Top hotel management companies balance profitability with agile management
by Megan Mazzocco
According to the March edition of CBRE’s Hotel Horizons forecast, the average occupancy level for U.S. hotels this year is projected to be 66.2 percent, significantly higher than the pre-2014 historical high of 64.8 percent. “Despite such healthy market conditions, not all hotels are enjoying lofty levels of performance,” Robert Mandelbaum, director of research information services for CBRE Hotels’ Americas Research, wrote in his report.
Hotel management companies are fine-tuning operations in areas where incremental improvements can impact growth and profitability. Today’s Hotelier explores how several top hotel management companies examine operations and implement sometimes-unconventional strategies to help drive sustained success and profitability in the face of forecasted headwinds.
Andrea Foster, senior vice president of Development at Marcus Hotels, observes occupancy rates increasing year over year, but pricing is remaining flat due to the increased sharing-economy inventory.
“Success at this stage is having an operator who’s experienced and successful and can source and retain talent as well as maintain a committed focus on ways to move the needle on profitability,” Foster said. “This can’t be achieved with broad strokes.”
CHOOSING THE RIGHT TEAM
“The next few years are going to be tough, whether we face a downturn or not,” said Sheenal Patel, chief executive of Arbor Lodging Management. Patel, who doesn’t consider himself your conventional hotelier, keeps a finger on the pulse of all sources of information that might bolster business. “We’re open-minded to thinking and opinions,” he said. “I think that everyone has something to add.”
This philosophy contributes to Arbor Lodging’s success in recruiting and retaining employees – the toughest aspect of hotel and hospitality operations in a tight job market. “I create an environment [where]they want to stay because they feel like they’re driving,” Patel said.
Arbor also makes sure it is providing the type of health coverage and benefits its employees want. “It’s easy for us to just say our employees want to go to the gym and drink green juice,” he said. But in speaking with its employees, the company has found that what its workers actually desire is access to select providers and adequate prescription-drug plans.
Retaining associates is imperative, Foster agreed. “The continuity within an asset is a key to its sustainable success,” she said. It starts with hiring capable associates and training them to deliver the best results most expediently. “We don’t outrun our talent,” Foster added. “We find the best and retain the best. And training time is laser focused to deliver exceptional-quality service that drives top-line and bottom-line results.”
David Roedel, business development officer of Roedel Cos., believes in creating a warm environment where character is recognized and performance is rewarded. He serves on the awards jury for the company’s annual Values in Action Award.
“Some of the stories are so endearing, it’s difficult sometimes to choose one associate to celebrate,” Roedel said. The company holds quarterly celebrations and an annual awards ceremony. In addition, all employees receive signing bonuses and are encouraged to recruit friends. “People enjoy going to work where their best friend is also their teammate,” he said.
Beyond the employee family, Roedel keeps a family-owned-business feel within the communities the company operates in, ensuring it makes a difference in civic life by embracing responsible development, supporting local charities, and fostering land stewardship.
“Roedel breaks through the [franchise]brand to connect with the community as a supporter and as leaders in the communities we serve,” Roedel said.
These softer skills may not always be a bottom-line item, but when the focus shifts to revenue, Foster suggested driving revenue through fine-tuning instead of cost cutting. The ability to create optimal performance at every property is important for holding onto an investment, as well as to create a legacy with a strong exit strategy, Foster said.
Marcus’s marketing, sales, and revenue leaders meet regularly to share citywide data, group space and RevPAR numbers, and to discuss dynamics in competing convention markets. “These are critical areas – a trinity, so to speak,” Foster said.
The group uses analytics, demographics, page traffic, and conversion data to uncover areas where it needs to be responsive to fluctuating demands, such as the need for larger meeting spaces.
Arbor also relies on a proprietary data and analytics software platform that brings in all data, from GFF to revenue to RPNLs and relevant HR data, “so we can assess our properties in a snapshot: what they’re doing, and what can we do to find issues and correctly identify where we need to focus help and attention,” Patel said.
The software predicts and models demand over the next 30, 60, and 90 days, which helps to reveal where the hotel can optimize efficiencies and ensures the right revenue mix. “It has become very tech focused and data-analytics driven,” Patel said.
To rev up its RevPAR a notch, Arbor encourages repeat guests to book through the franchise’s dotcom, thereby reducing royalties paid to online travel agencies. “Our job is to communicate those [loyalty]benefits to our guests, and that it won’t cost any more than the standard room rate,” Patel said.
IMPLEMENTING NEW TECHNOLOGY
Marcus’s entrepreneurial attitude, tempered with professional discipline, is innovating to face rising costs of goods and services and disruptors in the sharing economy that flatten RevPAR. The company uses out-of-the-box thinking with discipline when it implements new ideas and technologies, Foster said.
Before implementing new technology, Foster suggested hotel operators make sure it will do what it is intended to do to improve the experience for both guests and employees. “It should always be seamless and effective, grant access, and provide convenience and choices,” Foster said. “We refer to it as reload, not rebuild.”
Whatever technology Arbor brings to the guest experience, Patel stresses that it has to be familiar. All amenities across the brand should be consistent, from the television remote control to the entertainment platform; this also includes high-tech fitness, Patel said. “We have Pelotons [a cycling experience]at some of our hotels, and that’s been really successful,” he said.
In terms of operations, Arbor is experimenting with smart-building initiatives around energy and has seen the impact of LED retrofits incentivized by local utilities, Patel said.
Finally, Foster emphasizes leveraging scale and purchasing power when working as a larger hotel management company. “We’re larger than we may seem,” she said. “When it comes to procurement of goods and services for operations through vendor relationships, or procurement of insurance and health benefits for employees, we’re able to offer them to our owners and our partners economically.”
The ability to succeed despite the shifting hotel headwinds depends on the ability to adapt to the rapid pace of change. “Right now, success hinges on the ability to be innovative and change quickly to adapt to the times,” Patel said.
With unemployment at a record low and technology accelerating quickly, hoteliers face a tall order, but Foster suggests an entrepreneurial attitude that yields to discipline as a critical factor in implementing successful top-line and bottom-line initiatives.
“Captivating today’s customers and guests requires out-of-the-box thinking and a unique experience,” Foster said, adding that it has to be delivered with profitability and finesse in mind. “It’s a creative discipline. Don’t sacrifice quality in creating something with a cool factor; it’s a balance of efficacy and profitability.”