While looking over their shoulders wondering how slowing RevPAR growth will impact their bottom lines, how continual disruption from a dizzying number of new competitors will make it harder to market and further generate loyalty, how the new Marriott will reshape the brand landscape, and despite China’s big appetite for global assets, if the bid-ask spread will continue to slow M&A activity, the 1,800 attendees at this week’s Lodging Conference outwardly acted resolute and cautiously optimistic about their near-term prospects.
While STR reported that 2016 will be the U.S. hotel industry’s most profitable year ever, 2017 RevPAR growth will likely stand around 2% to 3% with expenses creeping higher and group demand potentially slowing. At the same time, new development appears to be slowing, with the exception of the upscale select-service sector. The good news is that financing appears to be getting more challenging without perfectly executed sponsorship.
Throughout the event, held at The Arizona Biltmore, HOTELS conducted interviews with newsmakers. Here are some of the highlights:
Best Western Hotels & Resorts CEO David Kong introduced SureStay, the first “white label” franchise concept for the traditional membership organization. “In North America, there are currently 17,000 branded hotels, and another 12,000 unbranded, in the economy and midscale segments,” Kong said. “The white label approach allows Best Western to tap into this tremendous potential without compromising its brand image. Currently, many of these hotels have little to no consumer relevance. Their brands have very little potential to drive superior revenue, and the owners are incurring high franchise fees from brands that don’t provide the necessary support, service or value.”
Kong added that properties exiting the Best Western system will be initial targets for SureStay’s three-tiered offering – SureStay Hotel (premium economy), SureStay Plus Hotel (lower midscale) and SureStay Signature Collection (midscale soft brand). “There is a big advantage to the white label approach as it does not compromise the integrity of the Best Western name,” Kong said.
The offer for potential SureStay franchisees is Best Western’s ability to leverage more favorable terms with OTAs, leveraging Best Western’s branding experience, including the ability to cross sell via its global sales team.
Just as presidential candidate Donald Trump was taking the stage to debate Hilary Clinton on Monday night, his hotel company CEO Eric Danziger was introducing Scion Hotels & Resorts to the media at the conference. He prefaced his comments by suggesting Trump Hotels has not lost 70% of its business this year and instead has for a large part had a record year performance-wise.
Scion is a new tier brand that Danziger called “uniquely us,” but not at all connected to the Trump brand name. It is not as luxurious as the Trump hotel experience, nor is it intended to be “Trump lite.” It is more of a 4-star-plus lifestyle “we” brand focused on connectivity and community created by Donald Trump’s children and Danziger, who are in charge of the hotel company.
While Danziger could not announce where the first Scion hotel will be located, he did say several deals will be announced within weeks, and the initial focus will be management contracts in North America. He said it could work in gateway or second cities like Dallas, San Jose or Nashville.
In a conversation with Choice Hotels International President and COO Pat Pacious, the focus remained on its emerging upscale brand, Cambria, which he says has witnessed plus-100% pipeline growth in 2016. “It’s a clean palette brand with a great distribution platform,” Pacious added. “With significant openings in the next 12 months, it really changes who we are.”
Pacious also boasted about the transformation of the company’s loyalty program with its instant reward focus. Choice signed up more guests to its program in the first half of this year versus all of last year.
When asked about initial results of its direct booking discount program, Pacious would say only that Choice is pleased with results and will launch a second phase next year.
He also mentioned that Choice had talked to Expedia about its “dimming” policy a few weeks ago, and low and behold, soon thereafter Expedia changed its policy.
Among the new brands launched during the Lodging Conference was Orlando, Florida-based Artistry Hotels. HOTELS met with Co-Managing Partner/CEO Chip Headley, who said his team is doing well raising capital through private placement investors. Initial announcements about the first two new luxury lifestyle projects that are community and art driven should come in October.
The company describes the brand as representing hospitality with the purpose of making a difference in the lives of its guests, employees and communities, with properties reflecting their locality through design and F&B. The company is working with design firm WATG’s Chicago-based Urban Architecture Studio practice.
Three additional deals are in the works, Headley said, and the target stands at about 15 hotels in urban core (with residential) and university settings. He said additional plans call for licensing and operating. “We want to be long-term operators and mid-term holders (about 7 to 10 years),” he said.
All but one of the initial projects are ground-up and the initial focus is the Southeastern United States. He expects costs around US$300,000/per key and plans to keep leverage low.
Elements include interactive, art-related programming, high-energy public spaces, as well as a very strong emphasis on F&B.
Prism Hotels & Resorts President and CEO Steve Van elaborated on his Dallas-based company’s new partnership with Louisville, Colorado-based Real Capital Solutions, which has committed a US$200 million fund to purchase hotels in U.S. oil and gas markets.
Van cited Houston, Oklahoma City and, surprisingly, Pittsburgh as initial targets and expect to buy several hotels before the end of the year and have three to five open by the end of Q1 2017. “There are not a lot of buyers to compete with in these markets,” he said.
More generally speaking, deals will focus on Texas’ Permian Basin and upscale, full-service assets.
Van said Real Capital Solutions’ Marcel Arsenault believes that the current state of the hotel industry and a recovery in oil prices to US$60-$65 a barrel in the next two years (crude oil is in the mid-$40s currently) makes the region very attractive. “We believe hotel fundamentals will improve when drilling recovers,” he said.
Brand leaders for several Hilton Worldwide products met with HOTELS to talk about news and developments.
To drive revenue, enhance loyalty and maximize profits, Homewood Suites by Hilton now has studio and one-bedroom options, a narrowed F&B menu and reduced loyalty fees, according to Hilton’s Adrian Kurre.
The emerging Tru brand has tweaked its prototype by toning down the color scheme in the lobby and creating a second room package, according to brand leader Alex Jaritz. To date, it has executed 120 deals for all location types and some are dual-branded with Home2 Suites.
Canopy has 26 approved applications and 33 in various stages of development, according to brand leader Gary Steffen. Several projects are under construction, including Dallas, Washington, D.C., Bethesda, Maryland and Portland, Oregon, among others.
As the Canopy concept evolves, Steffen said the F&B space design has been tweaked to enhance the visuals for the brand’s honest approach to food preparation.
Finally, Mark Nogal, managing the Curio collection brand for Hilton since launching in 2014, the brand now has 23 open hotels with 5,766 rooms in four countries with a surprising 15 new builds in the pipeline.