Navigating Together at HT-NEXT: Day 3

Real-Time CEO Perspectives Featuring Choice Hotels International, Best Western Hotels & Resorts, and Apple Hospitality, REIT

The final day of HT-NEXT kicked off with an amazing panel of hotel CEOs from Apple Hospitality, REIT, Best Western Hotels & Resorts and Choice Hotels International. The panel was moderated by Chip Rogers, CEO of AHLA. After an initial lighting round of questions to help the audience get to know the panelists better and realize that they’re “people just like us,” Rogers delved into some deeper industry topics beginning with each CEO’s industry outlook.

INDUSTRY OUTLOOK

Justin Knight, President & CEO, Apple Hospitality, REIT, kicked off the conversation by being open and honest with attendees.

“It’s difficult to predict what’s going to happen,” Knight said. “Based on what’s happening today, we expect to see strong leisure demand in 2022. Business transient is coming back, and we’re seeing better numbers than expected. As we think of the COVID-19 variants, we can tell that they’re having little effect on leisure and people are becoming accustomed to it and to the risk.”

Pat Pacious, CEO, Choice Hotels International, agreed noting that it saw high occupancy numbers throughout the pandemic due to its relationship with essential workers who couldn’t work from home and preferred to stay in an extended stay hotel format.

“They’re the person in the white van who stock shelves, open stores, and climb poles. They have worked throughout the pandemic and will continue to do so. So we are very confident in our ability to maintain our occupancy rates,” he noted.

Additionally, Pacious said he remained optimistic that President Biden’s infrastructure bill would further bolster the need for and employment of this call of business workers which would further benefit Choice Hotels in the long term.  

Larry Cuculic, President & CEO, Best Western Hotels & Resorts, added to the conversation by noting that Best Western is ending the year with a RevPAR index near $114 – making 2021 a record year for the company. Cuculic finds this very heartening and indicates that 2022 will likely be a good year for the brand as well.

“We’ve also been happy to see communications released by important global authorities, such as the SVP of International Travel at the World Health Organization, saying that the regulations that currently in place means we don’t have to go back to the ‘fear’ stage of COVID-19. Instead travel is acceptable and more consumers and organizations will begin to travel.”

WHERE ARE ALL THE WORKERS?

Rogers then turned the conversation to a topic that has been on hoteliers’ minds for months: the lack of labor. He asked each panelist what their thoughts were on the topic and what their companies are doing to deal with the lack of labor.

Pacious began the conversation with the question that is on everyone’s mind: “Where are the workers?” According to Pacious, some analysts are predicting that the labor force participation rate might return back to the 1970s as many individuals choose to take early retirement and more women stay at home permanently to take care of their family.

“If this comes to pass, the labor strain could be around for quite a while,” he noted. “So it comes down to automation. What can we automate to help out the staff we do have on property?”

Pacious gave the example of on-demand housekeeping. While the guest adoption rate is north of 80 percent, the company still needs to find a way to tie these on demand requests (or lack thereof) into software so that managers and owners can plan ahead for how many housekeepers will be need on any given day.  

Knight agreed noting that his company – and the hotel industry at large – is really competing with Amazon and other large retailers for workers. So Apple Hospitality is using online channels more often to find people either via social media or online recruiting.

“We’re also looking at automation as well,” Knight noted. “But we’ve always had a lean labor model, so it gets tricky trying to remove even more staff. However, we’ve found that the most effective technologies are technologies that our employees or guests are already familiar with and using regularly. When we build tech that’s new to employees and customers, it always falls flat. But when we incorporate technologies such as chat and text, adoption is high.”

For Cuculic, one of the hardest parts to hiring is overcoming the “bad reputation” the industry acquired during the pandemic.

“At its worst point, our industry lost three million jobs and we’re still down one-and-half million. What we’ve found is that when our current employees recruit friends and family members to work at our hotels, we have much higher retention rates. That means that we have to help our hoteliers learn how to be an employer of choice for which consumers want to work,” he added.

CHANGES IN LOYALTY

Rogers continued the conversation by asking his panelists how loyalty members have changed throughout the pandemic – noting that business travelers tend to be very loyal while leisure travelers not so much – and asking how that has affected their loyalty programs.

Thirty years ago, consumers chose where to stay based on location, price and brand – in that order, Pacious said. Then during the Great Recession it was price, location and brand. But it’s always based on those three attributes. Hoteliers have to be where the consumer wants to stay.

“A loyalty program is the most effective way for an owner to attract a customer from a price point perspective,” he added. “The cost of that reservation through a loyalty program is lower than if it were to come through an OTA or even if they were to just walk in through the door. But a loyalty program is also how guests can experience all of the higher tech options hoteliers offer: register quickly, go straight to the room, access a mobile key, chat with the front desk. Five years ago, we began to push the consumer to do direct bookings, and during the pandemic consumers didn’t go to OTAs the way they did during the Great Recession. This has been really important. Our owners recognized the power of the loyalty programs and that they continue to be important because the guest experience is happening on these proprietary platforms.”

Cuculic added to the conversation noting that hoteliers created real brand trust among consumers because of the safety protocols put in place as well as the communication and education with guests about those protocols – something the guests weren’t getting from OTAs.

“We wanted our guests to know we cared about them and their safety and we were doing our best to communicate that as effectively as possible,” he added. “We’ve also been very aggressive in trying to bring back our rewards members by extending elite statuses and other similar measures because this customer base is very valuable to us.”

THE ROLE OF TECHNOLOGY

At the end of the discussion, Rogers asked panelists for their thoughts on the role of technology and the guest experience.

Knight began the conversation by discussing the importance of the network and internet connectivity for its guests.

“The number one thing we think about and invest in when enabling the hotel for both business and leisure travelers is bandwidth,” he explained. “Of all the tech investments we can invest in, we know the one that is valued most by guests is their ability to connect to the internet in a seamless and secure way.”

On the other hand, when it comes to technology investments to improve business operations, Knight discussed how important data analytics and revenue management systems have been. A theme that was echoed by the other panelists.

“When I think about all the investments we’ve made, revenue management has given us the most bang for our buck,” he added. “Our movement out of this downturn has been so different in that rate has grown faster than occupancy. We attribute that to the continual tweaking of our RMS and adjustment of the algorithms to ensure we’re constantly optimized for the future.”

Cuculic agreed that the RMS has been integral to the brand and owner operators’ recovery.

“We saw the labor shortage as an opportunity to drive rate because we had rooms hoteliers could not turn quickly enough across the industry,” he explained. “So we’ve helped our hoteliers with revenue management and making sure that the rooms they have provided could get a maximum rate. This software program can ‘see into the future’ and see how much you can demand and can then push the rate. So we’re very focused on using technology to leverage our revenue stream as best as possible because rate drives that bottom line result.”

Pacious also said that the RMS was important to Choice Hotels, so much so that it created a brand new one which was rolled out during the summer of 2021. In 2020, the company made it a goal to beat its 2019 RevPAR in 2021 and it has been able to accomplish this because its new RMS can adjust its pricing multiple times a day. Plus, its RMS is now mobile and can provide alerts to staff or adjust prices automatically.

[Choice Hotels International won a 2021 Hotel Visionary Award the night before in the Enterprise Innovator category for its creation and rollout of ChoiceMAX – its new RMS.]