|By: Keith Kefgen and Rosemary Mahoney-Browning
- January, 1999
With 1997 characterized by heavy mergers and acquisitions, much of the
M&A activity spilled over into 1998, leaving many companies somewhat
metamorphisized into different organizations. For 1999, we will continue
to see the trend of hotel companies re-focusing
The focus of 1999 will no longer be on creating the biggest and fattest hotel company. Rather, companies are going back to the age-old strategy of focusing on their core competencies. just recently, we have begun to see this effect: "Amerihost sells 30 of 91 properties as it switches focus to brand growth," "Bass Hotels focuses on brand identity and quality," "Winegardner & Hammons stays focused on full-service hotels," "CHA focuses on structured growth." In addition, with these changes, comes the need for new talent; "Meristar announces new senior management team," "Felcor names new executives," "Prime Hospitality restructures executive lineup," "Management changes at Bass reflect future goals." Changes in 1999 will be dramatic, affecting the use of investment capital, human capital and technology.
For the past three years, investment capital was readily available. Wall Street bankrolled nearly a dozen industry IPOs and made lodging REITs the envy of the real estate world. That's over. We believe that no lodging IPOs will be done in 1999. We also predict that most asset transactions will be done by opportunity buyers and privately-held companies. Instead of investing in bricks and mortar in 1999, the large companies will invest in building brand equity and operational efficiencies.
One dynamic way of building brand equity is through a 100% sat-isfaction guarantee policy. It is well known outside the industry at places such as LL Bean, Wal-Mart and Nordstrom. Such companies support their products with absolute, 100% satisfaction guarantees, resulting in the attraction and retaining customers. Choice Hotels, Promus Hotels, and Tarsadia Hotels are among the select few hotel companies that have implemented satisfaction guarantee policies. Within the hotel industry, a written policy communicates to guests a no - risk experience. Further, if they are not content with their stay at the hotel, they are refunded their money. With fewer risks involved, guests are more likely to patron the hotel and become repeat customers. The proper utilization of human capital will become more acute in the coming year. With the large supply of new and re-branded hotels, operating talent will be in high demand. Hotel general managers must he more skillful leaders and have technology savvy. We predict a proliferation of hospitality-based educational programs through-out the state supported university system. We also forecast an increase in training and career planning expenditures by the smart companies. In terms of technology trends, enhancing company web sites and Internet access in hotel rooms will be high on companies' wish lists for 1999. Many have established a presence on the web; however, the next step is to enhance the user experience. We predict that virtual tours of resorts and other leisure destinations will increase, as will the ease of accessibility, to the Internet in hotel rooms.
Connecting to the Internet through high-speed cable modems (TV) has
become popular for home offices and we foresee this trend continuing into
the hotel industry. Winning strategies for 1999 include implementing a
more consumer driven revenue management system. The traditional role of
yield management, encompassed within the reservations department is gone,
replaced by a technological -based revenue management program. Hotel companies
such as Hilton Hotels and Marriott International have built sales pro grams
that apply revenue management, revenue optimization, price theory and market
analysis. The survivors of the next millennium will he the companies that
can maximize the use of investment capital, human capital and technology,
advancements. A deceptively simple goal but one that many lodging companies
will fail to meet.