This year will be the worst ever recorded for the hotel business, according to Atlanta-based PKF Hospitality Research. And recently revised projections from PKF and Smith Travel Research both point to a later and slower recovery than previously anticipated. How are hoteliers coping? M&C spoke with those leading the largest and most meetings-oriented chains to find out.
M&C: Have you changed your marketing message as a result of the economy and the public perception of luxury?
Chuck Floyd: Our general marketing message will remain consistent. What we will accelerate will be value opportunities where and when it makes sense to do so.
Arne Sorenson: We've de-emphasized the connection to luxury and made some tweaks in the way we've marketed in the past nine to 12 months. We now focus more on quality and the memorability of the experience; we've moved away a bit from luxury for luxury's sake. Within Ritz-Carlton, we've seen a greater bias toward urban properties, as opposed to resort destinations, where people may be more concerned about a "boondoggle" perception.
Hubert Joly: We are highlighting the message that meetings mean business and are important tools for training, education, sales, customer interface, new product development and motivating performance. We are also helping our clients notice that we have many properties where they can have highly effective and noncontroversial meetings and events.
Jim Abrahamson: We are not considering changing our marketing messages for our upper-upscale and upscale brands. Travelers are looking for smart value, and we believe that our InterContinental and Crowne Plaza brands provide that. We also are seeing resilience in the midscale segment, which makes up 80 percent of our portfolio.
Isadore Sharp: The goal of Four Seasons is to create exceptional experiences for our guests. The feedback we receive is that, given the current environment, their expectations of the quality of experience we provide have only increased.
Chris Cahill: Fairmont's positioning below what I call the super-luxury transient set puts it in a position where it has always been a more affordable luxury option. I don't think we use the word luxury that much, so it hasn't been difficult for us to adjust to the changes. I've actually seen some trading down, where people who tend to go for a more high-profile property destination instead felt they could get the quality they expected and yet not run into trouble relative to holding their meeting at our property. We have certain destinations that are vulnerable, from a positioning or from a perception standpoint, because of where they are. And so for those destinations, it has less to do with our properties than it has to do with the destination itself. There's not much you can do about that.
Mike Deitemeyer: At Omni, we have not changed our overarching message with respect to luxury, as we believe it is important to reinforce the type of brand we are from an image standpoint. Omni sits at an ideal niche, between the ultra-luxury set and upper-upscale. Therefore, Omni is typically seen as a company delivering superior value, especially during an economic downturn. In fact, while revenues are down, in regard to market share, we have gained a few hard-earned points in the last 90 days.
Jeff Wagoner: We really haven't had to change our marketing message due to the perception of luxury. We think our portfolio is distributed really well. We feel if there is any trade-down, there is the opportunity for the Wyndham customer to be able to go up or down successfully. And honestly, there's, to some degree, a little trade-up as well: A hotel that someone couldn't have reached before might be within their price range now, because rates have come down.
M&C: When is your company projecting a turnaround to begin? Have you seen any indications of group demand picking up?
Ian Carter: It's likely to be 2010 before we're able to enjoy more robust demand. Potentially, we could begin to see more positive trends during the third and fourth quarters of this year; a lot of this depends on how effective the economic stimulus is and how soon business and consumer confidence returns.
Cahill: Who the heck knows? We still see that year-over-year numbers in room demand are down -- rate is down even more -- but demand is starting to flatten out. Hitting bottom is only part of it. When do we actually foresee coming off the bottom, as opposed to bouncing along the bottom? I suspect we're going to have a very slow exit off the bottom. But companies do have to bring people together to plan, to build rapport, to put teams together. There have been a lot of layoffs at a lot of companies, and so a lot of people are working together who haven't actually come together as teams to move the businesses forward. I think that's going to have to happen at some point in the next five or six months.
Abrahamson: We have seen group demand pick up from where it was several months ago, as a sense of normalcy sets in. There is some renegotiation of corporate rates. The forward group booking process for 2010 will be challenging.
Deitemeyer: We see some promising signs -- erosion is weakening in the transient segments, booking pace is growing month-over-month and cancellations are declining. Of course, we expect to continue to address these challenging times through this year and into the next, but to a lesser degree.
Joly: In our meetings and incentives business, we're seeing an uptick in interest and additional business opportunities toward the end of this year. That momentum is flowing into 2010, not with just carry-over business, but with new business, too. While we don't expect to be back at our pre-2009 levels quickly, we are seeing a steady return of business and expect 2011 to be quite healthy.
Floyd: Our current belief is that a significant turnaround for our industry won't be seen until well into next year.
Sharp: We do believe that by the end of the year things will have settled down and people will be regaining their confidence in the economy. Organizations booking meetings will be less concerned about perception and more concerned about what is most important for them to be effective. In terms of group demand, there are more RFPs being generated, which include programs for 2009.
M&C: How has your development pipeline been affected?
Deitemeyer: Because we essentially own and manage nearly all of our hotels and have virtually no debt, we find this to be an ideal time to strategically yet aggressively acquire or develop new properties for the brand. At this juncture, we have put a development project in the Bay of Banderas, near Punta Mita, Mexico, on hold, yet we still intend to develop the land into a luxury resort community.
Abrahamson: Despite the lack of liquidity in the lending market, our brands are well-positioned and we signed 76 hotels in the first quarter. Also, we opened almost 100 hotels during the first quarter, more than the same period last year, and we remain on track to open around 400 hotels globally this year. Looking to 2010, there is a continued slowing in the pace of groundbreakings. Consequently, we expect the pace of movement through the pipeline to slow.