After a record-breaking period of growth, one word seems to sum up the outlook for the hotel industry in 2020: “Uncertain.” According to Jonathan Hamblett, senior vice president of HRS, the hotel solutions provider, “Uncertain is the word that seems to crop up the most when we consider 2020 projections at this juncture.” The cloudy outlook holds true both domestically and globally, he maintains.
In the US, domestic business travel is steady, but confidence in the year ahead is tenuous, says Hamblett. The US Travel Association, he noted, recently reported that inbound international travel has decreased for the fifth straight month; US-based hotels, which historically gain from higher rates paid by international business travelers, can’t count on domestic volume to pick up that slack.
In fact, when it comes to rates all the major hotel brands are already reporting softness and are projecting a less robust 2020. Operators and distributors of hotels are on the same page. Mary Beth Cutshall, executive vice president for HVMG, a hospitality investment and management company, predicts a gradual slowdown over the next two years. “I don’t think it will be dramatic,” she says, “but I do expect flat occupancy and rate growth will be nominal, as will RevPAR.”
Steve Reynolds, CEO of TripBam, the hotel reshopping solution, says the company is forecasting a “mixed market” with occupancy somewhat flat and rates trending down. In general, he says, clients are seeing a favorable negotiating market and are obtaining better discounts in their top tier cities.
Banyan Investment Group, an owner-operator of select service hotels, sees a slowdown happening, says Andy Amit Chopra, principal and chief investment officer. His company anticipates continued deceleration in revenue per available room (RevPAR, the industry’s standard of performance), driven primarily by occupancy. Depending on the specific submarket, he says, “we anticipate 0 to minus 1.5 percent RevPAR growth.”
Accelerating the trend, incoming room supply is significant. According to Lodging Econometrics, which measures development, pipeline totals are just 179 projects shy of the all-time high of 5,883 projects/785,547 rooms reached in the second quarter of 2008.
Boom=Innovation It’s not surprising that a slowdown is looming after a record-long boom. Profits from those heady years of growth have enabled the industry to innovate in many directions, with some changes close to revolutionary – like shared rooms, communal spaces and the explosion of short-term rentals.
The amount of capital expenditures for the US lodging industry set a record in 2019, notes Bjorn Hanson, a veteran industry consultant and researcher. Priorities for that spending include “panic buttons” for selected staff positions to alert management of a risk or incident, software and technology upgrades to protect guest and employee information, enhanced breakfast offerings, in-room technology including connectivity between personal devices and in-room entertainment systems, enhanced and sometimes larger fitness centers and increased high speed Internet capacity
Jason Fudin, CEO of WhyHotel, which operates residential style lodging, sees co-mingled and flexible space utilization as continuing to be major drivers of innovation. He points to increasing traveler demand for a variety of products pushing offerings on Airbnb, the OTAs and major hotel flags to become more and more alike.
It’s not always a good idea, caution some, to seize on the shiny new thing. Booking any new type of lodging, says Hamblett, depends on the company and the makeup of its traveling workforce. Shared living and design-led hostel products like The Collective in London (which offers co-living spaces), he says, are “fantastic options” for corporations with robust internship programs. While caution is still called for, he says, the advances alternative accommodations have made in terms of comfort, service and safety, he says, “have helped get them into the managed travel conversation.”
Reynolds agrees that choices depend on a company’s culture and its travelers. He says TripBam has had extensive discussions internally and with clients around including only hotels in a travel program that have, for instance, workout facilities, or an enhanced focus on sustainability, or other attributes that are important to the individual client.
Sustainability & Wellness In many cases, one of those attributes is sustainability, which has become so central to hospitality that entire brands are being created around it. For instance, Accor launched the Greet brand which will feature secondhand furniture, recycled décor and a general rejection of consumerism. Earlier this year, IHG became the first hotel company to announce the switch to bulk-size bathroom amenities, as its competitors also declared war on single use plastics. And on a booking platform called Kind Traveler, every booking provides a donation to a local nonprofit.
Wellness, too, is taking center stage. The real opportunity when it comes to wellness is in the corporate space, says Jack Ezon, managing partner of Embark, a high-end travel consultancy. Road warriors, he points out, are most deprived of balance and staying healthy on the road. They are looking for programs that deal with fitness, better sleep, healthy eating and “the ability to achieve mindfulness when jumping between airports and time zones.”
And brands are being built around staying healthy on the road – like IHG’s EVEN Hotels, created with wellness-focused business travelers in mind, to empower guests to maintain their routines while on the road. And Hyatt Hotels has invested heavily in wellness, acquiring the Miraval resort brand and Exhale, a spa and fitness company.
Building on the wellness phenomenon, a company called Priority Bicycles works with 300 hotels globally – a number that is growing fast, especially around extended stay hotels. Guests can use the bikes to commute to meetings and presentations, explains Wyatt Bostic, general manager of the Element by Westin/Superior/Boulder. Having a Gates Carbon Drive belt (providing a rust- and grease-free ride), he says, “means they can ride without worry of their clothes being dirty or stained – important for a business traveler.”
Airbnb Posts a Milestone Perhaps the most dramatic shift in lodging is toward short-term rentals as popularized by Airbnb. Skift Research estimates that Airbnb’s total revenue overtook that of Hilton in 2018, and will overtake Marriott in 2019.
This means the short-term rental sector is increasingly converging with other travel accommodation sectors. At an estimated $600 billion in gross bookings, the hotel sector is still considerably larger, but platforms like Airbnb and Booking.com are blurring the lines between different accommodation types.
“There have always been alternative accommodation options,” says Jonathan Kaplan, vice president of global sales strategy for IHG. The issue for travel managers, he says, is one of duty of care. “Hotels provide service, safety and security that’s essential for business travelers,” he explains.
However, the continued convergence of traditional and alternative accommodations may ease concerns. Ezon says hotel companies hope to add the edge of branding, hospitality, predictability and service to homes and apartments, setting them apart from Airbnb and VRBO. Many will fold in concierge services from local hotels while adding in loyalty points for booking home-share products within the group’s family of brands.
Micro rooms and traditional guest rooms centered around smaller, shared living space are “very compelling,” notes Cutshall. It will be interesting, she says, “to watch how guests respond to the new inventory options.”
Even a venerable economy brand like Super 8 is pushing the envelope. It held a contest for a new room design won by an undergraduate design student at Utah State University. Piloting at select locations next year, rooms will feature vintage arcade games, streaming-ready 65-inch wall-mounted TVs, cornhole boards, foosball tables and individual sleeping spaces for up to four guests in the same room. There will also be abundant seating, an open dining layout and a full-sized refrigerator and microwave.
The transformation of hotels is reflected in food and beverage as well as retail, says Robert Mandelbum, director of research information services for CBRE Hotels Research. Declines in revenue from minibars and restaurants, he maintains, are consistent with the desire of guests to enjoy a more communal, less formal, and quicker dining experience than has historically been offered at hotels.
While retail revenues in general remain below previous peak levels, says Mandelbaum, recent trends indicate a reversal in guest preferences. The traditional hotel “newsstand,” for instance, has been replaced with smaller kiosk operations frequently located near the front desk and staffed by reception personnel. These kiosks have proven to be popular with guests, and have created a rising source of revenue at limited-service and extended-stay hotels.
IHG’s Crowne Plaza brand has developed Plaza Workspace. Seamlessly integrated in the hotel’s lobby, Plaza Workspace is a flexible meeting and work solution with diverse areas that allow solo or collaborative work. Meeting spaces are available to guests and locals alike, and the private Studio space is bookable by the hour. Plaza Workspace also offers on-demand features like ample charging options, fast, free WiFi connectivity and electronic ordering.
The Future is Now According to a report from JLL, a hospitality investment and consultancy firm, hotels have been racing towards clever devices, robots and voice assistants. For example, the 290-room FlyZoo Hotel in Hangzhou, China, this year launched facial recognition entry to elevators and rooms.
At venues across Las Vegas, including the Vdara Hotel & Spa, according to JLL, robots are serving welcome nibbles and delivering snacks to guest rooms. Robots are also saving staff the grunt work of fetching luggage. For example, both Henn-na Hotel in Tokyo and Yotel in New York City boast a large mechanical arm that retrieves luggage from storage compartments.
“Hotels are now thinking about technology that can provide connectivity and convenience for their guests as much as they are design and interior styling,” says Huw Montgomery, project manager in hospitality at JLL. “The ability for a guest to set the temperature of their room before they’ve entered, or open their door without dropping their luggage, are quickly becoming the mark of a thoughtful establishment.”
IHG is currently piloting a digital guest entertainment solution, IHG Studio, which allows guests to connect and stream content securely from their personal devices to their guestroom TV. In addition, Kaplan says, guests can make service requests such as ordering extra pillows, arranging for a late checkout, reviewing room charges and accessing the TV remote from the mobile app. The solution also allows guests to “Pay with Points,” purchasing on-property products and experiences with their IHG Rewards Club points through the TV interface or mobile device.
Chopra says his company is making capital investments in technology across the portfolio, particularly as it relates to streaming content from personal devices to the flat panel TV in the guest room. The goal, he says, is to make the technology and connectivity “as seamless for the guest as they may experience in their own home.”
Will It Drive Satisfaction? Of course, with all those innovations, it’s important to know if the traveler is satisfied with whatever the product is – a core focus for travel managers. As the workforce continues to diversify, there is no one-size-fits all when it comes to business travel, according to Peggy Studer, vice president-marketing at RoomIt by CWT. She says one tactic RoomIt is using gives travelers the opportunity to provide feedback on their lodging experiences in less than a handful of clicks, visible to their peers and to their travel managers who can monitor this feedback and adapt their hotel programs.
A hint of what the future will bring came at the annual HX: Hotel Experience trade show in New York in November. The five finalists in TECHpitch were: a wireless device charger; an automated sports equipment dispenser; a futuristic “walkie-talkie” for staff; a noise-canceling box; and a high-tech in-room wine- by-the-glass dispenser called Plum. The winner: Plum.
What did they all have in common? Driving guest satisfaction. And while all this may seem pie in the sky to travel managers who remain focused on price and location, the fact is, travelers are accepting rapid change everywhere in their daily lives. And as work and home continue to merge as a result of technology and social forces, demand will grow to extend all those changes to the workplace – and the road.