NEW YORK — The COVID-19 pandemic changed the hotel industry landscape, in some cases permanently, but hotel executives believe that while there are still ongoing challenges, the industry is adapting and on the right path.
During the “The CEOs Check In: View from the Top” general session at the 44th annual NYU International Hospitality Industry Investment Conference, hotel brand CEOs spoke about what changes they expect will last, how the industry needs to evolve to meet employees' needs and sustainability efforts.
Lasting Pandemic Changes
Most of the ongoing trends in hospitality were already there before, but the pandemic has accelerated them, Hilton President and CEO Chris Nassetta said. Hotels were exploring contactless entry to varying degrees, but that has moved quickly to giving guests more control and engagement through their phones.
“We've just seen a massive acceleration that's taken a bunch of different forms of the connection of the physical and the digital,” he said.
How food and beverage operates has evolved, said Mark Hoplamazian, president and CEO of Hyatt Hotels Corp. There’s more self-service, more variety and more alternative formats. It used to be that room service was always the most assured loss-making department in a hotel, but that has changed.
The other major trend is a greater focus on well-being, Hoplamazian said. Hyatt’s Miraval brand is operating at “staggering levels,” he added.
“There’s a lot more focus on well-being programming, on opportunities to seek out unique experiences,” he said. “A lot of people while they’re traveling, even business travelers, they’re just looking for resources to be able to take care of themselves, including mental health.”
The shift toward blended trip purpose is here to stay beyond the end of the pandemic, Marriott International CEO Tony Capuano said.
“If you look at booking patterns by day of the week, Thursday and Sunday used to be the redheaded stepchildren — those were shoulder days,” he said. “Demand for those days has come back more quickly than Monday, Tuesday, Wednesday.”
The evolving expectations guests have during their stay is good news for the hotel business, but the industry must be deliberate in how it evolves the model, he said.
Lifestyle brands over the last couple of years have seen a 15-point lead in revenue per available room over traditional hotels, Accor Chairman and CEO Sébastien Bazin said. At lifestyle hotels, 50% of the revenue is non-travel-related.
“It’s food and beverage, and 90% is local-community-driven,” he said.
Those who live nearby like what the hotel offers in terms of food and beverage, its design and its team, and that local popularity brings in travelers, Bazin said.
Labor Challenges
Accor’s full team is down 25,000 people, roughly 10% of its workforce, Bazin said. To afford the employees needed, Bazin is encouraging hotel owners to push their rates as much as they can to sustain margin.
“They have to pay more for returning labor — inflation wages,” he said. “They have to be able to pay more for anything. Thank God the customer is accepting to pay a higher price.”
Even with higher wages, attracting and holding on to workers is difficult, Bazin said. Hotel employees sacrifice their nights and weekends, and these are jobs that can’t be done remotely. They have family and friends who can work from home while earning a good wage.
“Hospital nurses, construction employees, hospitality — why are we facing the same problem?” he asked. “For the exact same reason. If they can opt for the same pay in a job but they can actually have a bit of free time and work remotely and have less sacrifices, of course they go for that.”
Many practices in the hotel industry are antiquated, such as hotel shifts, Hoplamazian said. Workers trying to care for their elderly parents or get their kids to school in the morning aren’t going to make the morning standup for housekeeping.
“We've been stuck in this completely, totally old-world thought about how you schedule people,” he said.
Hotel companies need to become more dynamic in how they help people self-schedule, Hoplamazian said.
In the U.K., following both Brexit and the start of the pandemic, hotels lost a great number of employees because 60% of the hospitality, travel and tourism workers come from the European Union, IHG Hotels & Resorts CEO Keith Barr said.
“All of a sudden, they go home, they can’t come back,” he said. “They find new jobs, and you’re looking around and trying to find someone.”
Barr said he’s been working with the U.K. government, explaining there aren’t enough people in the country and the infrastructure isn’t there. Officials must encourage immigration to have enough workers, he said, adding that the U.S. has a similar issue.
While agreeing with his co-panelists, Nassetta said the labor issue has been correcting itself over time. When the conference met last in November, the situation was dire, but since then the labor shortage has moderated.
People were concerned for their health, had childcare or elderly care issues and other reasons keeping them from returning to work, Nassetta said. Many workers shifted over to retail, technology and other sectors. Now, people have generally sorted out the concerns keeping them from coming back, and those other sectors have been downsizing to some degree after the holidays.
“It will probably take another couple of years, and it was tough before COVID, so it’s not going to be easy, but I think it will be normalized over the next year,” he said.
Sustainability
Accor has a goal of removing 100% of single-use plastics from its properties by the end of 2022, Bazin said. The only region it’s running into trouble is in South America because of concerns over drinking tap water, but they’re still working on possible solutions, he said.
Overall, it’s a commitment to make this change happen, but it has to be done at each hotel, Bazin said. It’s the same with managing carbon emissions.
“If you don’t have it per hotel, per brand, you’re never going to be able to solve it,” he said.
The European-listed companies are under more regulatory pressure for sustainability efforts, Barr said. IHG has made its commitment to the 1.5-degree Celsius campaign by the Science Based Targets initiative. It also committed to reduce its level one, two and three emissions by 46% by 2030 as part of the Race to Zero.
What’s difficult about reaching those goals is that 80% of the hotels IHG will have in 2030 have been built, so it’s a matter of figuring out how to take the existing buildings and making them more energy efficient, he said.
IHG has been making a big push for renewable energy in the U.S., but that was easier before the current energy crisis, Barr said. Now, everyone is looking at how to build their prototypical brands as zero to low-carbon archetypes.
"It’s going to be hard, because we actually need to decarbonize the grid,” he said. “We need governments to take a very strong position in going forward because industries can be a big part of the solution, but they can’t solve it by themselves.”
The new Securities and Exchange Commission reporting requirement draft would have the U.S. close behind the EU’s requirements, Capuano said. Irrespective of the regulatory environment, customers and prospective future employees are as demanding as they’ve ever been about sustainability efforts.
“The number of group and corporate contracts that require a statement on our sustainability efforts is higher than it's ever been,” he said. “As we all participate in this fight for talent, that prospective future associate wants to find a company who has not only public statements about sustainability goals, but a demonstrated track record against those goals is an increasingly important part of their decision about where they're going to go work.”
Sustainability is not an area in which hoteliers should compete, Nassetta said, adding that he is proud of the work the industry has done collectively.
“I think we have a lot more to do together,” he said. “I think we have an amazing future, for all the reasons we’ve been talking about — not just short or intermediate, but over the very long term.”
Climate change is an existential risk to hospitality, and if the industry is not careful, there will be government regulations put in place that could truncate hoteliers’ opportunities, Nassetta said.
“Sharing best practices in this arena when each of us figure something out and how to crack the code a little bit better is going to be necessary,” he said.
Editor’s note: Chris Nassetta serves on Hotel News Now’s parent company CoStar Group’s board of directors.