NASHVILLE—Optimism was brimming at the Asian American Hotel Owners Association (AAHOA) Conference held here at the Gaylord Opryland Resort & Convention Center, which featured a “Success by Design” theme.
Over the past few years, the organization has had an increasing focus on enhancing the roles of and fostering second-generation hoteliers, as these owners take the reins of their respective companies from their parents. At this year’s conference, industry vet Mike Leven, one of the cofounders of AAHOA, addressed these second- and third-generation hoteliers.
Leven asked, “What happens when you are successful? The natural way things work is that you stop doing what made you get there in the first place…I believe the status quo is a prescription for failure, that all of you in the second and third generation of the founders of AAHOA have responsibility to continue to be dynamic in the search for change, the search for doing things differently, in the search for not being satisfied.”
Leven noted that the world is different than the one the first generation of hoteliers faced, and that the second- and third-generation hoteliers have to look ahead to the next cycle. “All of you will be involved in that cycle. If you make the same decisions that made you successful in one cycle, they may not be the decisions that will make you successful in the future,” he said. “Look around. This country is not the same country that your fathers or grandfathers, mothers or grandmothers came to. The opportunities are different. The stresses are different. The opinions are different. The way of doing business is different. The government is different. What you see on television everyday is how these differences of opinions may change the future of the United States, a country that most of the people who founded AAHOA came to for the opportunities that they took advantage of and the opportunities that made them successful.
“As a warning I say to you all: Success requires a drive to continue to be better, to continue to be vigilant, to continue to grow, to continue to learn and to continue to take advantage of your work ethic, your intelligence and your ethics to do the right things to be successful,” he continued. “Please don’t take what you have for granted. It will not last.”
During the conference, Amanda Hite, president & COO, STR, gave attendees an update on the economic outlook for the U.S. “2015 was a record year,” she said. “We continue to see positive RevPAR growth throughout 2016. The start of this year has been a little weak—RevPAR growth of 2.6% through February of this year—but we had 72 months of continuous RevPAR gains and we don’t expect that trend to end this year or next year.” STR’s industry forecast is RevPAR growth of 5% with a demand growth of 2.3% for 2016 and RevPAR growth of 4.5% in 2017. “It’s not quite as strong, but still good,” commented Hite. “If the room demand numbers go up as we predict for 2016 and 2017, both of those years will continue to be record years for our industry.”
Hite added that group demand has been very positive. “What’s been really helpful for our industry over the past year is the room demand growth that we’ve seen in the group segment. Group room demand increased strongly last year and now this year, we’re starting to see those rates slow down a little, but that in itself is not a bad thing. It just means that those higher end hotels are pretty full and can’t accommodate much more demand,” she said. “It also helps the hoteliers to have a little pricing power and to be able to yield more on the transient side of the business in the average daily rate because those are shorter booking windows. We expect to continue to see some pretty strong average daily rate growth because of that.”
Looking at market specifics, Hite noted that some have done well—such as San Francisco, Los Angeles, Tampa, Atlanta and Nashville—while others have not, including Houston, Miami, Chicago, Phoenix and New York. “New York has been a tough market for a couple of years. There’s been a lot of new supply growth that has hampered the ability to have pricing power,” said Hite. “Hotels are selling 7 out of 10 rooms, but average daily rate growth is actually down over 6%.”
With regard to new supply, the pipeline is heating up. “We have 150,000 rooms under construction currently and that’s up 17% over last year. The total active pipeline is 497,000 rooms, which is up 14%,” said Hite. Two-thirds of these rooms are in the upper-midscale and upscale segments. “These rooms are going to open in the next 18-24 months and that’ll be something you want to pay attention to to see how that affects markets,” said Hite. “[However], on an overall industry level, it’s still not a huge impact to supply growth.”
The conference also welcomed keynote speakers: the NFL’s Peyton Manning and entrepreneur, investor and TV personality Kevin O’Leary, who can be seen on ABC’s Shark Tank. O’Leary discussed his ten guidelines for effective entrepreneurship: employees are valuable assets but not your friends; maintain a clear line of command; be accessible; delegate, delegate, delegate; don’t procrastinate; never pass the buck; service trumps price; use technology as a weapon; the boss does not always make the most money; and (what he called the most controversial rule) business is war—there are winners and losers.
Over two days, attendees also heard from 10 brand CEOs on a number of topics affecting the industry: Steve Joyce, Choice Hotels International, Inc.; Geoff Ballotti, Wyndham Hotel Group; David Kong, Best Western Hotels & Resorts; Elie Maalouf, the Americas, IHG; Arne Sorenson, Marriott International, Inc.; Roger Bloss, Vantage Hospitality Group; Jim Amorosia, G6 Hospitality, LLC; Mark Hoplamazian, Hyatt Hotels Corporation; Chris Nassetta, Hilton Worldwide; and Keith Cline, La Quinta Inns & Suites.
One topic the executives spoke on was franchise advisory councils. “They’re a critical component to what we do as we refine existing brands and launch new brands,” said Nassetta. “In terms of how we select those people, we’ve changed that a little over time. It’s not democratic in the sense of an election, but we try to be really thoughtful about getting people that represent a broad cross section of owners, across brands, that have other relationships in the industry so they see the world from a fairly broad perspective.” He noted that a recent focus for Hilton is to change them periodically. “We had wonderful people involved, but a lot of the folks had very long tenure… [Change] gives you greater diversity of thought.”
Cline noted that La Quinta’s advisory members are elected, but agreed with Nassetta about benefits. “We’re really driving innovation and looking for ideas on how to make the brand better,” he said. Amorosia added, “We’ve got both elected and appointed for that reason; we want regionalized representation and you also want levels of communication that are beneficial to the developer and the franchisor.”
The CEOs also reflected on what hotels need to do to be competitive. Bloss noted, “Today, it’s really about distribution and loyalty programs. I really believe that to be competitive, we have to have the marketing dollars and with marketing dollars, comes size.”
Cline added, “If you think about where we are today and all of the disrupters in the economy, you’ve got to be aware of what’s happening with the consumer: you’ve got to focus on mobile, on instant gratification, [and make sure]that the loyalty program is robust. Make sure the points are worth something and give people more ways to engage with the brand. The loyalty space is more fragmented than it ever has been. They’re looking for experience.”
Hoplamazian agreed about experience. “We see consumers who are choosing experience over product, willing to pay a lot for experience. You see it in retail, consumer products and certainly travel. The idea that the product has to be perfected and that will drive the connection to the brand is weakening because people are looking for a more, holistic, emotional connection,” he said.
“Experience is delivered through culture,” commented Nassetta. “When we think about the disrupters, we have a huge advantage over these folks: we’re the ones that touch the customer. If we do it well, if we have an amazing culture focused on exceptional delivery and effective service and experiences, none of these guys could ever touch us.”
The executive noted that the experience doesn’t just go from check-in to checkout, however. “The experience has been expanded much longer than we’ve historically seen,” said Nassetta. “It’s not good enough anymore to be good between check-in and checkout.”
Hoplamazian agreed that experience is dependent on culture, attitude and mindset, but noted Hyatt has worked to avoid leaning on service delivery scripts. “It’s pervasive throughout the industry,” he said. “You cannot script an experience. We’ve been systematically removing them. You have to have procedures for safety and basic functions, but otherwise, we didn’t see another way of bringing humanity back into the equation than getting out of people’s way. For many hoteliers who relied on those scripts, this feels very risky to say no more.”