August 19th, 2011 by TRT Blog
Welcome to the second installment of our chat with Glenn Haussman of Hotel Interactive. If you missed the first part, click here to check it out.
TRT: If a hotel has gone through a complete renovation, say they’ve reopened after doing a 70 million dollar renovation, they advertise and promote it heavily do you think that does have an impact on the occupancy rate or the interest of travelers to book that particular hotel?
GH: Absolutely. I think that at the beginning of the Great Recession that we had (I hate using that term) it was really all about figuring out ways to take costs out of your hotel business. Now that we’ve done such a great job as an industry at paring down those costs, we need to try and maintain that cost structure without letting price creep back in, or raise rates. Renovation is a really smart, great way to freshen your property and be able to push those rates. You can then say, sure the guy down the road is charging a little less, but look at our great new product. And people want that new product. They want something new, they want something different, and they want something that feels refreshed. This is especially true if you’re doing it sustainably. If you’re able to figure out ways to be more sustainable while also lowering your ongoing costs while being more appealing to the consumer, I think that’s where you’re going to see a win-win.
TRT: With those renovations, do you have a sense of whether they are replacing old furniture with new. Do you have an idea of what that ratio might be?
GH: I think it really depends on each individual property. But what I can tell you is between 1995 and 2000 so many hotels opened up in this country and a lot of those hotels have not gone through a major refurbishment. They were thinking of doing it, but then the economy ducked down, so what we’re seeing now is a lot of pent up demand for renovations. And a good chunk of those properties are going to need to go through full renovations, which include having to replace some of those hardgoods. Now if they have an opportunity to not spend that kind of money and refresh their product, I think that’s going to be better. And here’s an interesting statistic about renovations: According to Lodging Econometrics, right now we’re seeing 10 times more rooms being renovated than are being built this year. And the same holds true for 2012.
TRT: With green initiatives but also cost savings, obviously refinishing is a combination of the best of both worlds, when you speak with others about these issues, what kind of responses are you getting?
GH: I think the audiences are very encouraged by the amount of renovations that are going to take place. And when it comes to the suppliers they’re downright ecstatic. Even though new construction has dried up for the time being, there are plenty of opportunities for them out there. And buyers, the ones who are refinishing these rooms are really starting to see projects pop. For a while now, the brands have kind of laid off the need for hoteliers to keep up with brand standards, and now they’re putting their foot down which is forcing owners to have to do renovations. The economy was so bad the brands were like “OK, OK, you don’t have to worry about the PIPs (Property Improvement Plans), we understand.” But you can only go so long by doing that without destroying the fundamental quality of each of those brands. And they have no choice now but to tighten the reins on people and say you have to put money into the property. I know a lot of people anecdotally who were saying “My business sucks” and in the last six months they’re like “Wow I can’t believe this happened. We’re getting call after call, we’re hiring people, and the jobs we’re getting are great, it’s fabulous.”
TRT: You mentioned increased occupancy. What do you ascribe this to? The economy is still struggling, why are you seeing increasing occupancy rate?
GH: Well number one is people feel they have the right to travel, or they need to travel. Businesses sat on the side so much [without traveling] they can no longer afford to do that. They have to get out there and pound the pavement and meet clients. They have no choice. Further, the whole idea of businesses not having big group meetings has abated and meetings and incentive travel is resurging now. After the Obama administration pilloried it, everyone was kind of scared for a while, but that’s over and meetings are coming back in force. Everyone I’ve talked to at the big convention hotels have said, “I’ve gotten nice business this year” and things have really solidified in their calendars for 2012 and ‘13.
TRT: In looking at the whole hospitality industry do you believe they have a strong focus on the green initiative or sustainability and how it can help their industry?
GH: I believe they have gone through a strong educational process the last few years, and green no longer the big buzz word that’s out there, and that’s good. Now that everyone has stopped talking about it as a concept, they’re now enacting it in their businesses. It’s no longer the hot new thing because everyone is doing it. Now everyone is digging down deep to figure out how they can incorporate sustainable elements into their properties and future projects. Again it’s being motivated by cost savings and not out of altruism, but I think the end result is really the same which is lower expenses and less impact on our environment.
TRT: Going back to value, when you go and book a stay at a property, you expect a good room that is well furnished and well serviced. What other types of value benefits do you think customers are looking for when choosing a hotel?
GH: They don’t want to feel like they’re being nickel and dimed. One of the things that they want is true high speed internet access without paying an extra fee. I think people love a breakfast that’s included. People just want to know what the overall cost of their trip is going to be and not have to keep pulling money out of their pocket. And that’s why there’s been a great surge in all-inclusive types of properties.
TRT: Do you have a sense of whether the same issues are affecting properties overseas as well as the US? The same issues regarding value and keeping sustainability and costs low?
GH: While I can’t speak too much on this issue, I can say I do feel that Europe and Asia have done a much stronger job at following sustainability trends and really getting in there no matter what the cost. I think the culture of Europe in particular is demanding it more. And in Asia, there are so many hotels that are so new they incorporated a sustainable mindset into the development process.
TRT: What can hospitality learn from or even teach some of the other industries some of these best practices in terms of reuse, sustainability, renovations. Are there lessons that can be shared?
GH: Yes. I think the biggest lesson of all is that you can’t do the sustainability effort from the top down. I think you need to give the people in your organization the power over the program so that they feel emotionally engaged in the process. And by them taking it over, they’re going to come up with great ideas. They’re really going to spearhead those programs and make those businesses successful in the long run.
TRT: Glenn I appreciate your time and thank you for participating and giving us your ideas on sustainability and green initiatives.
GH: My pleasure, thanks so much for allowing me to share my thoughts.