CAMBRIDGE, Mass. — All of the economic uncertainty and travel disruption in recent weeks has many wondering about the overall impact on U.S. hotel demand.
But sentiment is so far, so ... OK, some U.S. hotel company executives said during a CEO panel at the recent Hospitality Asset Managers Association spring conference.
“Well, I would panic, but I don’t know what to panic about,” said Warren Fields, president and CEO of Pyramid Global Hospitality. Pyramid third-party manages full- and select-service branded and independent hotels.
Despite the current political noise, Fields said right now, the second-quarter outlook for Pyramid is pretty good. While there's plenty of uncertainty that weighs on contingency plans companies put in place for the year in the year in case demand falls, he said this industry cycle doesn't feel as bad as some previous ones.
The company has gone through 15 consecutive quarters in which its hotels have outperformed competitors’ hotels on a revenue per available room index basis.
“I anticipate that to continue,” he said. “It’s too early to tell about the third and fourth quarters, but the second quarter feels good.”
Lark Hotels CEO Peter Twachtman agreed that it’s too early to tell how hotel performance will shake out for the year. Lark Hotels saw a small RevPAR decline during the first quarter, but that was mostly in markets popular with Canadian travelers. The second quarter looks stronger with early summer bookings selling well.
Lark's portfolio of managed independent hotels in New England and along the coasts sit in what he called a lower-luxury rate class, and travelers able to afford these rates are still traveling, he said. "So, we’re fairly well insulated in many ways based on our markets,” he said.
The economy seems a lot like the weather in Boston in that it can change at a moment’s notice, Sonesta International Hotels Corp. President and CEO John Murray said.
“We preach to our team members all the time that the only thing that they should really get comfortable with is change and they should be ready to pivot,” he said.
May is shaping up to be a great month along with June, but April is a bit dicey, Murray said.
“We’ve seen some government group cancelations, but otherwise group business is pretty strong for us,” he said.
Employee attraction, retention
The CEOs speaking emphasized how important finding and keeping a strong labor force continues to be, no matter what external forces may be at play in the economy.
The only thing harder than bringing a new employee on board is going through the process of training them and then losing them, Murray said.
“You want to get good employees, train them well and show them value — to show them a pathway to growth,” he said.
The joy of operating in the space that Lark Hotels does is he’s able to know his employees by name and face, Twachtman said.
“We can really get in there and form relationships with them with weekly training,” he said. “It’s not just about the operator on the ground but how we think about our training to accelerate careers.”
Having 85 independent properties in the portfolio allows the company to pivot quickly, he said. They’re not bound by anything, and that gives employees freedom to try different things.
“Our job is just to keep them motivated, keep them excited and really just say, ‘Don’t be afraid to fail. Take risks,’” he said.
Allowing for growth is important, Twachtman added. Lark operates in a unique space that allows people to cross lanes. The bigger an operation gets, the more specialized people need to be, and that sometimes puts people on a track that can both help and hurt them because they don’t know how to move outside of that specialty since it’s so focused.
“We really look toward how do we get people to be the best generalist,” he said. “Obviously people need specializing — great financing, great marketing [skills] — but ultimately, we allow people to move within the organization, even at property level, whatever it might be to learn skills beyond what they were hired for.
“Therefore, they get to touch an awful lot within the operations, and so I think that’s really part of the secret sauce.”
Fields said that employee growth is a major motivator behind portfolio growth. The company grows, in part, so employees can grow with the company.
“We have to give them those opportunities,” he said. “I never want to lose a really good person because I can't give them what they wanted to do for their career.”
That means Pyramid has to keep expanding its portfolio, Fields said. Adding cool hotels to the portfolio, like the company did recently with the Colony Hotel in Kennebunkport, Maine, excites the teams and helps motivate them.
“So as long as we keep doing those types of things, we're going to attract and retain, and we're going to have the best people, which allows us to drive more profitability to our assets,” he said.
Reinvesting in hotels
The CEO speakers also touched on the importance of hotel capital investments, especially now when tariffs threaten higher costs for renovations.
But since competition is a big part of hotel success, owners have to keep their hotels up, Murray said.
He called updates, repairs and renovations some "of the easiest things to hold back on if you want to save money,” he said. “You know, you come back to a little maintenance, delay fixing something. If you have a room out of service, you don’t put it back in service. That’s short-sighted, I think. I think you need to keep the properties up.”
If owners are concerned about the cost of furniture, fixtures and equipment rising because of tariffs, they need to explore different sourcing markets, he said. They need to figure out ways to make it economical.
“Guests have too many choices,” he said, meaning they can easily choose other hotels if yours is not well maintained. And hotels that let capital expenditures lag face an uphill battle regaining demand and rate.
As an operator, Fields said he’s all for hotels getting renovated as that makes his company's job easier. At the same time, if a hotel is in decent condition, particularly its guestrooms and public spaces, and the guest service scores are good and indicating guests have intentions to come back, a renovation may not be necessary.
“I think it’s a case-by-case perspective,” he said. “Is seven years the right cycle for soft goods? I don’t know. I think it’s hotel-by-hotel and market by market.”
It’s also important to look at what the competitors in the market are doing as well, Fields said.
“I don’t think it’s as easy as saying we just need to renovate, but when an owner tells me they want to renovate a hotel, I’m like, ‘Yes,’” he said.