Timed to coincide with this year’s meeting at the Americas Lodging Investment Summit in Los Angeles, the American Hotel & Lodging Association issued an interesting report on the state of the hotel industry.
While predicting that hotel room revenue will nearly return to 2019 levels — after falling by almost half in 2020 — the report further projected that ancillary spending will continue to lag behind.
Year by year, according to AHLA, hotel room revenue was $169.6 billion in 2019, $85.7 billion in 2020, and $141.6 billion in 2021. This means that over the past two years, hotels lost a collective $111.8 billion in room revenue alone compared to the preexisting norm. Room revenue is projected to reach $168.4 billion this year, or within one percentage point of 2019 levels. No projection was made for ancillary revenue from meetings, events and food and beverage, estimated at $48 billion annually before the pandemic, according to the report.
All things considered, and given that COVID-19 hasn’t yet disappeared, this projection seems remarkably rosy. However, we know that these numbers hide in many ways the real pain that our industry has experienced over many quarters, and that any recovery isn’t uniform. Just ask owners and operators of full-service, big-box hotels in many major cities, especially those dependent on major conventions and other events.
Being mindful of such issues — business and group travel and ancillary income — we must envision ways to prevent a recurrence of such lost revenue, which has put pressure on not only profitability, but ongoing investment in properties. At the same time, can we sustain the segments that have performed surprisingly well even during the pandemic?
In a Changing World, No Time for Status Quo
In recent years, with younger generations perhaps kicking us in the rear a bit, our industry has rekindled or rediscovered the truth that the hotel stay must be an experience. Increasingly, guests want a clean, secure, inviting room and environment for starters. Breakfast wouldn’t hurt, but their stay with us should also be personable and memorable. Great idea. Undoubtedly, the advent of so much sharing on social media and in online hotel reviews has boosted this awakening. Everyone has a story to tell.
Moreover, even with all of the challenges and limitations on services in some cases, the pandemic hasn't been a lasting interruption to experiences. In our experience, it has been just the reverse.
Hotel owners and operators are figuring out how to add experiential, lifestyle offerings; helping activate the hotel by aligning with its surroundings and nearby businesses — including gourmet chefs and food purveyors, local artists, musicians and leading attractions. Where the climate allows, outdoor social hours or special meals, served by a local pop-up food carts are great, and the rooftop bar for social hour remains popular. Find a “story” and wrap it around your hotel, whether in a city center or more discrete neighborhood.
As part of this, the AHLA report almost read our minds when it highlighted that “the rapid rise of bleisure travelers — those who blend business and leisure travel — are impacting how hotels operate. In fact, one study of global business travelers found 89% wanted to add a private holiday to their business trips in the next 12 months.”
We believe that the property strategies discussed also apply to non-business travelers, those individuals and families in drive-to markets that have helped sustain us — and more — in recent days. We are finding that “activated” properties are outperforming their comp sets by healthy margins in many cases, drawing surprisingly high redemption rates with brand loyalty programs, even against higher scale, full-service properties. These opportunities also align well with the continuing value of soft branding, which allows owners to individualize the property experience, while gaining from brand systems, training programs, loyalty programs and marketing.
Yes, these have been sobering times. But sharp operators are working creatively to enliven the hotel experience, property by property, which will build guest loyalty that transcends these present days.
Kerry Ranson is the CEO at HP Hotels.
The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concern.