cost changes was: "double, double, half,” which stands for: Double the price, double the deductible and half the coverage. These factors are why recent and future deals require strong cash flow and creative financing.

Most sellers and buyers have accepted that interest rates will stay higher for the foreseeable future. Many attendees and panelists agree that capitalization rates will rise in 2024. As such, there is no one-size-fits-all solution for financing. Mezzanine, bridge and Property Assessed Clean Energy, or PACE, loans were mentioned, as well as seller financing of PIPs.

As loans mature, owners grapple with refinancing, selling or giving the keys back. One panelist mentioned about refinancing, "If you believe in it, then so do we. They (the borrowers) will ask for creative cash stacks but won't put in personal cash. If you won't invest, why should we?"

Construction financing is even more difficult. One panelist on the "Financing Options" panel said that he sent a construction bid to 110 lenders and only received two term sheets in return.

Regarding an outlook on transaction activity, most believe more deals will transpire as uncertainty wanes.

Kevin Davis, Americas CEO for JLL Hotels & Hospitality Group, mentioned that two of the primary variables causing uncertainty in transaction activity have been answered: interest rates and the economy. The federal interest rate is within 25 points of being consistent, and most believe the anticipated recession will have little impact on the hospitality industry. Also, many industry leaders agree that hotels have reached a "stabilized" environment, reducing uncertainty.

Panelists agreed that resorts need to get the experience right or they will lose guests, especially as hotel rates are higher than ever.

The changing dynamics of hotels are pushing the boundaries of guest expectations, from being a place to stay overnight to creating an experience for guests through design, storytelling and technology.

Mike DeFrino, managing director for luxury and lifestyle hotels in the Americas region at IHG Hotels & Resorts, said personalized travel experiences are driving hotel performance, especially among upper-tier hotels.

Guests are looking for bespoke hotel experiences, and that is driving demand in many markets. Smaller markets also may benefit from this trend the most, according to DeFrino, as consumers who engage in experiential travel might travel to smaller markets for the unique and immersive experience that a particular local hotel might offer.

Hotels are increasingly relying on technology to enhance the guest experience. Self-service options, for example self-check-ins, have become more common, and live customer feedback is now easily collected. The term “Phydigitalism” was mentioned and described as the blending of digital experiences with the physical. This integration allows guests to use their phones for basic hotel needs as staff provide them with a more personalized in-person experience.

At the conference, there were more women presenters and panelists. There was not a main stage panel without at least one female leader. While the ratio was not even, it was progress from when we started attending hospitality conferences in 2011.

In the "Leaders in Hospitality" main session, Susie Grynol, president and CEO of the Hotel Association of Canada, was engaging and knowledgeable on many topics, but her comments about labor stuck out. We've been talking about labor for years and have heard effective resolutions, such as flex scheduling and daily pay, but Grynol took a broader look at the problem.

She said, "Employees look first at the company and then at the job." Employees care more about principles and values.

Julienne Smith, chief development officer at IHG, won the Peggy Berg Castell Award. The award honors female trailblazers in the hospitality industry. She humbly accepted the award, paying tribute to other inspirational women in the field. In a video, she inspired others by saying, "Show up, give back, be connected and pay it forward. Be your authentic self."

AAHOA President and CEO Laura Lee Blake provided insight into how to pay it forward for future women leaders. She challenged the industry to help women identify as leaders by helping them determine when and how to have authority. She said, "help them determine when they should speak up. In every meeting they're in, give them an opportunity to present to the group … make sure they are given authority to make decisions."

The headwinds or challenges that panelists and presenters listed as concerning were fairly consistent, and many could fall into the category of "black swan" events: the 2024 election causing social unrest, international turmoil, and the Federal Reserve over-tightening, causing larger banking crises due to deepening commercial real estate financial stress.

The overall sentiment for the industry remains positive, although maybe not at the same vigor as last year, as we've entered a more "normalized" environment. Hoteliers anticipate little volatility in topline metrics, are concerned about the bottom line, and are anxiously awaiting increased hotel deal volume.

Emmy Hise is senior director of hospitality analytics and Colin Sherman is director of hospitality analytics at CoStar.

The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concern.

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