Should We be Concerned About ADR?

Of Canaries and Coal Mines

By Trevor Stuart-Hill President & Founder, Revenue Matters | December 18, 2016

Projections for 2017 and beyond by STR, CBRE and PKF all call for anemic occupancy growth at best, notwithstanding record occupancy levels for the U.S. hospitality industry. With Revenue Per Available Room (RevPAR) growth projections at inflationary levels (2.5 – 3.5 percent, or so), it is clear that expectations call for Average Daily Rate (ADR) growth to continue, but will it?

Coal miners used canaries to warn them of lethal gasses they couldn’t smell, see or taste. And, while we can’t rely on canaries to help us stay out of trouble as hospitality operators, we may be able to rely on history. It is oft-quoted tenet that history is the best teacher and, if that is true, then we’d be well served to reflect on what we can learn from our past.

The Good

  • Sector Resilience - The hospitality sector as a whole is resilient. It employs lots of smart, dedicated and hard-working individuals. However, it is not immune to external shocks—and recovery can take considerable time. Renata Kosova and Cathy Enz published an excellent article (Cornell Hospitality Quarterly – September 2012 ) that examined the impact and industry response to two major external shocks from the previous decade (the terrorist attacks of September 11, 2001 and the financial crisis of September 2008). Their study concluded that hotel management didn’t fall into disarray, but successfully addressed the effects of these events as evidenced by hotels’ eventual recovery.

  • Cyclical Demand - If the past several decades are any indication, it is clear that demand in the hospitality industry is cyclical. As such, it has required hospitality executives to adapt to ever-changing conditions.

Coming up in March 2018...

Human Resources: Value Creation

Businesses must evolve to stay competitive and this is also true of employment positions within those organizations. In the hotel industry, for example, the role that HR professionals perform continues to broaden and expand. Today, they are generally responsible for five key areas - government compliance; payroll and benefits; employee acquisition and retention; training and development; and organizational structure and culture. In this enlarged capacity, HR professionals are no longer seen as part of an administrative cost center, but rather as a member of the leadership team that creates strategic value within their organization. HR professionals help to define company policies and plans; enact and enforce systems of accountability; and utilize definable metrics to measure and justify outcomes. Of course, there are always new issues for HR professionals to address. Though seemingly safe for the moment, will the Affordable Care Act ultimately be repealed and replaced and, if so, what will the ramifications be? There are issues pertaining to Millennials in the workforce and women in leadership roles, as well as determining the appropriate use of social media within the organization. There are new onboarding processes and e-learning training platforms to evaluate, in addition to keeping abreast of political issues like the minimum wage hike movement, or the re-evaluation of overtime rules. Finally, there are genuine immigration and deportation issues that affect HR professionals, especially if they are located in Dreamer Cities, or employ a workforce that could be adversely impacted by federal government policies. The March Hotel Business Review will take a look at some of the issues, strategies and techniques that HR professionals are employing to create and sustain value in their organization.