Strong Hospitality Marketplace Prompts Its Own Set of Challenges for Operators

By Richard Takach, Jr. President & CEO, Vesta Hospitality | January 11, 2015

A continued positive economy, with the 2008-2009 recession firmly in the rear view mirror; excellent levels of business travel; and consumer confidence have all contributed to a sustained strong hospitality marketplace. At the same time, a number of factors, including the ability to acquire existing hotels for below replacement cost, the preference of private and public entities to purchase existing properties with in-place cash flow and the difficulty to finance new hotel construction have, so far, constrained overall growth in supply. With that said, it is important to note that strong recent sales prices have helped encourage some additional supply, especially in strong markets. This is a trend that bears watching.

As a result of the improving economy and still relatively constrained supply, we are experiencing consecutive period increases in RevPAR. Occupancies are strong and, increasingly, rates are also being driven higher.

A November 2014 "Hospitality Directions US: Our Updated Lodging Outlook " paper by PricewaterhouseCoopers (PwC) reported RevPAR growth of 8.2 percent for 2014, with accelerating group demand contributing to stronger occupancy gains. This RevPAR gain was strong across all property categories. Also, PwC projects that in 2015 hotels will reach their highest occupancy levels since 1984, with RevPAR increasing 7.4 percent, more than 80 percent of which will be derived from increases in room rates.

However, as Bill Marriott, Sr. liked to note, "success is never final." Sustaining and improving upon success has its own set of challenges. In particular, it is only natural that when guests pay premium rates for a room, their expectations soar correspondingly. This is especially so for leisure travelers, whose accommodations aren't being funded by a company or, otherwise, accounted for as a business expense. Being busy and meeting the needs and expectations of demanding consumers also impacts our executive teams and staffing at properties; perhaps, raising their own expectations for compensation and organizational support.

Surely however, it's a "problem" we like to have.

In this article, we will consider some of the issues our hospitality industry faces, even as we are doing so well. Subsequently, we will review some key areas or topics that impact our efforts to extend these good times.

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Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.