A panel of asset managers discussed a wide range of variables influencing the hotel industry during a panel discussion at the 27th annual Hunter Hotel Conference.
Rate was a primary topic of discussion during the “Hotel asset management” panel at the conference.
“I’ve always kind of gone to believe there is absolutely more rate out there,” said Howard B. Isaacson, senior VP of asset management at RLJ Lodging Trust. “It takes a lot of courage. … In addition, it is not only a matter of driving the (best available rates) up, you need to look at the mix of business. We’ve relied on discounted business in the past, and there’s really no reason to do that.”
He said hoteliers need to take a close look at segmentation.
Come up with an ideal mix that will drive the rates you’re looking for.”
Brands are focused on driving rate as well, Isaacson said. “Some of the brands are negotiating national accounts on your behalf, and they are being much more aggressive on the rate side.”
Timothy Dick, managing director at Three Wall Capital, said hoteliers should focus on ridding themselves of lower-rated business. Lawrence Trabulsi, VP of hotel asset management at Capital Hotel Management, appeared to be a little more hesitant.
“I don’t know if there’s going to be enough transient demand. Maybe we ought to hold onto it a little longer,” Trabulsi said, referring to such groups as airline crews.
Knowing the business a hotel has coming in is more important than ever, the panelists agreed.
“It (used to be) push group, push group,” Trabulsi said. “Now it’s, ‘What’s the best segmentation mix?’”
Panelists said hoteliers need to be strategic in how they go about capturing group business revenue.
Trabulsi said he has noticed a lot of last-minute group customers. “I don’t know if they were cautious on their budgets or what,” he said, adding group appears to be holding up strong this year, nonetheless.
Speakers pointed to growth in corporate negotiated rates of between 5% to 7%, even in soft markets.
In-the-year, for-the-year group business is strong, Trabulsi said.
“Reduce your high-volume, lowest-rated accounts,” Trabulsi said. “Get more natural rate growth.”
Isaacson agreed, saying hoteliers should think carefully about their group mix. Should high-volume groups continue to get discounted rates?
“Go after the right accounts at the right rate,” he said.
Word will spread if hotel revenue managers hold the line on rate, Dick said.
“When accounts hear the same thing from (others about group rates), that is driving the market,” he said. “It’s driving it in the right direction.”
Isaacson said Houston, despite recent concerns about how the oil market might affect the hotel industry, also is holding up.
“They’re still coming back, so I think the Houston press is a little slanted to the negative side,” he said. “We’re not seeing that much negativity as is put out in the press.”
The panelists also discussed the variables affecting the hotel sector as a whole.
“I do see some (supply), but that’s not unexpected,” Isaacson said. “That’s the key here. We’ve understood what was in the pipeline, and more and more, the pipeline is becoming reality.”
Dick said there is a lot of new supply in New York City. According to data from STR, parent company of Hotel News Now, there were 13,711 rooms under construction in New York in February.
“If you have a good location and are well located within your neighborhood and market, you can mitigate some of that new supply,” Dick said. “You can’t replace your location.”
The role technology plays in shaping the hotel industry was also a major point of discussion during the session.
As it relates to Wi-Fi, Isaacson said he thinks complimentary access will become the norm. “I’m not sure Internet revenue is a term we’re going to be hearing about too much longer,” he said.
This is going to put a financial strain on owners, according to Isaacson.
“Not only are we giving it away, but the customer wants more bandwidth,” he said. “It’s very difficult to supply at a reasonable cost.”
Charging for tiered bandwidth options appears to be a good solution, Trabulsi said. But it has to work. “There’s nothing more frustrating than asking people to pay for bandwidth and then it doesn’t work.”
While not technology-related, another fee discussed was charging customers who cancel and give fewer than 24 hours’ notice.
“I hate it as a consumer, and I love it as an owner,” Dick said.
Trabulsi said he does not think such policies deter demand.
“Who’s not booking who would have booked when they saw a 24-hour cancellation policy?” He asked. “We haven’t seen any impact. The airlines charge you $75 if you even think about changing your flight.”