Despite Healthy Performance, Service Delivery Still Is Key

The message heard during the annual NYU International Hospitality Industry Investment Conference in New York in June couldn’t have been clearer: the industry is booming. Monthly occupancy rates and number of rooms sold are breaking records. Profits are increasing, demand is high and supply growth in most markets is under control.

soft and firm guest bedroom pillows

This is music to the ears of hotel owners and operators. Meanwhile, another set of messages emerged that are not headline-making but still deserve attention. Those messages were heard in the event’s keynote speeches, delivered by Las Vegas’ Steve Wynn and the legendary J.W. “Bill” Marriott Jr.

(It would be hard to find two more iconic industry veterans. Together, they have close to 107 years of hospitality experience between them. Bill Marriott got his start in 1956.)

young men and women smiling

Wynn and Marriott paid tribute to the role employees play in delivering guest service. “Things don’t make guests happy. People make guests happy,” Wynn said. Marriott echoed those remarks, saying, “We’ve always believed if you take care of your associates, they’ll take care of your customers.”

Truth be told that for guests to return back to your hotel it takes more than a good rate and location since invariably, new hotels are being built around us at an unprecedented rate. The real driver for customer loyalty is for us to create a “memorable guest experience” focus for associates at all levels.  With this mindset, empowering staff to execute these initiatives becomes a strategic objective.

In the context of the industry’s current outsize performance, Wynn’s and Marriott’s words served as a kind of reality check. The business is notoriously cyclical. A downturn will inevitably occur. The human fundamentals of the business, on the other hand, are ongoing.

2014 Bodes Well for the Continued Growth of the Lodging Industry

U.S. hospitality industry projections point to 2014 being another successful year with substantial gains in revenue and profitability. PKF Hospitality Research estimates that a key industry performance metric known as revenue per available room, or RevPAR, will increase by 6.6 percent this year and 7.5 percent in 2015. Profits, meanwhile, are expected to grow by 12.8 percent and 14.5 percent, respectively, during the next two years.

For M&R Hotel Management’s portfolio with its concentration of hotels in New York, these positive forecasts bode well. Reviewing the national data, PKF considers urban and airport hotels to be the only two industry groupings that have fully returned to their pre-recession peak levels.

Among the major urban hotel markets, New York always ranked number one, given the size and diversity of its lodging inventory. The city hosted 54.3 million visitors last year, an all-time high, according to NYC & Company, the city’s tourism promotion agency. That’s up from 52.7 million visitors in 2012.

Michael Bloomberg, who recently stepped down as New York mayor, has been a tireless booster of the city. Bill de Blasio, who took the oath of office this month, seems equally committed to keeping the Big Apple front and center as a world-class tourist destination, attractive to both leisure and business visitors, domestic as well as international.

Yet for as rosy as these forecasts may be – both local and national – projections are just that. An unexpected downturn in the economy, more dysfunction in Washington or a terrorist incident easily could affect consumer and business confidence, leading to a contraction in travel and hotel bookings.

At both the management company level and individual property level, hotels must remain vigilant when it comes to expense control and capital investments. Revenue management remains critical, including managing online travel agencies and other distribution channels. Rate is still a street-corner battle that has to be fought every day.

Consistently high occupancy, in turn, has encouraged developers to build more hotels. New York has more hotel rooms under construction (12,729) than any other of the top 26 U.S. markets. As long as demand continues to increase – and all indicators suggest it will – the increased rooms inventory will be absorbed without diluting the profitability of existing hotels.

These concerns notwithstanding, I’m confident 2014 bodes well for the continued growth of the lodging industry. Americans have come to view travel, whether for leisure or business, as a right, and the nation’s hotels and resorts stand ready to welcome them.

The Special Challenges Involved in Managing Airport Hotels

The outlook for airport hotels is positive, with the International Air Transport Association forecasting a 5.3 percent increase in the number of airline passengers worldwide annually between now and 2016 and Smith Travel Research projecting healthy RevPAR growth for each of the next few years.

In light of such positive trends, what is it about airport hotels, whether they’re actually on the airport grounds or located nearby, that sets them aside from hotels generally and makes them a special challenge to operate?

While all types of hotels are 24-hour-a-day operations, hotels at international airports and regional hubs frequently look as busy at 3 a.m. as they do at 3 p.m. Flights arrive day and night, and so do guests, checking in after a long transatlantic journey or for a quick night’s sleep if the weather isn’t cooperating or they miss a connecting flight.

For hotel managers, the extra activity poses important operational issues ranging from maintaining adequate staffing levels to ensuring that the hotel’s shuttle service is frequent, reliable and welcoming. They must be hyper-conscientious about wake-up calls to make sure guests don’t miss their flights. It really helps if hotels are equipped to print airline boarding passes to save guests a few extra minutes.

Shuttle buses perform a critical function, both in picking up inbound guests and transporting outbound guests to catch their flights. Consequently airport hotels typically run 24-hour complimentary shuttle service on a strict schedule. At M&R Hotel Management, we believe that a guest stay begins with the airport pickup, so our shuttles provide bottled water and even snacks to make guests feel welcome (and to differentiate our hotels from the competition!)

Guests who stay at a hotel that offers complimentary breakfast as a standard can count on receiving a basic meal to fortify them for the flight ahead. At our hotels, even those who check out in the middle of the night can request a brown bag breakfast to take with them on the shuttle. The light grab-and-go offering (ready at that unusual hour) represents a level of thoughtful customer service that guests may not expect but surely will remember.

Since hotels that serve international airports can expect guests to show up at the front desk at virtually any hour, front desks must be staffed accordingly as well as housekeeping, which will be called upon to turn over rooms at all hours.

Noise is an unavoidable fact of life for airport hotels that overlook an active runway. Such hotels should be constructed with extra sound insulation and soundproofed windows. But it’s also important for the staff to take care not to disturb guests who may have checked in during the morning expecting to sleep through the day. That means hushed conversations in the hallways and no banging of housekeeping carts.

Given how fundamental the operating issues are at airport hotels, managing these properties provides a kind of Lodging 101 training for new hires. And when executed effectively, there’s no better way of ensuring that guests step onto that waiting shuttle refreshed and refueled.

Hotel Management 2.0

At first glance, third-party management companies and their counterparts that both own and operate hotels appear to be cut from the same cloth. Scratch the surface, and you’ll discover profoundly different cultures that can make a difference when it comes to maximizing revenues – and profits.

Both are responsible for day-to-day operations including budgeting, planning, renovations, recruiting, human resources, revenue, distribution, food-and-beverage, meetings, sales and marketing, including public relations, social media and managing property websites.

But owner/operators like M&R Hotel Management bring something more to the table: the perspective of an investor whose money is at risk. We may have everything to gain by their decisions and actions, but we also have everything to lose.

Owner/managers are less encumbered by procedural hurdles such as formal capital expenditure proposals and approvals that can inhibit progress. For example, we can allocate funds immediately to make improvements that promise to boost ADR.

We made such a decision recently at one of our hotels at JFK International Airport. During an inspection, we noticed that the marble bathroom floors didn’t look pristine because they weren’t polished. So we decided on the spot to hire a contractor to polish them.

Within weeks, we received higher guest satisfaction scores. The greater the sense of urgency, the faster the improvements will be completed and the more guests will benefit. Happier guests mean higher guest satisfaction scores.

Similarly, we can make aggressive rate changes in response to rapidly changing market conditions without going through a formal proposal and waiting for approval. By acting quickly, we capture revenue gains faster.

Owner/operators can approach management of a hotel holistically, giving architectural, design and construction issues simultaneous and equal consideration with operations and marketing.

The bottom line for other owners is this: When evaluating the strength of a prospective management company, ask whether it ever owned hotels. When a management company has walked in an owner’s shoes, the more effective it can be.