by Michael J. Shapiro | May 01, 2018

The year since our last hotelier roundtable has been filled with disruption on every front, and the hospitality business has not been immune. Our latest panel discussion covers such hot-button issues as third-party commissions, alternative lodging, security, the drop in international visitors to the U.S. and more.


In January, Marriott became the first to announce a third-party commission cut from 10 percent to 7 percent, and Hilton followed suit one month later. What's your perspective on this issue?

Trina Camacho-London: Hyatt is doing business as usual, for now. We are closely monitoring market share and everything else in regard to this. We value our third-party partners highly, but it's hard to predict the future. Hotel companies might all jump on board with the cuts, but if we then have a natural disaster, the first thing we'll do is go right to these partners to help us fill our hotels. I know the cost of sale is a huge expense for everybody, and it's a huge discussion point at board of directors and owners' meetings. We're always looking at how we can minimize that cost of sale.

Peter Strebel: In the short term, Omni is very committed to third-party meeting planners, and we have no plans to cut their commissions. We are a niche player in the meetings market and we do rely heavily on third-party planners, so we value their partnership.

The challenge with our business today is the pressure on our profitability because of wages, which is our largest expense; I think smart hotel operators are looking where else they can make cuts for profitability. So I do think, unfortunately, there is going to be further pressure on commissions. But again, I don't think at this point Omni has any plans; we're a group-focused company, and more than 50 percent of our business is meetings and events.

Michael Massari: The meetings and events customer is critical and very profitable for us. We value our relationship with third parties and what they bring to the table, so at this juncture we don't plan to cut commissions. We view it as a fair interaction and a fair price to pay. We are observing what's happening in the industry and following it closely, and it remains to be seen what the future will bring.

At properties like ours, where the meetings customer is super-profitable, the effort is much more around driving volume and earning more of those customers than reducing the channel costs. But if you had a different situation -- if that customer wasn't remarkably profitable -- I guess you would view that problem differently.

Michael Dominguez: I think you're going to see some different camps among hoteliers, depending on their business models, their need for group business and their relationships with partners. But I'm always reminded that seven out of every 10 hotels in the United States is independent. I don't think you're going to see independents jump into that model [of cutting commissions] -- and that's a lot of the hotel base.

All hotel models are a little bit different, depending on where you are, what your needs are and what your mix of business is. Candidly, I really like the approach that Hilton has taken in that they're leaving it up to the properties whether or not to participate -- the market should dictate what can and cannot be consumed.

It's an interesting decision, though, to make this change when we're coming off five all-time record years in the United States. But we will have a downturn, and I have found in my career that planners have very long memories. They tend to help the partners that have helped them, and I don't think that has changed. Our belief is that relationships matter, and that we put the relationship first and look at it long term, not short term. We look at how we can drive our businesses together.

Danny Hughes: Our perspective remains the same since we made the announcement. We are constantly reviewing our distribution policies and practices, and will continue to be nimble and agile. [Read M&C's exclusive interview with Hughes on the topic here.]


What is changing with respect to group business, and what trends are you seeing?
Camacho-London:
 In recent years we have had to manage a lot more short-term booking than previously, and it's a new way to manage. We're so used to looking at the future and group history and projecting based on that. And now, it's much more common for, say, a big pharmaceutical company to come in at the last minute and shift your whole projection -- in a positive way, but it's still a new way to manage. We used to forecast every 90 days, but now we're forecasting every month.

Hughes: We are seeing a lot of last-minute pickup and groups exceeding their blocks, and that's for both large events and smaller bookings.

Dominguez: We're so tight with space and patterns, the challenge is finding something that's perfect for the gaps. There's still this compression in the market because not enough ballrooms are being built, and that will continue to add to the compression.

Massari: The pressure for planners and sponsors to deliver results from the meeting is immense, and it's growing. We've had to get smarter about making sure that we know what our customers are trying to accomplish, because if we don't identify with it or understand it, then we can't really help them and be as supportive as we ought to be. We provide them data, but every customer has a unique way of doing this. Until there is a standardized way of establishing meeting ROI, I don't know that we can be anything more than a source for input -- what data do you need from us, how do we get it to you in a digestible format -- and then you can do with it what you will.

Strebel: Room blocks are going down in the citywide market because there is so much more alternative lodging available in the cities. So for a convention that maybe used 5,000 rooms on peak historically, now they might only need 4,500 because a lot of potential guests are doing Airbnbs and VRBOs [Vacation Rentals By Owner]. We're seeing some of the compression for those large conventions and events not be as strong as it was before.

Camacho-London: Hyatt has seen a big increase for weekend social groups -- the hobby and religious groups. Our select hotels, Hyatt Place and Hyatt House, have made a huge difference in capturing more of that business, which we weren't getting before. And those select hotels are popping up everywhere now. The most successful locations are near downtown areas, where they capture citywide overflow -- no doubt picking up attendees that might otherwise go to alternative lodging.

Hughes: We're also seeing more changes in terms of the group experience and preferences. Wellness and corporate responsibility are two huge trends, and this is definitely generational. It's not just about having great facilities; the younger generation wants to do business with companies that share their values. We're seeing more groups looking for the opportunity to make a positive impact on the world, and we're responding to that with a variety of programs. And we're seeing recognition from meeting planners that if you give your attendees the opportunity to thrive in mind, body and spirit, it will increase their loyalty, productivity and camaraderie.

Inbound visitation to the U.S. continues to decline. Are you seeing the effects at your hotels?

Chris Cahill: The decline is relatively modest despite some of the fears last year. On the meetings side, I can't give you even anecdotal information about stuff we've lost. I think a lot of the effect is probably on the leisure side -- and sometimes it's just a matter of people just deciding that they won't put the U.S. under consideration. How do you measure that?

Massari: We don't notice it as much on the meetings side; it's more of a leisure-side problem. But we definitely notice as a destination, as a series of properties, that there is less inbound international travel. As a country, we've got to be welcoming, we've got to have a sales effort. Anybody who thinks, "We're the United States, people are just going to flock here," has lost their mind.

Strebel: We have some hotels in gateway cities like New York, San Francisco and Los Angeles that rely heavily on international business, but most of our group business is domestic, and the drops are not dramatic to the point of 9/11, for instance. The numbers are down, but not to where it's becoming a major issue.

Hughes: We haven't noticed any drop in international group visitation, but even if it is happening in some way, it's been more than made up for by domestic groups choosing to stay in the U.S.


What's your biggest concern for the future?
Camacho-London:
 Just staying on top of security needs and providing our customers with the information they need to book our hotels is a great concern. More than anything else, our logistical planning with customers has become all about security. Half the time we're not even talking about ballroom size or how many guest rooms there are. It is, "What's the security plan at your hotel?" We've done more security plans at the request of our customers than ever before. We do webinars about what our policy and procedures are. There was a time when I wouldn't have thought to include my vice president of security in those conversations; now, we're always working closely with our security team.

Dominguez: Advanced security is something our industry needs to talk about even more. We need to teach the meeting planning community that the moment anything happens -- a health scare, a terrorism attack -- you're no longer in charge. The only thing you're responsible for is communication to your company, to your attendees. We're going to figure out what we can do to protect the buildings as best we can. But the next time something happens -- and I think all of us know that  something will happen -- planner responsibility is on the communications side. If you haven't thought 13 to 15 rungs down in a communications hierarchy, you're missing it.

Massari: I think it's a lack of general understanding about, as well as an inability to articulate, the value of a face-to-face gathering vs. some other form of gathering. Our industry has to continue to get better at that, because we will face more threats around that topic. Facility operators, intermediaries, meeting planners, meeting executives -- we all need to be better at this. We have come so far over the past several years, but just because you've climbed high on the mountain, it doesn't mean you're at the top.

Cahill: I'm concerned about GDPR [the EU's General Data Protection Regulation], because it flies in the face of the other broad trend in hospitality, which is the whole issue of trying to be better at personalization and the guest experience. There will be a lot more involved in making customers comfortable with granting permission to use that data.

To some extent, if you have a good relationship with the customer, they're not going to have a problem providing you with what you want; and if you don't have that relationship, you probably shouldn't be asking in the first place. But my concern is that we'll have to be much more aggressive about communicating the value-add of us knowing more about you in order to provide a better experience. That won't always be apparent to the customer.

Strebel: For us, it's really competition -- there are a lot of new hotels under construction. We're one of the companies building them, but if you go into certain markets like Nashville, for instance, there is a plethora of new hotels. Look at a city like Austin, where the last couple of years has brought a major increase in hotel supply.

Industry consolidation is another concern, but I see that as both a positive and a negative. We're a nice size, where we can still be unique, special, appeal to a niche market and stand out. On the negative side, I'm a little fearful about how consolidation will affect choice. Will it be easier now for some companies to consolidate their business with only one brand?


What excites you the most about the future hotel experience? What should we expect?
Strebel:
 We'll see our properties become more entertainment spaces. In the past, a hotel would open up across from a convention center and have one restaurant. Now we have a restaurant, an active lobby bar, a steak house, a food hall with six different F&B outlets, a pool and restaurant on the roof, and a speakeasy with a bowling alley. That's going to continue to be important. And I think technology will continue to be important, but not as much as the desire to be personally connected through the socialization of our spaces. Omni is never going to be at the forefront of technology -- we will be on the forefront of experience and interactivity.

Massari: Technology changes everything so quickly. You think about things like check-in, car retrieval, wake-up calls, food-and-beverage experiences, delivery of food to rooms, and you wonder where personal interactions begin and end. At our properties in Las Vegas, we've now installed kiosks in most of them so that people can bypass the front desk to check in. Now, I love one-on-one interactions, but I want them where they're valuable. The things that are transaction-based, I prefer them to be just that. And you'll see most of that transactional stuff like check-in become remote, where you can do it from your device.

I'd like to see the group-booking process completely automated for a certain size and below. It exists really well on the rooms side; it exists not so well on the meetings side, and not at all in the way I'd like to see it as a combination of the two. But we've challenged our tech partners to help us get to where, for a certain size meeting, you could block your own meeting space, book your own hotel rooms, generate a contract and sign it, with real-time availability. I think we're two years away from having that.

Hughes: We want to be able to use technology to help liberate people. It's going to be expected by planners in the future that with the proper device in their hands, they can control the lighting, air conditioning, whatever they need more of. It will allow them to react to changes as they are happening and focus entirely on the experience of their attendees. In terms of automating meeting-space booking and real-time availability, we're in the test phase now with certain properties, and our intention is within the next 18 to 24 months to have that systemwide.

Dominguez: We love to experiment with technology that we believe can enhance the meetings experience. For instance, we're experimenting with a product called Cisco Spark, which we want to launch for executive meetings. Cisco has what they call the Spark Board -- it looks like a TV, but you can write and color on it, and take notes. With one touch, I can email all meeting participants any notes that were taken. We're going to launch something based on that, called Spark Rooms.

When you attend a meeting in a Spark Room, you'll have access to any materials you see on the Spark Board, and they will run on any device you're using. After the meeting, you can reference anything that was put up on-screen. It also ties the Spark Board into a live virtual community -- the dialogue never goes away, and we can talk before and long after the meeting. You can even start a WebEx during the meeting by pushing one button for a live videoconference. We think there's tremendous opportunity for this. If it works in the executive lounge, where we're testing it, we could put it in the meeting space in all our hotels.