RSBA & Associates 
Hospitality Consulting Services
400 Spear Street, Suite 106
San Francisco, CA 94105
Email: [email protected]
Web site:
 This Year’s Critical Issues Will Escalate If the
Hotel Industry Doesn’t Address Them Now
by Rick Swig, September 2007

At the start of the Year, The International Society of Hospitality Consultants determined what would be the top 10 issues for the industry in 2007. They were, in order: labor and skills shortages; construction costs; technology; changing demographics and their impact on travel trends; future of hotel profits; branding; distribution revolution; travel restrictions; global emerging markets; and capital availability. Now that the year is halfway complete, let’s see how their predictions panned out.

ISHC noted that the availability of labor was the most critical issue. Hotels are now importing workers from Jamaica, the Philippines and various other locations just to support basic housekeeping and culinary services. In terms of salaried positions, hotel expansion and human resource attrition have reduced the experience and skills available for key positions. The industry must take some aggressive action, from improving pay scales to pressuring the government to adjust immigration policies, if it is to attract a workforce to deliver the services expected by customers.  Construction and renovation costs have continued to soar in 2007. Global pressures on resources have overwhelmed even the most liberal budgets, while the ability to deliver goods on time to match renovation schedules has declined.

Technology continues to alter the ways hoteliers manage their businesses and customers make their purchases.  Hotel owners and operators who have fallen behind the curve must invest now to catch up, whether it relates to operations, marketing and distribution or guest entertainment and telecommunications.

Demographic studies are proving that boomers, Gen X and Gen Y travelers are coming together to create a culture clash with their different moods and whims. And if you add travelers from emerging markets such as China and India, or the various subsectors within those demographic groups, from seniors and singles to families and gay travelers, there is even more product slicing and dicing to be considered.

Revenue managers are the new and dominant force, but can they figure out a way to successfully mix rate increases and market penetration tactics to boost profits?  When will most markets learn to charge rates that are adequate to overcome expense growth and prevent further cutbacks on quality and service standards?

PricewaterhouseCoopers identified 24 new hotel brands in the last two years. Will any of them get the critical traction necessary to build familiarity with the customer?

Meanwhile, the transformation of global distribution systems in the 1990s helped to somewhat level the playing field. In many cases, the Internet has become the new distribution medium. Hotel operators, however, are now struggling to get their websites found over the clutter of key words and other optimizers.

And just when the dollar hits an all-time low, the US government makes it even more difficult for international travelers to gain entrance to the greatest travel bargain in decades. Meanwhile, greater global competition for travel currency has stimulated emerging destinations.

Tourism has become the number-one industry in too many locations, and traditional destinations may be sustaining volume but losing market share. Why go to Vegas when there is Macau? Dubai is now the resort superstar. Luxury travel is as accessible in the “third world” as it is in the first world. Domestic leisure destinations and the US government’s marketing initiatives need makeovers in order to compete.

Lastly, capital availability is contingent on maintaining investor and lender interest. Support will continue as long as the hotel industry’s cyclical expansion continues.  The gap between cap rates and interest rates is thinning, so is it time to worry about the length of the cycle?

All of these critical issues are only continuing to escalate, rather than subside, in 2007. And 2008 may be too late to start concentrating on them.

The views expressed in this article are those of the author and not Real Estate Media or its publications.

Rick Swig is president of RSBA & Associates, a hospitality industry consulting firm based in San Francisco. He may be contacted at [email protected].

RSBA & Associates
400 Spear Street, Suite 106
San Francisco, CA 94105
E:mail:   [email protected]
Tel:  (415) 541-7722
Fax: (415) 541-5333

Rick Swig Article Index:
CapEx Discussions Require Balancing Brand, Owner Needs; The current fervor of standard compliance may simply be a reasonable process to catch up on postponed necessities / Rick Swig / June 2007
Lack of Human Capital Is Becoming Serious Issue for Hotel Owners, Operators / Rick Swig / December 2006
Successful Hotel Brand Differentiation Means Connecting With Customers / Rick Swig / RSBA Associates / June 2006
Shortage of Sites, Rising Expenses Should Keep Hotel Development in Check / Rick Swig / RSBA Associates / February 2006
In Today’s Hotel Acquisition Market, How Much Do Cap Rates Matter? / Rick Swig / RSBA Associates / January 2006
Lodging Business in Transitional Year, But Challenges Will Remain After ’05; A Hotel with Truly Unique Attributes Is Worth a Premium / Rick Swig / October 2005
Despite Lack of Long-Term Data, Hotel Developers Favor Hybrid Projects; The Fractional and Condominium Component Not a Proven Solution to Development Prosperity / Rick Swig / June 2005
Travelers Prefer Innovation, Creativity Over Predictability, Discount Pricing / Rick Swig / March 2005
Recent Occupancy, ADR Growth Still Do Not Spell Post-9/11 Relief; Total 2% revenue growth over four years has not kept up with national annual average inflation growth of 2.5% / Rick Swig / RSBA Associates / November 2004
Hotel Success Hinges on Relationship Between Owner, Asset Manager, GM / Rick Swig / August 2004
Hotel Operators Can Gain Market Share Through Distinctive Brand Images; A 100-room boutique hotel can develop more identity within a market than its 1,000-room competitor  through customer impact points / Rick Swig / May 2004
Hotel Operators Must Share Blame with the Economy for Stagnant Performance / Rick Swig / RSBA Associates / January 2004
Investors Seeking Opportunistic Hotel Buys Are Likely to Come Up Empty Handed  / November 2003
Hotel Sector Remains in the Game Despite Reaching Strike Three; Occupancies are now beginning to improve compared with last year and a poor first half of 2003 / September 2003
Some Stability Has Returned to the Hotel Sector, But Its Staying Power Is in Question; The Plundering of Lower Market Tiers Has Cost Upscale Hotels / May 2003
New Business Practices Essential to Lodging Companies’ Success / February 2003
Unreliable Market Trends Yield an Uncertain Direction / October 2002
The Bigger They Are, The Harder They Fall / September 2002
News of Boutiques’ Demise Is Greatly Exaggerated  / May 2002
Management by Spreadsheet Erodes Full-Service Hotel Core Values / Feb 2002
Hotel Lenders Face Challenges In Tough Climate / October 2001
Where We Are Now Depends on Starting Point / Summer 2001
Solid Management Practices Can Improve Franchise Value / May 2001
Hotel Market Stagnation To Continue / January 2001
Here Today…but Tomorrow? / November 2000
Ready, Willing, and Unable? / August 2000
Independent Hotels: The New Brand Alternative / June 2000
Ankle Biter Syndrome / January 2000
Redefining a Mature Hotel Sector / November 1999
Focus On Operations Is Not Enough / August 1999
What’s Next?? / May 1999
Growth Through Management  / Feb 1999
Expect a Subdued Market in 1999 / Feb 1999
Hotel Real Estate: Back to Fundamentals / Nov 1998
The Hotel Investment Barometer For Institutional Investors / 1998
The State of Independents / 1998
Success (or Survival) of Boutique Hotels and Resorts / 1998

Search Hotel Online
Home| Welcome!| Hospitality News| Classifieds| Catalogs & Pricing| Viewpoint Forum| Ideas/Trends
Please contact Hotel.Online with your comments and suggestions.