Geopolitical and global economic issues seem to be converging all at once, but business in the the U.S. hotel industry isn't expected to soften anytime soon.
Still leaders in industry say they must not get too comfortable with the headwinds.
Michele Allen, chief financial officer at Wyndham Hotels & Resorts, speaking at the NYU International Hospitality Industry Investment Conference, said while the strength of leisure demand continues to be sturdy, her team is "not burrowing their heads in the sand with respect to the broader concerns with what might happen after the summer season."
"At Wyndham, we are preparing for any and all scenarios," she said during a panel titled "Perspectives in Leadership: Focusing On Staying Focused."
Heather McCrory, Accor's CEO for North and Central America, said there's push and pull within the industry, and leaders face four key factors — the economy, labor, guest expectation and putting environmental, social, and governance initiatives in place.
Labor
From McCrory's perspective, the labor issue has two sides to it.
"It's really difficult to recruit. When we do find people, you sign up 20 people, two of them actually show up and that same day 10 people are calling in because they've got COVID," she said. "So that dynamic, at the hotel level particularly, is difficult."
The other side to that is companies must also work to retain the employees who have been with them for multiple years.
"We need to make sure that they're staying, they feel the love and that they understand that they're very valuable to us," she added.
With labor and wage inflation creeping higher, Wyndham's Allen said owners are underwriting more sustainable strength in average daily rates.
"We're working with our owners, giving them the tools and the education to really price their hotels [and] yield their inventory/hold back inventory when they're not getting the price they want," she said. "Everyone understands now, especially with the labor shortages and wage inflation, that you don't want to sell out the house every night."
Balancing Needs of Owners and Guests
Guest expectations are now more demanding compared to earlier in the pandemic, and several hotels have yet to resolve that, McCrory said.
"I think we are going to see a lot of compression on that. At the same time, owners are getting pretty good margins right at the moment but it's still [not making up for] what we lost in the last two years," she said.
Mit Shah, CEO of Noble Investment Group, said hoteliers have been able to price rooms like never before. Now, the question is can hotel industry pricing outrun rising interest rates.
"Think about the value proposition, because the capital markets are changing how we think about being able to price," he said.
As an owner of hotel assets, Shah said it's about "getting back to what we do." Noble pushes hard on technology and innovation in order to eliminate some costs while still enhancing the guest experience.
However, the overall hotel industry has been behind on innovation, Shah said. One of the questions that remains is "what sticks and what doesn't" at different hotel types.
At a select-service or extended-stay hotel, for example, it might be worth implementing a touchless experience. But if a customer is paying higher rates at a luxury property, they're going to want all service touch points.
Shah said it will take a willingness to be innovative, but some owners still yearn for a uniform approach to doing so.
Alex Alt, senior vice president and general manager at Oracle Hospitality, said service delivery issues will become increasingly difficult.
"I was doing some research on the airline industry. Before COVID, 50% of airline travelers domestically checked in at the airline desk, so they actually talked to a person, traded an I.D., got a boarding pass. Today, that number is down to 25%," he said. "That is a huge change. We've got to innovate in such a way that we have those kinds of step changes to allow us to preserve the guest experience."
Alt said that customers are comfortable going digital and limiting face-to-face interactions, but collectively the hotel industry is "not great at delivering it."
"It's not about retraining the customer — the customer's already been trained on modern digital interactions — it's about providing the opportunity," while also reducing the burden on short-staffed properties, he added.
Allen said Wyndham has an auto call routing program that sends all calls to a central call center, where agents are professionally trained to convert calls into more bookings and at higher rates than at the hotel's front desk.
"It frees the front desk up to focus on the human element of the experience and there's also revenue uplift," she added. "When we think about the future, five years out, we're starting to consider different tech solutions and how those would integrate throughout our systems."
Environmental, Social, and Governance Standards
McCrory said now is the "perfect storm for [diversity, equity and inclusion] and ESG. We need to get underneath it and make it real," as there's more pressure on it now than there's been in the past.
"You can't do greenwashing. It's just not acceptable. You actually have to put it in place. And with all these other dynamics happening, it's more difficult," she said, citing supply-chain issues as one example.
When ESG is taken seriously, McCrory said its a win for both owners and consumers.