Don’t get Anthony Melchiorri started about what’s wrong with today’s hotel industry because you are going to get a rant, although his diatribe will be colorful and extremely entertaining.
The star of Travel Channel’s Hotel Impossible, Melchiorri in a phone interview readily demolishes investors’ misconceptions and selfish visions about what they want their hotel to be, as opposed to what it needs to be. And, he does it about as fast as he’ll tear down sheetrock and uncover filthy hotel rooms in Hotel Impossible Season 3, which kicks off August 12.
Melchiorri’s underlying idea is that “running a hotel is hard,” although he claims that in his several decades in the hotel industry, ranging from running front-office operations at New York’s Plaza Hotel to becoming general manager of the The Lucerne hotel in 1997, he’s never had a bad day (although he’s been “pissed off.”)
“I love what I do from my toes to my ears,” Melchiorri says of his hotel experience.
Clueless Hotel Investors and Operators
When Travel Channel debuted Hotel Impossible in April 2012 Melchiorri says he “wasn’t really 100% prepared for the absolute inexperience of people investing millions and millions of dollars in hotels, and having no experience.”
One of the biggest mistakes they make is opening a hotel based on their personal visions or dreams of what a hotel should be, he says.
Melchiorri says instead the hotel should be built around what the neighborhood or clientele needs. Perhaps the area needs a convention hotel or a “limited service” property as guests may want “free water, free Internet, and a room they can manage that’s not too big or too small,” he says. “They want you to answer the phone when you call the front desk, but otherwise don’t bother them.”
“I don’t care what you like,” Melchiorri says, taking aim at would-be owners who may want to operate a hotel that’s an extension of themselves. “None of them get it.”
Newbies to the business don’t understand revenue management and distribution channels, including the fact that “the AAA book may still drive major business.”
“Then they hire inexperienced people who are cheap and they do everything wrong,” Melchiorri says.
Boutique Hotels Don’t Exist
Do you want to open a boutique hotel? Well, they certainly are trendy.
Melchiorri argues that boutique hotels “don’t exist” — or at least labeling a property a boutique hotel, especially in its earliest stages, can be dumb and dangerous.
“Don’t label your hotel until the hotel labels itself,” Melchiorri says, because first the owner has to analyze what the size and design should be, and whether it will cater to local hospitals or conventions. “Don’t give birth to it before it’s born.”
And avoid getting into the hotel business “until you can explain to a bank and to me how you can sell a hotel room,” he says.
In other words, learn the basics and keep your grand visions at bay.
Actually, Melchiorri says he would characterize the Waldorf Astoria New York as a boutique hotel.
For real? After all, It’s clean, well-serviced and has a unique personality, he says. “To me, that’s a boutique hotel,” Melchiorri says.
The Exit of the Pretenders and Rise of the 3.5-Star Hotel
Despite all of the ignorance about the business he sees and the hotel consultants he says will steal an owner’s money, Melchiorri thinks the hotel industry is in great shape and that the 2007 recession cleaned out the “pretenders, who got clobbered.”
“There are not many people any more in my industry who are faking it,” Melchiorri says.
He believes Manhattan, though, is an exception to that rule, characterizing the borough “as the only place you can make money even if you are running the hotel wrongly.”
Hoteliers who survived the 2007 recession “really knew the craft,” and that leaves the hotel industry with “tremendous potential,” he argues.
Melchiorri contends that the 3.5-star hotel, which wasn’t a big deal before 2007, is hitting its stride these days as owners won’t need to invest in big overhead such as banquet space.
“Pound for pound and dollar for dollar, the profitability of 3.5-star hotels on a percentage basis beats 4- and 4.5-star hotels,” Melchiorri says.
In that regard, you can see how big private equity firms such as Blackstone are investing these days away from luxury proerties such as Hilton and getting more active in limited-service hotels.
It’s no accident then that the Hilton New York removed room service because it’s unprofitable “unless you can reinvent room service,” Melchiorri says.
Favorite Hotel Brand?
Melchiorri says he’s had disappointing experiences at several Four Seasons properites of late, and his favorite brand at the moment is Holiday Inn Express, adding that it has “not once screwed up my reservation, my stay or the hotel pool.” (Melchiorri says Holiday Inn Express “does not give him one penny” for the kind words.)
Speaking of brands, Melchiorri says there are tradeoffs when deciding whether to flag your hotel or stay independent.
“There’s a reason 80% of hotels are run by brands,” he says, because brands have figured out what the hotel needs to be, although they will take a huge chunk of your profits.
On the other hand, hotel owners who don’t understand what their hotel truly needs to be in their specific market are making a dreadful mistake if they invest their own money and hire a hotel consultant who’ll “rob them” and general manager to run it “because he’s going to tell you exactly what you want to hear,” Melchiorri says.
With Hotel Impossible Season 3 in the wings, Melchiorri says he is constantly amazed and saddened that hoteliers “are not paying attention.”
“People are making incredibly bad decisions, and successful people are getting destroyed,” Melchiorri says.
Meanwhile, Melchiorri says he’s developing the concept for a new hotel brand, although he’s mum on the details.
Here’s a “sneak peak” of the first episode of Season 3, focusing on the Abacrombie Hotel in Baltimore: