What’s On the Horizon for the Hotel Industry?

It wouldn’t be a CEO panel at a hotel conference if the biggest names on the speaker lineup weren’t asked for their predictions on upcoming industry performance.

After several years of “enjoy the ride” and then a year or so of “cautious optimism,” hoteliers at last month’s Hotel Data Conference in Nashville were less optimistic.

On Day 1 of the conference, STR’s President and CEO Amanda Hite announced the company’s revised forecast, which showed expectations of slower ADR and RevPAR growth than what was previously announced.

“We actually underestimated the demand we’ve seen,” Hite said about the second quarter of 2017. “But ADR growth was revised down from 2.5% to 2.3%.

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“We just haven’t seen the rate growth we expected with the demand fundamentals that are there and the sellouts that we’re having,” she continued. “Hotels are full in many markets, and so we thought there would be a little more pricing power and that just hasn’t come to fruition.”

Later, on a fascinating panel called “Beers with the Bosses” to wrap up the first day of the conference, Noble Investment Group’s CEO Mit Shah referenced Hite’s forecast. Celebrating his birthday on stage with cake and a beer, Shah said, “Every time someone comes out with numbers, it’s downward, downward, downward.”

“I’m only talking about micro markets, but I believe we’re going to have a really choppy third quarter,” he said.

“I would second what Mit said about being cautious about the remainder of 2017,” added Suril Shah, managing director of acquisitions and asset management at Starwood Capital Group.

Identifying Upcoming Challenges

On the heels of several major industry mergers and the launch of a handful of new soft brands in 2017, some leaders pointed to brand oversaturation as a potential problem.

“There are so many consumers who only travel once or twice a year, and they’re confused,” said Mike Marshall, president and CEO of Marshall Hotels & Resorts. “I’m confused, and I am in the business.”

Bill Duncan, global head of all suites brands at Hilton, said guests want an independent hotel experience but feel more comfortable when the hotel is attached to a larger entity with brand standards. Much of the same can be said for developers, he said.

“We have done huge research, and this is long-tail so we can own guests as their mind-sets change. This is all so dynamic, and it is getting faster,” he said.

“Since we started this panel 15 minutes ago, Marriott has introduced two new brands,” Suril Shah joked.

Marketing and distribution strategies were also front and center at HDC, with some hoteliers touting their solid relationship with OTAs while others called for more transparency between suppliers and distributors.

La Quinta’s senior vice president of digital commerce and media Ted Schweitzer said he wants his hotels on as many platforms and as many shelves as possible.

“For La Quinta, channels are important to us and OTAs are important to us,” he said. “The transparency in the selling rate is better than it has ever been; you see less companies taking mobile rates and loading them as public rates, for example. I see these partnerships getting more transparent there.”

However, Andrea Thibeault, senior regional e-commerce manager for MCR Development, said that while her company looks at OTAs as partners and honors parity clauses, there is more work to be done in the relationship.

“Data sharing is definitely still a problem,” she said. “If a reservation comes through Expedia, we just see the name. We don’t see that data as much as we should be seeing it.”

“That’s why it’s critical for us to use numbers to show why it’s better to book with us,” added Susan Guimbellot, vice president of revenue and channel analytics for Hospitality Ventures Management Group. “Consumers should get the better rate with us and the easier upgrade options.”

What’s Next?

Despite somewhat tumultuous times, hoteliers agreed they need to continue innovating by finding new ways to learn about guests and tailor better experiences.

Duncan said hotels should already have their downturn strategy in place.

“Companies fail when they do not have the policies in place to be at the front end when a recovery comes,” he said.

A successful strategy means combating downward market pressures and continuing to outperform your market in RevPAR Index.

Mit Shah said an upcoming downturn, no matter how far away, will be different this time around.

“We’ve never been in a downturn with this amount of data,” he said.