Despite the uncertainty over the economic outlook, Concord Hospitality continues to see strong hotel performance and has been able to make headway on new hotel development.
While the company had a weak first quarter in 2022, performance across the company’s portfolio took off after that, said Nick Kellock, chief operating officer at Concord. It closed the year with $981 million in hotel revenue, with comparable hotels seeing 41.6% revenue-per-available-room growth compared to 2021. Food-and-beverage operations grew revenue 25% year over year for more than $125 million.
Concord ended the year between 8% and 9% over its budgeted top line. Looking ahead to 2023, the company is planning for another 8% to 9% increase in its top line on a comparable basis.
There’s more to it when taking newly opened hotels into consideration, and there’s still concerns over a potential recession, Kellock said. However, it remains to be seen what effect there would be from a recession or if there will even be one.
“So far, in the pace of bookings we have coming forward, and in terms of our January and February runs, we have not seen any kind of pulling back on the travel front,” he said. “We haven’t seen events being canceled. We haven’t seen newly introduced travel restrictions from companies.”
There’s still quite a way to go before corporate demand returns to pre-COVID-19 levels, but there is still a large amount leisure and mixed-purpose travel, Kellock said. Events are coming back, and people are dining out more.
“That’s all doing great, well ahead of 2019 levels of performance now and has been since September, even late August, last year,” he said.
At the same time, no one knows what’s around the corner, so Concord isn’t getting complacent about current market conditions, he said.
Openings and Pipeline Projects
Concord added 15 third-party management contracts last year, Kellock said, and he hopes for similar numbers in 2023. It also retained 18 properties that underwent ownership changes.
The company was the developer for a majority of the 12 hotels it opened last year, he said. The openings were a mixture of traditional new hotel development, including such brands as Hampton Inn, Marriott Autograph Collection hotels and several WoodSpring Suites properties.
Concord has been doing a programmatic build-out of 27 WoodSpring Suites hotels, something new for the company, in partnership with one of its capital partners, Kellock said. The WoodSpring Suites properties involve a different team to operate them as it’s unlike the other hotels in Concord’s portfolio.
“You’ve got one foot in the door of economy extended stay, and you’ve got one foot in the door in multifamily, so it’s a very tight operating model,” he said, adding that means having a different team overseeing these properties.
At the moment, the company has 15 hotels under construction, split almost evenly between WoodSpring Suites hotels and other brands typically found in the portfolio, such as AC by Marriott, Homewood Suites by Hilton and even a larger Westin being built in Duluth, Georgia, he said.
The pace of adding new development deals will be a little slower for a year or so until there’s stabilization in development cost as well as more positive developments with interest rates, Kellock said. Generally, however, the company will continue to move forward in its development projects with more economy-segment properties in the near term.
“That said, we're close to getting a deal finalized on one large full-service hotel, so it's still possible to do those deals, but it’s just not as easy in this environment,” he said.
Concord has been growing its portfolio of upper-upscale, boutique hotels, restaurants and bars in its Opus Collection, Kellock said. It’s not a consumer-facing collection; instead, it’s a business-to-business collection to highlight the company’s expertise in developing and operating lifestyle independent and soft-branded hotels as well as unique bar and restaurant concepts.
“Opus is a way of saying, ‘We have a significant presence in the space, we’re good at it, we have amazing hotels, and they’re all framed within this collection,’” he said. “It's a means of presenting ourselves optimally within this particular space.”
The Opus Collection currently has 29 properties, and it is expected to grow by 17% this year as Concord pursues new deals on the West Coast in the southeastern U.S.
Labor Strategy
As has been the case for every hotel operator, Concord had to make adjustments to attract and retain talented employees, Kellock said. The company became more flexible with hours and more aggressive on unit wage costs, and those changes are permanent.
“That’s not going to change back because there’s a general labor shortage,” he said. “We’ve lost a very large population out of the workforce, and we’ve got a lot of other people who used to work in our businesses move to other sectors.”
The labor environment for attraction and retention has been improving even within the last year, he said. At this point in 2021, the company had a job vacancy rate of about 12%, but that has dropped to about 8% to 9%.
Labor was already a major challenge for the hotel industry even before COVID-19, he said. After the pandemic started, what compounded the challenge in attracting workers to start or return to work at hotels is hotel wages were not competitive with some of alternatives out there, such as Target or Amazon.
“Now I would say we're much more directly competitive,” he said. “The challenge now is more the availability and also making sure we retain people because there's a lot more job-hopping going on than there ever was.”
Concord hired a refugee from Afghanistan who had worked for the Afghan army and was part of the airlift out of Kabul before the Taliban returned to power, Kellock said. He’s been traveling across the U.S., recruiting other refugees who are looking for work.
“It’s been hugely successful,” he said, adding these new employees are thrilled to take on new jobs.
So far, the program has hired 60 employees across the country, and while that may not sound like much, that’s the equivalent of a fully staffed hotel, Kellock said.