Friends - I’m more convinced than ever that hospitality is the best place to be right now, and wanted to share why.
This week I was in New York, where I not only got to tour a bunch of the city’s most exciting new hotels but spent a few days at the NYU Hospitality Investment Conference, listening to hotel owners, operators, brands, and bankers talk through the opportunities they see ahead.
In short, the future is bright for us.
Hospitality as the best place to work now
The labor market remains hot, but the hospitality industry is evolving to become a more attractive career option than ever before.
For those on property
98% of those in the hospitality industry work on property, and attention and resources are being directed towards improving the work experience there.
“We’ve been dipping into the relationship bucket for two years and now we’re focused on replenishing the relationships with our associates on property,” said Heather McCrory, CEO of Accor’s North and Central America group.
Accor CFO Jean-Jacques Morin talked about how their leaders have been reminded that the people they hire to take care of guests are as important as the walls of the hotel itself.
“My lens for thinking about anything is through the associate experience. Whatever I can do to enhance that, I’ll do.”
Andrew Jordan, CMO at Aimbridge Hospitality
The Boston Consulting Group previewed new research they did on the biggest reasons people haven’t wanted to work in hospitality in the past. Near the top of the list was scheduling flexibility, and hotel groups like Aimbridge are now offering solutions to address this – using their scale to offer flexible scheduling in places like Houston, where the company manages 65+ hotels.
Historically, hospitality been a way a way for anyone – regardless of experience – to build a high-impact career. Kevin Jacobs was the first in his family to attend college, and started his career as an hourly hotel employee. Now, he’s CFO of Hilton Hotels. “The opportunities are immense,” he said.
But it’s clear not all hospitality jobs lead to executive experience. You often need need finance and real estate development exposure, Maaloof pointed out. IHG and other companies are implementing more programs than ever to provide this to those who want it.
For those supporting those on property
The opportunity isn’t just for those working at hotels. For those working at hospitality brands or at companies providing services to hotels, boom times are ahead as well.
During the pandemic, not all industries were impacted the same, with entertainment, finance, and technology companies posting record growth. “Now, hospitality has tailwinds,” Maaloof said. “Even if we face a prolonged recession, I expect hospitality to do well.”
This is why hospitality isn’t just the best place to work, it’s a great place to put money to work.
Hospitality as the best place to invest now
Leaders across the hotel ecosystem made the case for investment.
Bullish in a bearish macro environment
“It’s a great time to be investing in the hospitality industry,” said HVS CEO Stephen Rushmore – a sentiment shared by many others.
Why? “The micro economy of hospitality is decoupled from the macro economy,” said Jay Shah, CEO Hersha Hospitality Trust.
Blackstone’s Head of Strategic Investments, Tyler Henritze, agreed: “The fundamentals around hospitality are incredibly strong. We are looking at how we can invest more in hospitality.”
Investors in office, retail, and other types of commercial real estate are having hard conversations now, but “the outlook is much clearer with hotels,” he said. “There are very powerful technological and demographic trends that show the short-term and long-term potential in hospitality.”
STR President Amanda Hite shared data pointing to continued growth in the years ahead. “We do not expect an upcoming recession to impact the hotel and travel industry the same way last recessions did.”
“There’s no better place to be in a recession than in hospitality,” said hotel financier Michael Lipson.
What’s different in hospitality
How do we know these leaders aren’t just sticking their head in the sand and ignoring the economic challenges unfolding now?
Lonny Henry, Global Chairman of Investment Banking at JP Morgan, said group segments, business travel, and international travel are just starting to come online. “Most travelers haven’t begun to travel again, there’s still a lot of untapped demand out there,” said Jeffrey Horwitz, Proskaur.
Michael Bluhm, Morgan Stanley’s Global Head of Gaming and Lodging Investment Banking, mentioned his clients are seeing 20% higher revenue this year so far, and expecting to see another 15% growth in 2023.
Revenue technology is helping hoteliers benefit from that demand. “We have tools today that we never had before,” said Noble Investment Group CEO Mit Shah. “We can push rates – and drive earnings.” Wyndham CEO Geoff Ballotti agreed, saying they are seeing higher profitability in their HotStats data than pre-pandemic.
Another benefit of dynamic pricing? It’s a great inflation hedge, Shah pointed out. “We change rates daily.”
“There’s a lot of capital looking for a home in hospitality”
Global investors have confidence in the US lodging market’s recovery specifically, with capital coming in from Europe and the Middle East.
“If you have conviction now you can act on it and benefit before anyone else,” said Bluhm. “There’s a lot of capital out there looking for a home.”
Access to investment is opening up
Finally, we are starting to see efforts towards diversifying the hotel investment ecosystem.
Marriott announced a $50 million hotel development program to help provide underrepresented groups with more access to investment opportunities that have unfortunately been limited historically.
Hospitality as the best place to innovate with experience design
The most fun hotels to stay at have always been the ones with great experience design. But the financial returns from these has been mixed for many – until recently.
Accor CEO Sébastien Bazin is now seeing his lifestyle hotels deliver 15% better RevPAR now. Virgin Hotels is seeing outperformance as well.
“The focus on well being is off the charts,” said Hyatt CEO Mark Hoplamazian.
Food & beverage as a priority
F&B provides more touch points to engage your guests and improve their experience than the check-in or elsewhere on property, said Margaritaville CEO John Cohlan. “It’s a point of high leverage.”
While you might expect that from Margaritaville’s leader, Hoplamazian is also seeing this opportunity across his brands at Hyatt. “It used to be that room service was the most assured loss-making service at a hotel, but that’s changed. We’re offering a lot more variety.”
Renovations are paying off
“When owners invest in renovating their properties they’re seeing a disproportionate return on that investment right now,” said Marriott’s CFO Lenny Oberg. Allen at Wyndham agreed: “Owners that are focused on the guest experience and are adding value are the ones who will come out of this winning.”
The opportunity ahead
The past two years have been brutal for the hospitality industry, but the outlook is bright for the years ahead.
Based on more than just wishful optimism, the opportunity is really about demographic trends that are much bigger than short-term demand cycles. In the words of Jacobs:
“We are setting ourselves up at Hilton to take advantage of the massive mega trend of the growing middle class. This has doubled over the past 20 years, and it will double again in the next 20. It’s why I’m long travel and don’t really care about what happens in this market cycle.”
Kevin Jacobs, CFO, Hilton Hotels
Taking advantage of the opportunity ahead is going to require smart operations and capital allocation, but those who do this will be in a strong position to significantly outperform not only others in the hospitality industry – but those in other industries as well.
Technology was a recurring theme for the reasons above. What has your experience been? Take our 4-minute survey now, and get benchmarking data and our upcoming special report on technology in hospitality.