This year’s ALIS Conference in Los Angeles was very interesting because nobody knew going in whether or not it would be upbeat. The elections were contentious to say the least and there are still some hard feelings around the country but at ALIS it was all business. STR came out with their 2017 forecast, Hilton added Tapestry, Marriott set up an “innovation lab” and Kalibri Labs announced insightful findings about how much share the OTAs take from the pie.
STR’s Jan Freitag is forecasting 2.5 percent RevPAR growth in 2017 and many feel he is being conservative. That comes after a year of RevPAR growth of just over 3 percent. It seems that this will be the year that supply exceeds demand so there is likely to be a slight decline in occupancy and average rate growth of 2.8 percent. Our forecast is marginally more optimistic.
Hilton is continuing with organic growth by adding Tapestry as a “soft” brand. The brand seems to equate to Doubletree on the hard brand side, in other words, below Curio and Hilton full-service. Hilton is likely relying on its power to lift these soft brands without impacting the core brands. Other brands touted their success including Best Western with Premier, Vib, Glo and Sure Stay and Choice with Cambria. Both organizations are offering some key money.
Marriott’s Innovation Lab
Marriott’s Innovation Lab was set up outside the Nokia Theatre and featured healthy and different breakfasts for Element, cool décor for Aloft and some Virtual Reality. Element is piloting a new guest room design that will feature a communal room in the center of four guest rooms, allowing travelers to share a kitchen, dining room and lounge area. Aloft is reinvigorating its food and beverage offerings with an emphasis on fresh, healthy ingredients such as spinach, quinoa, and avocado.
According to Kalibri Labs, just 10 years ago OTAs had just a 5-6 percent share of the market; now it is 15-16 percent. While brand.com still leads the way, Cindy Estes-Green and Mark Lomanno of Kalibri Labs indicated that $147 billion in room revenue was consumed in the U.S. last year and only $123 billion went to the hotel or 84 percent. The direct channels seem to be taking quite a beating. For example, I remember when voice represented 25 percent of all bookings and now it is 8 percent.
The New Global Traveler
Arne Sorenson, CEO of Marriott, touted the importance of establishing a trusted global traveler program and urged attendees to push for it. “I encourage all of you as leaders in this industry, every time you get an opportunity with American politicians, local politicians, foreign politicians, or technology partners, let’s talk about and build the momentum to build a global trusted traveler program,” he said.
Chris Nassetta, CEO of Hilton added, “these young travelers add so much value to our businesses that it’s easy to overlook that they’re facing serious and unprecedented challenges.” He was referring to what he termed “the worst youth unemployment crisis in modern history.” 71 million people around the world who are under 30 are looking for work.
He also noted that young people today are three times more likely to be unemployed than adults and emphasized that the problem is worse for minorities with more than half of African-American high school graduates unemployed as well as some 36 percent of Hispanics. Nassetta emphasized that despite automation “at our core we remain a business of people serving people,” he said.
There was definitely an air of uncertainty; Jeff Higley, Editor-in-Chief of HotelNewsNow, referred to this as “optimistic uncertainty.” From transaction levels to capital from China, impact of supply, Airbnb and more, there is a lot of uncertainty as a number of factors beyond our control could impact our businesses. There was talk of the Trump effect and it was both good and bad but most believe he will be good for business (please note that this was just before the recent Trump Administration implementation of the targeted travel ban).
My biggest takeaway came from a conversation with Mark Lomanno of Kalibri Labs. As former president of STR, Lomanno knows supply, demand, occupancy and rate as well as anyone and he and I were concerned about the lack of rate growth given the historic highs in occupancy. So my question is, “if not now, when?” Drive those rates!
To a great balance of 2017 and to our Chinese friends, “Shen yun kwai la; kung hsi fa tsai” – loosely translated by an Intro to Chinese student (me) as “Happy New Year and may you be prosperous.”
Note: Please don’t miss an opportunity to see us at our annual LIFE (Lodging Industry Forecast Event) conference – March 24! Let me know if you are interested in participating as a sponsor or attendee. We will have year-end results 2016 as well as an analysis of 2017.