CHARLOTTE, North Carolina — The hotel industry is in a "new normal" environment, not necessarily fully recovered from the pandemic but distanced from most of the chaos that came with it. As the travel segments recover at different paces, it's been a challenge for revenue managers to dig their feet in and forecast for the future.
In a roundtable discussion at HSMAI's Commercial Strategy Conference, Erica Lipscomb, senior vice president of revenue strategy at Crescent Hotels & Resorts, said destination resorts recovered faster than other properties but are now failing to hold on to rate as occupancy continues to decrease. After a broadly challenging first quarter for the hotel industry, Crescent is targeting the segments that aren't fully back to 2019 levels.
"We are looking for what are those segmentations that have not recovered, and then how are we leaning in heavy on those to make sure we're spending our marketing funds in the right place," she said.
Group travel is one of those segments that hasn't fully recovered. Priya Chandnani, senior vice president of sales, revenue and distribution strategy at Sage Hospitality Group, said a consistent base of strong group travel can protect transient rate efficiency, but if you lean too hard into it, transient rate will erode along with its demand.
That group travel may help to build occupancy, but it won't necessarily be at the desired rate as it replaces leisure travel, said Linda Gulrajani, vice president of revenue strategy and distribution at Marcus Hotels & Resorts.
"It's all about the mix of business that's hindering rate from growing as much as people hoped it would — or even maintaining rate because as leisure's changed and group or [business travel] has replaced it, it's just not coming in at the same rates," she said.
The return of business travel has varied from market to market, Lipscomb said. What has changed, though, is the ability to model a successful market to another similar market.
Karen McWilliams, vice president of revenue strategy at Concord Hospitality, said the volume of major citywide and large association group travel hasn't been the same, and her company has had to make up the difference with a bevy of smaller groups. This, in turn, has made it harder to compare markets and has added additional seasonality.
"We've really seen that in some markets where you might have had a downtown city center area and then maybe a research park not too far away, they could share business. Drastically different markets now," she said.
Chandnani said the industry as a whole has yet to find stabilization.
"Pre-COVID, it was almost like you could regionalize and you could create certain trends that were across portfolios and across markets, but today, we're still finding stability," she said. "Some markets are doing better than others with group, [business travel] has rebounded for certain markets ... so maybe it is give it a few more years before we can truly start tracking overarching trends versus getting more curated."
Biggest Obstacles Ahead
California's new laws targeting hidden fees are among the biggest challenges hotel revenue managers will have to account for moving forward, said Jack Easdale, chief commercial officer at By The Sea Resorts. Those fees account for a significant amount of top-line revenues, and while the law originates in California, there's an immediate impact on all other states and a lingering impact of other states across the U.S., with the potential for more to enact similar laws.
If every property were to be affected by this, it wouldn't be an issue necessarily, but that isn't likely to be the case, Easdale said.
"If everybody does it, if everybody comes up, theoretically you can maintain your existing revenues. I just don't see that happening," he said.
Marriott International already had a policy enacted in regard to price transparency, and Lipscomb said for the majority of those hotels, nothing changed. The properties that are affected, however, are those in a market where other hotels don't disclose the hidden fees.
"When you're in a market and the majority of your market is actually charging — so destination hotels, resorts — I tell them, 'This is nothing for you to worry about because you're in a market where everyone is doing it,'" she said. "It's those markets where if you were the one-off, then there you are going to be impacted."
Lipscomb said she still isn't too concerned about it, and that any revenues that disappear can be made up with other ancillary revenues and experiences.
"A destination and resort fee, those are amenities that you're offering your customers to enhance their experience. Ancillary revenue is the same thing," she said. "You have to just be intentional about how are you presenting that and positioning that through the customer journey, in front of the customer so this is something [they] have to have."
Among the other challenges in the revenue management discipline is navigating artificial intelligence applications in the hotel business.
McWilliams said the hospitality industry should take its time to understand what the technology is and the risks involved. However, Lipscomb said there are a lot of layers to it, but the industry is usually too slow to adopt new things.
Harry Carr, senior vice president of revenue management at Davidson Hospitality, said that online travel agencies such as Expedia have already rolled out their own AI-powered chatbots for trip planning. Falling behind in the race to using AI could hurt ancillary revenues and the overall guest journey.
"If we just become a supplier, and [OTAs] are able to push a spa service that's outside the hotel, the [food and beverage] if they're integrating with the recommendations that they're getting from Toast instead of the hotel ... we have to make sure that we're reaching out to the guest and customizing so that it's not a third party in between us and a customer," he said.