Sunday, June 10, 2012

Big Boys

How The Big Boys See It

Here are how top executives from some of the top hotel companies are viewing the most critical business issues of 2012.

Friday, June 08, 2012
Glenn Haussman
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One of the highlights of the NYU Hospitality Investment Conference is getting the chance to hear not just how major hospitality companies feel about the state of the industry but to also get a sneak peek into their strategies. For us hotel biz junkies it’s much like the Star Wars weekends going on right now at Disney World: a chance to meet and greet some of our beloved stars, get the inside scoop on the future of our favorite brands and overpay for food and souvenirs. This is New York after all.

And unlike the dour times of previous years the hotel industry is in a resurgent state of mind these days so executives are feeling pretty good about their businesses. That means they’re ready to share a little bit more than in past years. Here’s what some executives are thinking on the big industry topics and how it relates to their companies.

Hotel Real Estate

Vasant Prabhu, Vice Chairman and CFO, Starwood Hotel & Resorts Worldwide said the outlook for U.S. hotel real estate is “very good.”

“There is global money out there, not just the usual suspects. There are many pockets of money out there and not what you saw in last cycle. However, until rates go up it isn’t attractive to build new full service hotels and you won’t get same level of financing as 10 years ago. Today you can buy cheaper than you can build, so why would you build them?” said Prabhu.

Joel Eisemann, Chief Development Officer, The Americas, with InterContinental Hotels Group said there are two segments of transaction; above and below $15 million. “There are a huge amount of $15 million or less hotels because the hotels in that space have different financing needs. A lot of those buyers are individuals or partnerships with personal guarantees.”

Jim Abrahamson, CEO Interstate Hotels & Resorts said in the midscale segment and below there is a market for new product, but not other categories right now. And building hotels at the upper end of the market were never really viable on their own in the past cycle either. “I don’t think upper upscale or luxury hotels were financeable on their own. There was always a mixed use component or these projects were largely subsidized,” said Abrahamson.

Renovations Galore

David Kong, President and CEO, Best Western International said there is a strong business case to upgrade product. “Not only does upgrading hotel build guest loyalty but with our hotels owners can get an $18 premium in the upper midscale over midscale. On average that is a $700,000 in RevPAR. [For most renovations the] payback is less than two years and enhances an asset by a couple million dollars in value. So there is a business case,” said Kong.

David Pepper, SVP Global Development, Choice Hotels International said the major hotel companies were patient during the past few years in requiring upgrades, but no more. “For the last four years brands have done a decent job of not requiring upgrades during the tough econ environment. But now the industry is trying to push ADR and people don’t like paying more money for the same product. Hotels have to upgrade assets. Our brand programs try to gradually put it changes and not require owners to make changes all at once,” said Pepper.

Consumer Trends

“We have a very vibrant society that is aging very well,” said Chris Thompkins, Senior Vice President Marketing and Brand Positioning at B Hotels & Resorts. “We want to do two things; we want to speak to younger consumers today, for example the tech savvy person. And we want as the B brand grows that we have large psychographic target because we target he hotel around what the offering is around the destination to create experiences.

What we are offering is taking things to the next level because we are focused on individualized self-expression and experience. This is not just a hotel stay but an experience,” said Thompkins.

Mike Depatie, CEO of Kimpton Hotel & Restaurant Group also sees experienced based stays as the best way to connect with guests.

“We are going for a group of people that sees that our hotels speak to them more personally. That is what the boutique hotel experience is all about; something less transactional and more relational. We differentiate on customer experience through experiences such as chef drive restaurants. We can’t just put more dots on a map and expect to win, we have to win over customers,” said Depatie.

Glenn Haussman   Glenn Haussman 
Editor in ChiefHotel Interactive, Inc.
Bio: Glenn Haussman is Hotel Interactive's Editor In Chief, where he manages all editorial content for the hotel industry’s leading online information resource. Here he creates unique and in-depth content that stimulates and educates the publication’s ...

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