RAR Hospitality: A one-man band grows into an orchestra
SAN DIEGO—The RAR in RAR Hospitality is Robert A. “Bob” Rauch, an industry veteran with more than 40 years experience ranging from general manager to consultant to CEO of the management firm which is celebrating its silver anniversary this year. He is also known as The Hotel Guru (or @truehotelguru, as his Twitter handle proclaims), and has run the hotelguru.com website for 20 years, providing insights on all aspects of the hospitality industry. He has also taught at Arizona State University for 25 years.
So, when he forecasts what is to come for the future of his company and for the industry, people listen.
He predicts the U.S. lodging industry “will do very well in 2O16, with a solid 5% RevPAR growth. [However,] there are some headwinds ahead, and I’m calling for a soft landing in 2017, driven by some global economic changes, Airbnb supply and new hotel supply.” About his company, which is headquartered here and has an office in Phoenix, where Rauch resides, he said of the near future: “I think we’re going to get to, most likely, 25 properties by the end of this year.
Right at the moment, I would forecast we’ll be in the mid-20s.
”
The company has already been busy this year, adding three properties to its portfolio over the first two months.
How Hotels Can Gain An Edge This Year
SAN DIEGO—Being aware of trends in the capital markets, asset management, technology and customer service will serve hoteliers well this year, RAR Hospitality’s president Bob Rauch tells GlobeSt.com. His firm recently held a lodging forecast event here titled “Harnessing the Tailwinds: Capitalizing on the Successes of the Year Ahead.” We spoke exclusively with Rauch and Atlas Hospitality’s group president Alan Reay, who participated in the event, about some of the key takeaways that could help hoteliers gain an edge in a highly competitive industry.
GlobeSt.com: How can hotel investors and operators harness the tailwinds and capitalize on the successes of the year ahead?
Rauch: The first thing we talked about at the conference is that this is still a very, very strong year. While there may be headwinds in the future, right now everything is going smoothly. Whether it’s an impending terrorist attack, minimum-wage hikes affecting us in the future orObamacare impacting our costs, these things have not hit us hard because RevPAR is moving at a faster clip than our increases in costs. We say take advantage of that. Don’t just take whatever business comes in—increase your rates. This party won’t go on forever. We have had tailwinds for the last 80 months, and no matter what happens in 2017, the party will come to an end. You don’t want to throw away profits, so think of where you can cut labor costs.
Minimum wage is going up, and so are insurance and energy costs, so you’ve got to figure out a way to reduce those. If you shop aggressively, you can cut costs. I’m doing this now in anticipation of next year because it’s smart. there’s no reason to pay the going rate, so to speak. Also, if you haven’t renovated your hotel, now’s your last chance. You won’t have an excess of capital if we have a recession.
Invest wisely in things that will make a difference for you.
Reay: Over the last two to three years, we have seen tremendous appreciation in RevPAR and net income at California hotels; however, a number of owners have not kept pace with the increases and are now trailing the market. For successful hotel operators, there is a lot of opportunity and upside in purchasing these under-performing assets.
Higher hotel taxes for ‘convadium’? EconoMeter panel weighs in
Q: Should the city’s hotel room tax be raised from 12.5 to 16.5 percent to finance the Chargers’ proposed downtown stadium-convention center annex?
Bob’s Answer: No.
Currently, this relatively low tax is the only thing tourism marketers can throw to meeting planners where the number is not high. Our convention center rental costs and direct airfares are among the highest in the nation and our convention hotels are expensive due to the cost of land.
Further, much of the proposed increase is going toward a stadium while some is going toward a noncontiguous convention center. This issue requires non-litigious leadership.
2016 and Beyond – Official Forecast
2016 is looking to continue the trend line of 2015 albeit with a somewhat muted feel. While average daily rate growth (ADR) will be a solid 4.5 percent, occupancy levels look to remain relatively flat, up just one half of one percent with demand outpacing…
RAR Hospitality touts industry expertise
The banter and jokes that revolve around wives telling husbands what to do are well known.
But heeding a suggestion from his bride created serious business success for Bob Rauch, the founder and CEO of RAR Hospitality, his Phoenix-based hotel ownership, managing and consulting firm.
Rauch was living in Phoenix when he met his wife, Linda, in San Diego in 1988. He was working for Deloitte, managing its hospitality consulting practice. Rauch was trying to get Deloitte to transfer him to San Diego but was unsuccessful. Linda, a pension planner who assists Rauch with RAR’s marketing, had a possible solution.
“Why don’t you start your own company?
” Rauch said of his wife’s idea.
He did. In 1990 , Rauch launched RAR as a hotel-consulting firm and gained a client list that included the Tempe Mission Palms and the Hotel San Carlos. It was named RA Rauch and Associates at the time.
He was both employer and employee of a company of one. To grow the company, Rauch slowly hired others to help staff offices in San Diego and Phoenix.
In 1997, with his wife’s encouragement, Rauch purchased his first hotel. This would be one of many he would buy and sell over the years. But the initial plunge took some creative accounting and financial help from family members who were willing to loan them some cash.
Hotel Forecast Calls For Continued Room Demand Growth in 2016
San Diego County’s lodging industry should see continued growth in 2016, with a “soft landing” expected for the local and U.S. markets in 2017 as hotel room demand slows, according to a newly issued forecast by San Diego-based consulting firm RAR Hospitality.
At a March 25 forum in Carmel Valley, company President Robert Rauch said the San Diego market this year should achieve its highest hotel occupancy levels and average daily room rates of the last 30 years.
Regionwide occupancy is expected to remain at 76 percent, with rate growth of 5 percent, to 8.
Revenue per available room (RevPar) is expected to reach $120, topping 2015’s $115.04.
Unemployment at 4.7%: Are you happy?
Q: At 4.7 percent unemployment, is San Diego County truly at full employment?
Bob’s Answer: No.
A more encompassing measure of unemployment includes those who have left the workforce, the underemployed, discouraged workers and others who haven’t applied in the past four weeks. Further, the “sharing” economy does not provide a head of household with a decent living that includes benefits. The economy is not as robust as it could be and quality jobs are not easy to find.
Much work is ahead given the headwinds of the global economy.
Read more answers here.
Unionize ‘gig’ economy workers?
Q: Should independent contractors, such as Uber drivers, in the “gig economy” be allowed to unionize?
Bob’s Answer: NO
Labor laws have not kept up with the needs of businesses and employees because you are either an employee or not. With “gig” economy workers, what we need is a new category of independent worker due to the imbalance of hours worked from week to week.
This creates real challenges for everything from health care to minimum wages earned – does a driver get paid for waiting? and more but does not require a union.
Read more answers here.
Returning factory jobs for U.S.? Don’t count on it
EconoMeter panel weighs campaign promises on a reality meter
Q: Can the U.S. bring most of the manufacturing jobs back that were lost to other countries in recent decades?
Bob’s Answer: YES
We need tax, regulatory and energy reform. Our tax code is among the most expensive in the industrialized world and it is indeed possible to bring manufacturing jobs back to the U.S. by cutting the corporate tax rate, negotiating better trade deals with China and easing regulations. That would help level the playing field for new manufacturing jobs including energy-related oil and natural gas production, refining ever-cleaner fuel and reducing greenhouse gas emissions.
Read more answers here.
CEO (Trump) as president: EconoMeter panel speaks
Q: Is a CEO – Donald Trump this year – a good choice to be president?
Bob’s Answer: NO
Trump has no grasp of the issues facing this country as witnessed by his one-line answers. This election should be marked by a determination of which “qualified” candidate we want as president.
Regardless of left/right, we need a leader with strong foreign policy experience and a plan to keep our economy strong.
I believe social issues are secondary. In a debate with Marco Rubio, Ted Cruz or Hillary Clinton, Trump would get crushed.
Read more answers here.