8 June 2017

Spring Conference Season – What is the Buzz?

By Bob Rauch - President of RAR Hospitality

Spring brings on many conferences including our own Lodging Industry Forecast Event (LIFE) Conference held in March. Recently we've had Meet the Money, held in early May and the NYU Hotel Conference, being held now. In this article, after Meet the Money in LA and during NYU in New York, we analyze one and predict the other.

Meet the Money
At Meet the Money last month, we learned that capital is still available for the right sponsor with the right location, brand and equity. The glass remains half-full, not half-empty. And we heard that consolidation will likely continue. Perhaps Mike Cahill's presentation on behalf of the Lodging Industry Investment Council (LIIC) said it best with the title "Forecasting Clear Skies with Some Clouds and Slightly Cooling Temperatures."

Many of the sessions included a discussion on a reduction of Chinese investment and an increase in Private Equity to finance most hotels and many attendees seemed to believe the economy had more runway at least in 2017. The biggest fear seemed to be new supply. In a session that I moderated called, "Brands, Soft Brands or Independents: Who Wins?" the operators on my panel were very savvy in explaining how level the playing field is today between these three entity types, especially in dving market share.

Additional topics discussed at Meet the Money were development and redevelopment, the economy, lodging industry metrics, financing availability, EB-5, modular construction and valuations. This conference might be one of the last industry conferences of this "extra-inning" recovery period that has a positive tone on financing. Lenders still sounded relatively bullish—let's see how NYU fares on this point as the new supply pipeline crosses the threshold of demand levels later this year.

Speaking of NYU, this is a much larger version of JMBM's Meet the Money. JMBM's annual event, developed almost 30 years ago by Jim Butler is great and with less than 400 attendees, it is easy to approach all speakers, panelists, JMBM staff and attendees over the two-day period. The NYU Hotel Conference is a monster event, with a broader array of topics that will include all of the above but will also delve more deeply into design, travel trends, OTAs, asset management, technology and much more.

I expect that the CEOs that kick off the event will not all agree on where we are in terms of the economy, Airbnb, OTAs, minimum wage and financing. They will likely agree that consolidation will continue but might disagree on whether or not REITs are hot or not. All of these subjects will be interesting because we are at a "tipping point" where several facets of hotel marketing and operations are going to undergo change. These include:

  1. Robotics
  2. Minimum Wage Growth
  3. Occupancy and Rate Growth
  4. Airbnb and OTA Impacts
  5. Millennials

Robotics or utilizing Artificial Intelligence will increase because of the combination of wage growth and availability of technology. We just unveiled a robot at our newly-opened Fairfield Inn & Suites by Marriott. Created by Savioke, the robot delivers supplies or food and beverage to guests and is absolutely adored by guests and staff alike. This is clearly a trend as it will reduce operating costs over time—and no paid overtime, no PTO or sick days. Look for more of this activity in housekeeping and food and beverage.
Minimum wage growth must slow down because average rate growth will be slowing down as the economy transitions to a soft-landing over the next couple of years. The large cities have not been spared this significantly increased cost and when added to health care costs, will dramatically increase the cost of doing business. A very recent study tried to claim that only inferior restaurants will go out of business as a result of wage increases but it was a limited and flawed study.

Airbnb is at war with hotels and frankly OTAs are as well. The truth is, we can all co-exist but tell that to a hotel owner who no longer fills during peak periods due to Airbnb or sees shrinking margins due to distribution channel cost increases caused by OTA dominance. In a publication by Kalibri Labs, sponsored by AH&LA, distribution costs have ramped up markedly and hoteliers must understand how to obtain direct to web business.

Millennials are becoming the powerhouse that Bill Marriott predicted just 5 or 6 years ago. They represent more than half of the traveling public now and are driving decisions about design, marketing, digital services and much more. This trend will continue for a very long time as those of us who are Baby Boomers know that we dominated the mix for three decades.

Being a hotelier is a great and noble profession and we should see a very strong summer ahead—smile and keep those chins up and rates growing! Enjoy the ride while it lasts!

Bob Rauch

Bob Rauch, CHA, is a nationally recognized hotelier and President of RAR Hospitality, a leading hospitality management and consulting firm, and one of the fastest growing hotel management companies in the industry. Rauch has more than 40 years of hospitality-related management experience in all facets of the industry, and is currently a Faculty Associate at Arizona State University where he teaches Entrepreneurial Recreation and Tourism.


Revenue ManagementOnline Travel Agencies (OTA)USA & CanadaUnited States

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