Hotel executives on a webinar hosted by HVS and The Lodging Conference discussed adjusting operations, needed liability protection and the benefits of bleisure travel.
The hotel industry had a 10-year run of good performance before the COVID-19 pandemic hit, which caused hoteliers to quickly rethink and adjust operating models, sources said.
During the “A view from the top, hospitality insights and strategies” webinar presented by HVS and The Lodging Conference, Justin Knight, president and CEO of Apple Hospitality REIT, said his team thought it was doing everything possible to manage margins at its properties and looking at the business holistically before the pandemic.
“In the pandemic, we’ve started from scratch … looking at every aspect of our business,” he said. “Looking at how people perform tasks at the hotel and asking what are the things that we offer that have the greatest value to our guests?”
The result in the short term has been a shift in how the real estate investment trust runs its business, Knight said.
Heather McCrory, CEO of North and Central America at Accor, said her company also made changes and moved to zero-based budgeting when the pandemic hit.
“We put (the budget model) through the filter of people, process and product and how is that going to be impacted and make sure we didn’t cut too close to the bone, but make sure you deliver on those service components in different pieces,” she said.
McCrory added that it was an interesting process because Accor officials also thought they were doing everything right but found the company “could do things differently and get the same results and sometimes better results.”
“We’ve been digging into our DNA to make sure we’re doing everything we possibly can to deliver that margin to the owner at the end of the day and frankly during these days just help them get through this period in time,” she said.
Cutting costs shouldn’t lower level of service
Dave Johnson, executive chairman at Aimbridge Hospitality, said Europe has been a tough region to be in because of the multiple lockdowns that have happened throughout the pandemic, resulting in hotel closures, some of which are still in place.
Despite challenges, he said scale has allowed Aimbridge to drive down costs throughout the pandemic.
While many companies have had to cut costs, Johnson said the pandemic is not an excuse to deliver poor service, which he has experienced at some hotels he’s traveled to in recent months.
“Don’t take for granted delivering great service,” he said.
Biran Patel, chairman of the Asian American Hotel Owners Association, said the pandemic has “made everyone step their game up” in terms of making operations leaner.
Some AAHOA members thought the pandemic would lead to more hotels up for sale at a discount between 30% and 40%, but that hasn’t been the case.
Knight added that hoteliers have overestimated distressed assets that would come to market at steep discounts in every down cycle. While there aren’t many distressed assets up for grabs right now, there will be some going forward, he said.
“In the interim, there will be some help from the government. I anticipate there will be more of that, specifically helping some of the smaller ownership groups that otherwise would have an incredibly difficult time making it through this,” he said.
Needed liability protection
Some states have passed liability protection for hoteliers, but more needs to be done on this front at the federal level, said moderator Chip Rogers, president and CEO of the American Hotel & Lodging Association.
A 50-state program is needed as the industry doesn’t need to have patchwork protection where liability protection differs from state to state, he said.
Rogers said that the Biden administration could reverse tax reform laws that were put into place in 2016.
Knight said the industry could take a tax hit, but it seems unlikely that the tax reform will be reversed while the economy is still in bad shape.
Geoff Ballotti, president and CEO of Wyndham Hotels & Resorts, said the industry needs to get behind AHLA’s advocacy efforts.
AHLA must tell the hotel industry’s story and “we need to follow,” he said.
That story needs to include how tax cuts have helped the industry over the last few years and how hoteliers running small businesses might not survive if it is reversed, he said.
While many are itching to get back on the road and meet face to face again, the pandemic has presented tools, such as Zoom, that could benefit the industry going forward.
McCrory said working remotely and the use of video conference calls has allowed for more flexibility in the workplace, which has built trust among employers and their employees.
This flexibility and trust could lead to more business/leisure trips going forward as employees can be productive wherever they are, she said.