Issues the Hospitality Industry Will Ignore at Its Own Peril

The U.S. hotel industry continues to break records.

In fact, according to data from STR, 2017 was another record year. In 2017, U.S. hotels saw a 0.9 percent increase in occupancy levels to 65.9 percent nationwide; a 2.1 percent bump in average daily rate to $126.72, and a 3 percent increase in revenue per available room of $83.57. All three metrics were the highest STR has ever recorded.

The U.S. hotel industry also set records in supply and demand, with approximately 1.87 billion room nights available, and 1.23 billion room nights sold.

With all of these exceptional numbers, you’d think the industry would be content to continue doing what it’s been doing for the past nine years of the current lodging cycle. However, smart hoteliers know that there’s always room for improvement, especially given ever-present threats to the hotel industry such as online travel agencies and Airbnb.

At the most recent Americas Lodging Investment Summit (ALIS) conference in Los Angeles, Skift spoke to a number of hotel industry executives and asked them what they thought the hospitality industry isn’t focusing on right now — but really should be.

The answers ranged from employment issues to technology and everything in between, but they certainly reflect an industry that, despite enjoying incredible levels of profitability and success, knows that it can’t afford to rest on its laurels.

Talent

Several executives said the industry needs to focus on the next generation of hoteliers.

Tony Capuano, Marriott International’s executive vice president and global chief development officer said, “I don’t think the industry’s doing as good a job as it should educating prospective employees about the dignity of service. I think we suffer in some areas of the world where people sort of look at hospitality jobs as a job of last resort or as a transitional job, as opposed to saying, ‘There is a real dignity in serving others and enhancing their travel. And really extraordinary careers can be made.'”

Capuano noted that at Marriott, a large number of managers have worked their way up from hourly jobs. “We try to do our best to tell that story if you have had the chance to meet Bill Marriott or listen to him speak, he always quotes statistics about more than half our global general managers having started as hourly associates. And so, I think the industry as a whole needs to do a better job highlighting what an extraordinary career opportunity it is.”

Jay Stein, CEO of Dream Hotel Group, said he finds similar challenges in recruiting the right talent for his hotels. It’s tough to find personnel coming from “great hotels” or candidates who “spent $300,000 for an education,” Stein said, adding, they wouldn’t “want to come in and be an assistant housekeeping manager at $55,000 a year. It’s just not going to happen.”

Stein’s solution at Dream Hotel Group is to recruit young people who may have never had any experience in hospitality, but are looking for career opportunities, and hiring them as operations analysts with starting salaries around $70,000 a year at entry level. They undergo a year-long introductory program and might get promoted to a rooms’ division manager. Within two to three years, they could be on their way to becoming a general manager with a salary of $175,000.

“The real concept is taking real talented people, get them involved in our industry early on, but get them on a fast track, cause they’re not going to go the traditional route that I did,” Stein said. “I hope our industry does realize it, because we take advantage of doing it and keep ending up with good results, but I think truthfully for our industry, it is something we’re going to have to figure out ways to how do we get people on faster tracks, so we’re not losing this potential great American talent that’s here but they’re not really attracted to our plan. Millennials are different.”

Leeny Oberg, Marriott’s chief financial officer, echoed Capuano and Stein’s comments, saying, “The criticality of talent for operations of the future” is something the industry needs to be paying more attention to. “It used to be that you had roles in hospitality that were very specific, and I think more and more with technology we’re looking at hospitality has a much broader definition. And so, we need to make sure that young people are getting the training across the full breadth of areas given how much it’s changing over the next number of years.”

Technology

Not surprisingly, a number of executives said the hotel industry is lagging in terms of its ability to keep up with technology — something echoed by Ali Abidi, principal and technology consulting lead for PwC’s Hospitality and Leisure practice.

“Hospitality is at the tail end of making the most use of data” when compared with other industries, Abidi said, adding “every company today needs to be a technology company.”

Pat Pacious, Choice Hotels CEO, agrees that there is a gap between talk and action when it comes to technology.

“I think where Choice Hotels is moving, we’re moving down the path of thinking about our owners first and our guests first, and making sure that we as a company, not somebody else, but Choice Hotels, is going to provide the best value to them, and all that’s technology enabled,” Pacious said.

When consumers share data with Choice and the chain can take it and improve the guest experience, then that presents “a better opportunity for us and for our owners, and is really the direction we want to head,” he said.

Choice Hotels, which just announced its new proprietary central reservations system, Choice Edge, the same week as ALIS, is also piloting technologies around voice-based search.

“We figured out how to book a room through Alexa or Siri or those types of things, but then it’s the question of how do you commercialize it?” Pacious said. “We’re doing a lot on the personalization front. Along with Choice Edge comes a fantastic data analytics engine that really can ingest significant amounts of data, and that we’re looking for ways to turn that into things that matter to our consumer.”

Choice is also examining blockchain. “It has to be how does this actually help? Can you use it in the reservations world? Can you use it in the loyalty program world? We do see opportunities there but we’re in the early stages of that.”

Pacious said he’s also very conscious of who Choice Hotels’ customers are, and that he wants to ensure Choice Hotels caters to them with technology that responds to how they want to experience hospitality.

“It’s interesting you come to these conferences and people think about who the consumer is,” Pacious said. “It’s not who the Choice Hotels consumer is. The Choice Hotels consumer does not go and stay at the 300-room big box hotel and stand in line behind 10 people, saying ‘I wish I could open my room with my phone.'”

For that reason, Pacious said, Choice Hotels is keeping human interaction at check-in desks. “People come in, they want to be greeted by someone across the desk, and we’ve tried technology solutions with kiosks and consumers walk right past them and go see the person. That human interaction is still a key piece of what we want. I think those are things we’re working on.”

Best Western CEO David Kong echoed Abidi and Pacious, saying, “I think the industry pays attention to a lot of things, but we’re not the fastest to embrace technology,” primarily because it’s just so expensive to be at the forefront.

“I think we would continue to make investments but we wouldn’t be the cutting edge on technology. There’s no compelling reason to be cutting edge right now because you open up such vulnerability with that. You’ve got to think about the security that I mentioned,” he said, referring to privacy issues related to voice-based search and other technologies, something that other hoteliers have also noted.

Loyalty

Wyndham Hotel Group CEO Geoff Ballotti said the industry isn’t paying enough attention to loyalty in the way that it really should be.

“I think [it’s] the promise of a free night,” Ballotti said. “I keep coming back to that. Everybody I talk to on the consumer side, everybody I talk to here, I ask them, ‘What’s in your wallet?’ One of the questions that I’m going to be asked in the panels today is what does status mean to you? In this industry, it’s the promise of getting a free night.”

At a time when hotel and travel industry loyalty programs have become increasingly more complicated, Wyndham has taken a contrarian approach with Wyndham Rewards, and that, he believes, is something the rest of the hotel industry needs to begin considering, to ensure loyalty isn’t devalued in the eyes of consumers.

“We have something that nobody else has,” he said. “We have turned, as you know, this industry upside down on its head. All of our hotels that used to cost 70,000, 80,000, 90,000, or 100,000 points are available for 15,000 points with no blackout dates. I think consumers are feeling somewhat betrayed and dismayed, whether it’s their car program, or their airline program loyalty program, or their hotel loyalty program, when those points become devalued, especially when it becomes tougher to get that vacation flight or that vacation room night.”

Multigenerational Travelers

Mark Keiser, chief development officer of SH Group said, thinks multigenerational travel is a trend worth paying closer attention to.

“[This idea of] grandparents recreating a second home or a familiar home somewhere in a resort environment to get their kids to bring themselves and their grandkids. If I were given the choice of spending a winter vacation out of New York in Mexico with my parents, my aunts and uncles, everybody, versus doing that in upstate New York, why would I not do that?” Keiser said.

“And it would save on them turning around and having a January trip with just my family and I. I think that marketing that, presenting a product for it, changing the services, having product that’s flexible where people can kind of join for a few days or rooms or just buy the whole thing.”

Instead of treating multigenerational family travel groups as leisure travelers, Keiser thinks the industry should view them as “a corporate group or a social group versus just a bunch of rooms, and really plan activities around what could be fun.”

The Hotel Property Owner

While Pacious, Keiser, and Ballotti are very focused on consumers’ desires for technology and loyalty, Ken Greene, president of the Americas for Carlson Rezidor Hotel Group, said he doesn’t think he industry is paying enough attention to the property owner.

“This business got built based on the property owners first, and then consumers second,” Greene said. “Now the pendulum’s swung exactly the other way. Everybody’s focused just on the consumer and hopefully that will benefit the property owner. In a perfect world that makes sense, but if you keep on adding brands, and that slice keeps on getting smaller, you’re not building the value proposition for the owner.”

Greene said that with the proliferation of so many brands, it’s harder for owners to feel like they have control over their properties.

“It devalues the return on investment for an owner. It also, I think, it pushes an owner farther away from feeling they have a voice at the table,” Greene said. “And I think, you know, great owners, they buy into a brand and a vision. If they wanted to be an independent, they’d be an independent. They may be a franchisee, or have a managed property, but they’ve bought into the vision of the brand, and there’s some passion there. And that passion …

“And they’re smart people, they’re entrepreneurs, and they have ideas. And they want to participate in the brand. And I don’t think they have quite the avenue that they used to have, and quite the voice they used to have. So, I think the big thing over the next five years, 10 years, in this industry is the fact that the industry has forgotten about the property owner, and they’ve taken the focus off of them. And I think that’s huge.”

Avoiding Commoditization

Hyatt president of the Americas, Pete Sears, said that while he understands the industry’s desire for more scale, he’s worried that becoming bigger also means that hotel companies are losing touch with their customers along the way.

“I personally think that consolidation size it certainly matters in a lot of ways,” Sears said. “But it also tends to create commoditization and, well, growth is great, but not if you can’t connect with your customers in an authentic and personalized way. I think our industry is in jeopardy of really losing our hospitality and it’s what we focus on extraordinarily is to make sure that we don’t ever lose that because you know we’re big but we’re relatively small and our ability to give a different differentiated customer experience is what we think is out there for us.”