Global Hospitality
Advisor: The hospitality industry has a fundamental business
challenge: its inventory has to be sold every night or it expires. So,
at the foundation it is about "heads in beds." What, in your opinion is
inside those heads and what are their shifts in spending patterns.?
Jim Butler (Jeffer,
Mangels, Butler & Marmaro LLP, Partner & Chairman, Global Hospitality
Group): There is a fundamental change underway in consumers.
Current studies show that consumers, especially more affluent Americans,
are strongly trending to a "I want what I want when I want it" and "When
I want it is right now!" attitude. The companies that can gratify these
consumers will be the winners.
Stephen Rushmore (HVS
International, President & Founder): Technology will
greatly reduce the need for business people to travel. This declining market
segment will be offset by enormous growth in tourist / vacation travel
from the middle class in developing countries and from senior citizens.
Randy Smith (Smith
Travel Research, Chairman): Over the next 10 to 25 years,
the shift in age of the U.S. population as baby boomers begin to approach
retirement will have a tremendous
impact on the volume of travelers, their level of spending and their
preferences. In addition, demographic trends globally indicate a growing
middle class that will affect the hospitality industry worldwide.
Kapila Anand (KPMG,
Partner, National Director - Hospitality Assurance Services):
I agree that aging baby boomers will greatly influence consumer trends
in where and how they choose to travel for business and leisure and in
where they choose to live. But they will also search for new sources of
amenity-rich assisted and senior living which could be a competitive advantage
for the stronger hospitality brands that are expanding into senior living.
Peter Yesawich (Yesawich,
Pepperdine & Brown, President & CEO): I think
two factors are contributing. "Time Poverty" the perceived decline
in leisure time and corresponding decline in average length of stay. But
you will also see more family and single-person travel: for families,
because vacations will become a surrogate for family time missed at home,
and from single persons, because of their growing demographic significance
(25% of all U.S. households and growing). And the second is "Personalization"
one size no longer fits all in the industry, and guests will soon expect
very personalized accommodations.
Global Hospitality Advisor:
Take those trends and tell me how this translates into business decisions
for hotel chains, with regard to branding, pricing, reservations, distribution
or guest loyalty.
Rushmore: The Internet will be the
primary form of communication. Only those hotel brands that control the
Internet will survive.
Yesawich: I think we'll see a growing
preference for brands which is already now professed by 7 out of 10 leisure
travelers and 8 out of 10 business travelers. The ascent of "Techknows"
people who embrace new technology and use it to their advantage both personally
and professionally... the implications for distribution are profound.
Butler: Listening to the consumer
and delivering the product and service that the consumer wants will earn
a disproportionate share of business and profits. This extends to pricing,
service and the very definition of our business. We need to look to senior
living, cruise lines, entertainment and all aligned hospitality arenas
to select the best of each in order to satisfy our customers.
Global Hospitality Advisor:Clearly,
the Internet and information systems will transform the way hotel companies
complete transactions, including collecting and disseminating information.
How pervasive will technology be in the industry in the next decade?
Anand: Although hospitality companies
are not currently reporting significant amounts of booked revenue from
the Internet, Internet, E-commerce will have a greater influence
on both the marketing and revenue management strategies of hospitality
companies. These technology advances will also allow hospitality companies
to enhance E-commerce purchasing solutions and to expand their customer
database management strategies to cross-sell revenue from related services
such as golf courses, timeshares, cruises, casinos, assisted living, etc.
Yesawich: We're going to see growing
use of the Internet in travel planning - 3 out of 10 business travelers
used the Internet to plan some aspect of a business trip last year, and
the figure for leisure travelers was 1 out of 4. Those percentages will
increase.
Smith: The extent that video could
eventually have an impact on business and personal travel - that's
worth keeping an eye on. The ability to conduct meetings and interact without
having to endure the stress of travel will impact the industry within the
next 20 years. Technology will offer the industry opportunities in information
management, marketing and guest tracking. Applications within the guestroom
will change the room from merely a place to sleep to an area for work and
entertainment utilizing access to the Internet and e-mail.
Global Hospitality Advisor:
We've talked so far about the revenue side of the equation. Let's shift
from top line to bottom line. What are your thoughts about the changes
in operations or management.
Rushmore: The industry will find
that consolidation has not achieved the anticipated efficiencies. And so
the consolidated hotel companies will be broken up.
Anand: Skilled labor shortages
and turnover rate increases will continue to challenge the industry. Attracting
and retaining qualified personnel to ensure the level of service and maintain
brand value will impact human resource policies in areas such as recruiting,
performance feedback and training. Also, hotel companies will he forced
to develop innovative incentive plans or other compensation and/or reward
programs to motivate personnel beyond the traditional plans.
Butler: Financing will be
critical. Availability and cost of hotel financing controls development
and affects the hotel market's liquidity, demand and valuations. We learned
in the 1989-93 cycle that hotels trade at cap rates well into the teens
with little debt financing, and can go into single digits for the tight
property with ample financing. When new development is spurred by construction
and permanent financing, developers design new hotel rooms, adding to the
supply and reducing occupancies, ADRs and ultimately RevPAR. It also affects
operations as owners are more willing to spend generously to upgrade, maintain
and service their hotels when profits are high, but it is "slash and burn"
when the mortgage is about to be foreclosed. Financing also shapes who
the players are and what they do
sometimes favoring quieter private capital and joint ventures, other
times fueling acquisitions and consolidation, or tapping public markets.
Financing will continue to be one of the most important factors shaping
our industry.
Global Hospitality Advisor:What
is the "macro-idea" that hotel managers and owners should intently watch
in the coming decade?
Yesawich: The five most significant
trends likely to affect the performance of the industry in the years ahead
are "Time Poverty," the rapid growth of "Techknows," personalization, demographics
and branding.
Anand: Technology will change the
way companies do business; the successful companies will be the ones that
realize that effectively managing subsequent organizational changes takes
time and resources but also pays a high rate of return.
Butler: Same as it has always been:
Listen to the customer and follow the money. Whether you are looking at
finance or guest revenue ... listen to the customer and follow the money.
'90s Trends That Didn't
Make It
Yesawich: Videoconferencing. It
may be born again...although still unlikely to become a big demand generator
for hotels and resorts because the next generation will probably run on
personal laptops!
Anand: Industry experts embraced
the "bigger is better" slogan and success was measured via rapid growth
using equity markets. However, time and the stagnant capital markets have
proved operations are just as important as size and successful companies
are redirecting their efforts toward managing their core business.
Smith: That the industry would exercise
more discipline when it came to supply growth, now that the industry has
"gone public." One of the big advantages of having the industry go public
over the past several years was to have been the oversight the public markets
would provide in controlling excess supply growth. In fact, we have seen
more rooms built in the past two years than in any two-year period in history
as the industry seeks to maintain growth levels that are acceptable to
the investing public.
Butler: For at least a decade prior
to 1995, all the computer gurus predicted each year that networks would
be the hot computer industry development the following year. For more than
10 years, that prediction flopped until just recently, and now everybody
is networked. I think the year-after-year prediction of the convergence
and integration of related hospitality products is a similar prediction
- hotels, cruise lines, timeshare, senior living and entertainment. The
convergence has only shown a few glimmerings so far with Radisson in cruise
lines, Hyatt in senior living, Marriott in timeshare and senior living,
but the next decade should show convergence of these areas on a much greater
level, just like the recent dominance of networks in the computer world. |
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