How easy is it to be successful in the hotel business today? That question was posed to a panel of CEOs at the NYU International Hospitality Industry Investment Conference, held at New York’s Marriott Marquis in June. It was answered with varying degrees of confidence. According to Sébastien Bazin, chairman and CEO of AccorHotels, the hotel business is tough because guests are becoming increasingly demanding. And, thanks to social media, today’s guests are louder than ever when disappointed. “We, as an industry, are resilient and still growing, but it is not a business for amateurs,” he said.
Mark Hoplamazian, president and CEO of Hyatt Hotels Corp., expressed concern that Donald Trump’s campaign-trail promise to improve the country’s travel infrastructure will end up sidelined as focus is shifted to tax reform (or worse, piggybacked atop tax legislation). According to Hoplamazian, infrastructure updates are sorely needed by the public and would be a boon for the travel industry. He urged those in attendance to become more active in promoting the infrastructure agenda. “The CEOs at this table may feel this is not the right order [for things],” Hoplamazian said. “We believed, based on what we heard from the administration, that they can make infrastructure reform a reality apart from tax reform. We, as an industry, need to work together to move that needle.”
Expedia’s president and CEO, Dara Khosrowshahi, chimed in with a note of positivity, stating society’s trend toward experiential travel is a big plus for the industry, as evidenced by data mined from Instagram. “The number of pictures taken of ‘stuff’ is going down on Instagram, while pics of places and events are on the rise,” he said. “We are going from a society of stuff to a society of experiences and this experiential economy has incredible potential.”
Customer-booking trends are always changing, and it isn’t getting any easier for hotel companies to keep up. During a panel titled “The Distribution Dilemma,” five industry executives broke down the difficulties inherent in understanding today’s distribution models and discussed how hotels can maneuver themselves in front of guests. Drew Pinto, SVP of Distribution at Marriott International, said the heart of the distribution dilemma lies in data. He said guests are handing over data to numerous sources and, in return, they expect businesses they interact with to offer personalized, frictionless experiences as fast as possible. For this reason, Marriott is placing great emphasis on collecting and applying guest data to their travel experience; but in order to make that a reality, it’s being forced to rethink its own internal operations.
“We like to say digital is in everyone’s job description, from marketing to distribution,” Pinto said. “We’ve been very focused on moving beyond the traditional conversation about rates while keeping the customer in mind to fulfill what we are trying to fulfill.” Properly digesting the data collected about guests is one of the most challenging aspects of hotel operations today, but also creates one of the biggest payoffs. Just ask the online-travel agencies. Lou Zamerka, director, Global Accounts at Booking.com, said his company combs through billions of data points to learn how to package hotels in a way that creates insight for all of its data partners, but, currently, there are holes in the data necessary for proper application. In some cases, one company may have all the information another needs, but nobody is sharing.
Key Industry Trends
Four top industry thought-leaders convened for a frank discussion on the key trends impacting hospitality and tourism, analyzing topics such as infrastructure, business-travel trends and how the hospitality industry is contributing to the country’s economic productivity.
In a panel moderated by Bloomberg TV’s Betty Liu, Thomas J. Baltimore, Jr., chairman and CEO, Park Hotels & Resorts; Sébastien Bazin, chairman and CEO, AccorHotels; Mark S. Hoplamazian, president and CEO, Hyatt Hotels Corporation; and Dara Khosrowshahi, president and CEO, Expedia discussed the rise of the experience economy, the crucial need for strong investment in infrastructure and the importance of empathy and human engagement in creating a better customer experience.
When discussing today’s discerning travellers, who increasingly want to immerse themselves in experiences that include impeccable service at affordable prices, Bazin stated, “People want time well lived, not money well spent.”
State of the Industry
In a panel moderated by PwC’s Scott D. Berman; Chris Cahill, CEO, Luxury Brands, AccorHotels; Steve Haggerty, global head of Capital Strategy, Franchising and Select Service, Hyatt Hotels Corporation; Kevin J. Jacobs, EVP and CEO, Hilton; Elie Maalouf, CEO, The Americas, InterContinental Hotels Group (IHG); and Mit Shah, CEO and senior managing principal, Noble Investment Group, discussed the industry’s growth potential as it related to geopolitical and economic shifts. Most have seen, and believe they will continue to see, moderate growth.
Bazin; Mark Hoplamazian, president and CEO of Hyatt Hotels Corporation; Jonathan Tisch, chairman and CEO of Loews Hotels & Company; and Dara Khosrowshah, president and CEO of Expedia, took a break from the event’s main boxing ring to sound off on the big issues affecting the hospitality and travel industries.
Six Notable Insights:
1. Guests have changed Today’s travellers have to deal with ever-changing factors from online-review sites to fears of terrorist strikes in major cities. Bazin, whose AccorHotels saw revenue fall after two attacks in France last year, noted that safety concerns don’t seem to affect people’s desire to travel, but does affect where they go. “They go elsewhere,” he said. “All the traffic we didn’t get in France for the past 12 months went to Spain, Northern Europe, Amsterdam and London.”
2. …and so has their spending The retail industry’s struggles could be hospitality’s gain, Tisch said. With millennials — and other demographics — opting to spend money on experiences rather than things, hotels are poised to see stronger bookings.
3. The travel ban isn’t changing travel patterns…yet While the industry is waiting to see what long-term effects the President’s attempts at instituting a travel ban will have on inbound travel to the U.S., none of the CEOs said that they had seen a significant impact on numbers that could be attributed to the bans with any certainty. Instead, said Khosrowshahi, the biggest factor for the global OTA was currency fluctuations: U.S. volumes were hurt a little by the strong dollar, he said, but now that the dollar’s getting weaker, that should be a tailwind for inbound U.S. demand.
4. Regulating Airbnb While traditional hoteliers and Airbnb will likely never see eye to eye, Hoplamazian said AH&LA is focusing on taking the wind out of the home-sharing service’s sails through local laws. “The particular focus has been on listings by what could be described as commercial owners of multiple properties,” he said, emphasizing that these businesspeople are not just renting out a room in their apartment but are buying multiple apartments in which they never reside, but list on the site for visitors to rent.
5. Hotel investment is still strong In spite of changing times and travel patterns, hotels remain a popular investment option. “We’ve seen consistent demand for hotel properties,” Hoplamazian said. “[There’s] no question that interest rates have contributed to the level of activity and nterest, but also in helping to preserve returns.”
6. Top markets attracting attention Which regions are hot for investment right now? The panelists had a wide range of opinions. “The Asia Pacific markets are going gangbusters,” Khosrowshahi said. “The outbound Chinese consumer is an absolute powerhouse as far as demand goes.” Africa is also ripe for development, Bazin said, and is attracting investors from South Korea and China. “But it’s a difficult market because each country has different geopolitical risks or macro-economic risks. So for those who know better, this is a place not to miss — but it’s a 20-year-bet.”
Finally, over the last three years, diplomatic and trade relations have improved between the U.S. and Cuba, and more global hotel companies have started to gain a foothold.
Stephen J. Renard is president of Toronto-based Renard International Hospitality Search Consultants