Austin Hospitality Blog

Luxury hotels will become the fastest-growing business for Marriott International Inc., a U.S. company that has its roots in budget lodging, President Arne Sorenson said.

“This segment will grow faster than the rest of our business,” Sorenson, who is also Marriott’s chief operating officer, said in an interview yesterday at the company’s Bethesda, Maryland-based headquarters.

Marriott, the owner of mid-priced brands such as Courtyard and Residence Inn, has added upscale locations to capture that sector’s higher profit margins as the economy improves. The company announced a new luxury brand last week, the Autograph Collection, through which it expects to add as many as 100 independent hotels as operators struggle with a travel slump.

“There’s talk about a return to simpler things but that talk always happens during recessions,” Sorenson said. “The fact is, the wealthiest demographics are growing very fast, like in China and Russia. They will become increasingly important.”

The company plans to open its first two hotels under the new boutique brand Edition, a partnership with developer Ian Schrager, and two Ritz-Carlton hotels in Hong Kong and Shanghai next year. Through Edition, Marriott eventually expects to add another 100 hotels to its operations, Sorenson said.

Fees Decline

Marriott is seeking expansion opportunities after third- quarter revenue from franchise fees dropped 7.4 percent to $100 million and management fees slid 19 percent to $116 million. Occupancy in the U.S. dropped to 57 percent this year through September from 63 percent a year earlier, according to Smith Travel Research Inc.

Marriott is also considering acquiring brands, particularly in areas where the company is “underrepresented” such as in southern Europe, Sorenson said.

Separately, Chairman and Chief Executive Officer J.W. Marriott Jr. said he was seeing early signs of a pickup in travel but doesn’t expect substantial economic recovery in the near future.

“I don’t think the economy is going to get better for a while until we solve the unemployment problem,” Marriott Jr. said today during a question-and-answer session at The Economic Club in Washington.

Marriott Jr. voiced disapproval of Washington lawmakers who have criticized lavish business travel, causing what he called “a blanket of despair and dark clouds over the industry.”

He said he backed a congressional bill that would help promote the U.S. as a destination to international visitors. The number of foreign travelers has stagnated since 2000, Marriott Jr. said.

The company opened its first hotel, the 365-room Twin Bridges Motor Hotel in Arlington, Virginia, in 1957, according to Marriott’s Web site.

Marriott fell 59 cents, or 2.2 percent, to $26.40 at 4:15 p.m. in New York Stock Exchange composite trading. The stock has climbed 37 percent this year.

Want to order a burger and beer from room service before you check into your hotel so dinner is waiting for you?  Guests at Hilton, Embassy Suites Doubletree hotels will be able to do that using a new iPhone and iTouch application that parent Hilton Worldwide is announcing Monday.  Hilton also will unveil Apple apps for Conrad, Hilton Garden Inn, Homewood Suites and Hampton Inn chains. All will let guests check into their rooms remotely up to 48 hours in advance, and let guests choose bed type, pillow type and more.  Hilton plans for the apps to become available this month and next, pending Apple’s approval.  Once they can be downloaded, Hilton’s apps will become the latest and most sophisticated of the apps recently launched by big hotel chains.  The chains are scrambling to create ways to keep up with consumers who increasingly arrange travel on the fly using mobile devices.  The iPhone and iTouch applications market has been exploding because research indicates iPhone users disproportionately use the Internet to do everything from research products to conduct their banking, says Henry Harteveldt or Forrester Research. He says Apple also makes it easy to create apps.  The hotel apps, he says, “help you manage your stay.”  ”If you’re on the road constantly, you can use this to book a hotel,” he says. “There are people out there who constantly are on the go, and they never quite know where they’ll be staying.”  Of the 100,000 existing apps available on the iTunes store, about 5% pertain to travel, making travel the fifth-biggest category after games, entertainment, music and weather, says Chuck Sullivan, a Hilton executive who oversees global online services.  Two other hotel apps made a splash in recent months:

Priceline.com’s Hotel Negotiator app launched last week, and it already is iTunes’ fifth-most-downloaded free app, according to the iTunes website.

When Starwood launched its SPG loyalty program app in June, it was downloaded around 40,000 times and reached No. 11 even before Starwood began promoting it, says Brad Minor, a Starwood spokesman.

With hotel companies hit hard during the recession, the big chains are picking priorities carefully. And designing apps strictly for Apple gadgets doesn’t always rank No. 1.

InterContinental Hotels Group, which runs the Holiday Inn Express, Hotel Indigo and InterContinental chains, has been focusing on making its websites convenient for all mobile browsers, including BlackBerrys and Palms, according to Francie Schulwolf, a company spokeswoman. The company plans to launch its iPhone application early next year, she says.

Marriott International doesn’t have a timeline for an iPhone/iTouch app as it, too, is still focusing on website functions designed for all smartphone users, says John Wolf, a Marriott spokesman. Marriott’s mobile site receives 500,000 visitors each month, he says.

Starwood Hotels & Resorts Worldwide Inc. said it plans to sell its Bliss spa and product business to Steiner Leisure Ltd. for $100 million as the company looks to focus on operating its hotels.

As part of the deal, Bliss and Remede spas and amenities will remain exclusive to Starwood in the hotel category at W Hotels and St. Regis Hotels, respectively.

The sale is on top of the planned sale of $125 million in other “non-core assets” that Starwood said Monday are due to be closed on this quarter.

Bliss spa products are found in 15 locations. Starwood acquired the spa business at the start of 2004 from LVMH Moet Hennessy Louis Vuitton for $25 million.

The hotel owner and manager has been reporting weaker results, like many in the industry. But third-quarter earnings for the major players, including Starwood, were largely above expecations, though the results didn’t give Wall Street any more clarity on the speed, scope or depth of a nascent recovery in the recession-battered lodging industry. For its part, Starwood said revenue per available room could fall another 5% next year on top of 2009’s double-digit decline.

Also Monday, Starwood slashed its annual dividend by 78%, to 20 cents a share. Chief Financial Officer Vasant Prabhu had said in January that based on its initial 2009 earnings forecast, a payout at 2008’s level would work out to 80% of earnings.

Starwood, which has 982 properties, has also been culling its portfolio some. It sold two hotels in the third quarter for about $96 million.

Steiner reported weaker results in the third quarter. The company operates spas and salons on 126 cruise ships and 51 resort spas.

CHICAGO-Locally-based Hyatt Hotels Corp. will launch its initial public offering this week. The company, one of the 10 largest hotel companies in the world, will take the ticker symbol H when shares begin trading this Friday. Company officials hope to acquire up to $988 million through the IPO.

Hyatt Hotels Corp. is not listing any of its class A common stock, except for what the underwriters can purchase if they exercise the option. Rather it is a number of the company’s current stockholders who are selling shares. In total 38 million stockholder shares will be sold between Thomas Pritkzer, Marshall Eisenberg and Karl Breyer, according to the Securities and Exchange Commission filing.

After the offering, more than 38 million common class A shares will remain as well as 130 million common class B shares. Both class A and B shareholders will vote together as one unit on deals. Those holding class A stock will have one vote per share while class B stockholders will have 10 votes per share. This structure allows the Pritker family to retain control of the company.

“Following this offering, Pritzker family business interests will beneficially own, in the aggregate, approximately 80.7% of our Class B common stock, representing approximately 62.4% of the outstanding shares of our common stock and approximately 78.4% of the total voting power of our outstanding common stock, or approximately 60.4% of the outstanding shares of our common stock and approximately 78.1% of the total voting power of our outstanding common stock if the underwriters exercise their option to purchase additional shares from us in full,” the filing states.

According to the filing, As of September 30, Hyatt’s portfolio contained 415 Hyatt-branded properties, for a total of 119,857 rooms and units. The company employs more than 80,000 people in 45 countries.

The company, which started in 1957, has seen revenues decline this year. According to the SEC filing, “For the year ended December 31, 2008, revenues totaled $3.8 billion, net income attributable to Hyatt Hotels Corp. totaled $168 million and adjusted EBITDA totaled $687 million. For the nine months ended September 30, 2009, revenues totaled $2.4 billion, net loss attributable to Hyatt Hotels Corp. totaled $31 million and adjusted EBITDA totaled $302 million.”

Hyatt officials declined to comment to GlobeSt.com about the pending IPO, citing registration with the SEC as the reason for silence.

The IPO is expected to be the fourth largest to take place this year in the US. But whether it will raise the desired amount of capital remains to be seen. The hotel company has taken a severe hit this past year, and five of the last nine IPOs ended up pricing below the expected per share price, according to reports.

“We’re running into renewed volatility in the market that we haven’t seen in some time, and one essential requirement for a robust IPO market is stability in valuation,” says Jim Rossman, head of U.S. equity capital markets at Macquarie Capital, in a Wall Street Journal article about the IPO. “The performance of the market in the last few weeks has impacted IPOs. Buyers are more likely to sit on the sidelines when they see comparable valuations coming down.”

Marketing Is Not The Primary Thing…It’s The Only Thing

We suspect that 2010 will show some signs of recovery mixed with continued hardship for many hotels. We all know what happens when revenue levels are constricted; fewer dollars in, fewer dollars to spend. At this point, careful consideration should be made for every dollar spent to develop business.

For many years, hotel companies have grappled with the decision of how many marketing dollars to commit to build business. At no time in history has this been a bigger challenge for hotels. Many hoteliers have historically considered marketing dollars as redundant if these dollars are needed to cover revenue shortfalls and/or operational over-spending.

This practice of redirecting dollars, which were ear-marked for marketing, to cover revenue shortfalls, could be a critical mistake in 2010. In actuality, it is too easy to cut marketing dollars to temporarily improve a P&L statement. After-all, every dollar spent on marketing comes off the bottom-line. This makes the marketing budget extremely vulnerable.

We must avoid the dreaded downward spiral; reducing rates to temporarily increase occupancy reduces revenue and profit. Using lower rates as a marketing strategy is just plain self-defeating. You may successfully sell a few more rooms, but you will enjoy it less. Don’t join the “woe is me” crowd. Create more value, then market that value.

The fact is that hotels which devote the time, money, and human resources to market and promote their hotel in 2010 , will be the ultimate winners when the economy returns to normal. This is an opportunity to harvest increased market share, which will provide a huge payback for hotels aggressive enough to go after it. But, it will take planning and commitment to accomplish this.

When times are tough, operational spending must be carefully reviewed. Service levels and amenities, which were developed during the boom years, must be re-considered. The revenue will not be there until we stop considering sales and marketing funds as discretionary and not essential to building business. It’s time to make commitments.

Strategies & Planning

In this writer’s opinion, 2010 will not be a time for experimentation and new market development. Creating new business markets is costly and time-consuming. It can sometimes be rewarding, but we have neither the money nor the time to do it properly. It’s time to review your historically productive market segments, prioritize them, and create a plan to grow them. Target marketing dollars to historically lucrative markets and always weigh the results.

If marketing funds are limited, prioritize markets in which to concentrate. Hoteliers need to search-out the 20% of markets that produce 80% of the business for your hotel; the old 80/20 rule. At the same time during the prioritization process, hoteliers need to assess the response speed of each market. How long and how many dollars will it take to see positive results; speed is good. Everyone is hurting, so create those travel partnerships, which you never found the time to do before.

Any plan, designed to build business in 2010, must include a comprehensive Internet and electronic marketing presence. There are few market segments, if any at all, which can produce results as quickly or with the zest of business as is possible with the Internet. Nothing you can do to produce business can equal the cost-effectiveness and return-on-investment of a well conceived Internet marketing program.

There are still too many hoteliers who have been unable or unwilling to devote marketing dollars to get their fair share of the increasingly lucrative Internet market. These hoteliers must understand that simply having a website is not nearly enough.

Anyone, who is serious about developing a strong Internet presence, should come to terms about how their website is performing. Performance is measured by the number of visitors your site attracts and, more importantly, the number of reservations it generates; organic search and sales. We still see many hoteliers who have no idea to what extent their website is contributing, if at all.

As we head into 2010, it’s time to get a true and honest assessment of your website to determine its soundness and functionality. Unfortunately, there are still too many hotel sites, which were designed by people who know little about search and/or hotel sales. This has resulted in having many hoteliers who have dysfunctional websites and, sadly, don’t know it.

The challenge is that they don’t know that the basic structure of their site is more than likely the cause for failure. Designing an attractive site is only a small part of a functional site..You simply cannot determine the functionality of a website by the way it looks.

There are many knowledgeable site developers who can provide you with a objective analysis of the search and sales soundness of your site. Often, minor changes can make a huge improvement in its functionality. This is often a small investment to improve Internet sales.

Human Resource Trends

Human resources will still play an essential role in hotel marketing for 2010. I believe that there are marketing people who may be perfectly suited for an abundant economy, but are totally unsuited for a tough one. Tough times call for tough players. Sometimes it’s necessary to go to the bullpen to bring in a heavy-weight when increasing market share is the goal.

If this is financially out-of-reach, get some training for your sales and marketing staff. If training is out-of-reach, many hotels have delegated marketing duties among other staff members. During a robust economy, this would not be a wise decision, but it is becoming more common today. The lack of leadership can be solved if the general manager or someone on staff has the marketing experience to implement the program.

Many hotels have solved the marketing leadership problem by outsourcing this role to outside marketing experts to guide their internal process. This is becoming a popular and very cost-effective way to implement a productive marketing plan without adding to permanent payroll cost.

It’s time to end the practice of shoot-from-the-hip marketing spending and lack of commitment to building business through marketing. For 2010, marketing will not be the primary thing, it will be the only thing for success.

The U.S. General Services Administration (GSA) today announced the new Fiscal Year 2010 (FY2010) federal per diem rates, which will take effect on October 1, 2009 and run through September 30, 2010.

Some examples of lodging changes for this year include:

• Phoenix/Scottsdale, Ariz., for the Maricopa Co. area mid-season:  down $120 from FY09’s $122
• Miami, Fla., for the Miami-Dade area mid-season:  up $128 from FY09’s $121
• Chicago, Ill., for the Cook and Lake Cos. area high season:  down $205 from FY09’s $218
• New York City (Manhattan) high season:  down $340 from FY09’s $360
• Kansas City, Mo., for the Jackson, Clay, Cass and Platte Co. areas:  unchanged at $107
• Las Vegas, Nev., for the Clark Co. area low season:  up $109 from FY09’s $105
• Cincinnati, Ohio, for the Hamilton Co. area:  up $115 from FY09’s $112
• Seattle, Wash., for the King Co. area:  up $159 from FY09’s $158

The nation’s economic downturn has affected per diem lodging rates in many localities, but overall the majority of locations did see an increase or no change in per diem lodging rates.

According to GSA, there will be a slight increase of 0.6% of the estimated lodging costs compared to FY2009.  In contrast, the previous three years (FY2007-09) had an estimated average increase in lodging costs of 6.8%.   In FY2010, there are about 400 areas that have per diem rates higher than the standard CONUS rate.

The standard Continental U.S. (CONUS) per diem rate for lodging, which applies to destinations that are not specifically listed on the FY2010 per diem rate schedule, remains the same as last year at $70 per night.  GSA reviews the CONUS rate every three years and continues to use market data provided by Smith Travel Research to establish per diem rates.  The last adjustment was for fiscal year 2008, which increased the lodging rate that had been in effect since 2005.

GSA noted in its Sept. 24 release that besides updating the lodging rates for all nonstandard areas, the meals and incidental expenses (M&IE) will increase by $7 for each of the six M&IE tiers, resulting in a $5 increase for meals and a $2 increase (from $3 to $5) for incidental expenses.

The complete FY2010 rates can be viewed on the Internet at the GSA’s per diem Website, www.gsa.gov/perdiem.

Hospitality franchiser Choice Hotels has tasked text analytics software provider Clarabridge with collecting and processing nearly 1 million customer comments in order to improve service and customer lifetime value.

The hotel chain, which includes brands such as Comfort Inn, MainStay Suites and Econo Lodge, has renewed its emphasis on the quality of rooms across brands. Mark Weiner, VP of customer care and reservations at Choice Hotels, said he expects that initiative to result in better customer-retention rates.

“We get a lot of unstructured feedback from our guests, and increasingly we saw the need for detailed analytics in order to make sense of all of it,” he said.

The hotel franchiser began testing the software this summer.

“Clarabridge’s Content Mining Platform allows our representatives to tailor the solution to an individual customer,” he said. “If the same hotel has had a number of room-cleanliness complaints, the rep can solve the problem for the guest right away, rather than referring them back to hotel staff.”

Based on initial testing of the software, the company may extend its use across other programs, including its preferred guest loyalty program. Weiner said that customer satisfaction went from 21% to 70% from this March to September, according to internal surveys, and call center times have decreased.

“We’ve gotten much faster at addressing customer complaints since our representatives can call up the relevant information that they need right away,” he said.

The developer of the stalled Fontainebleau resort in Las Vegas plans to appeal two key legal rulings in its lawsuit against banks over their decision to stop funding for the project.

In a ruling that appeared to signal the end of Fontainebleau Las Vegas LLC’s development of the resort, U.S. District Judge Alan Gold in Miami on Aug. 26 sided with Bank of America and other Fontainebleau revolving-loan lenders in the banks’ interpretation of the credit contract at issue.

Gold at that time rejected Fontainebleau’s motion for partial summary judgment and an order that the banks immediately turn over $656 million in planned funding needed to restart construction of the project.

A separate group of term lenders, part of a $1 billion term-loan group that had been supportive of Fontainebleau, later cited that ruling when it moved for Fontainebleau’s Chapter 11 bankruptcy case be converted to a Chapter 7 liquidation. The bankruptcy judge instead appointed an examiner to supervise the sale of the project.

But in court papers filed Friday, Fontainebleau said it wants to appeal Gold’s ruling to the 11th U.S. Circuit Court of Appeals. It also wants to appeal his ruling moving the lawsuit from the bankruptcy court to U.S. District Court.

Mediation in the lawsuit, in the meantime, has been unsuccessful and the parties reached an impasse, court records show.

“The court’s orders raise issues of law concerning which there are substantial grounds for difference of opinion,” attorneys for Fontainebleau said in Friday’s filing.

They said the issues it wants to appeal should be decided as soon as possible, not at the conclusion of the lawsuit, because of time constraints facing the bankrupt company.

Fontainebleau said the lawsuit remains “an important part of its efforts to reorganize.”

“Deferring an appeal until the conclusion of these proceedings would undermine those efforts, and — even if successful — would almost certainly come too late to be of any real assistance,” the company said in its filing.

The casino resort developer also said resolution of the issues it wants to appeal would help resolve four other lawsuits related to the banks halting funding this spring after, they said, Fontainebleau defaulted on the loan agreement because of cost overruns and other problems.

Two of those lawsuits pit certain term lenders against the revolver lenders; a third suit was filed by certain term lenders against Fontainebleau; and a fourth was filed by revolving lender Deutsche Bank against Fontainebleau chief Jeffrey Soffer over loan guarantees.

Fontainebleau has borrowed $1.675 billion against the unfinished project — once valued at $2.9 billion — and estimates to complete it have ranged from $1.5 billion to $2 billion.

Besides dealing with lenders’ claims against the 63-story, 3,815-room resort, Fontainebleau last reported that as of Aug. 17, $615 million of contractor liens had been filed in the case.

Do not embrace the “New Normal” and increase your RevPAR in 2010.
Over the past year we have seen hotels focus more on driving occupancy than rate to improve their RevPAR.  While hotels may not be able to achieve the higher average rate of the pre down turn, there are opportunities locally they can exploit to drive rate even in the current economic environment.

“NOT THAT”
The first step a property must take is to not accept the “new normal”.  That is to say do not accept the current ADR, or occupancy of their property.  While a hotel may not be able to achieve the occupancy and ADR of 2007 or the first three quarters of 2008 (the old normal), it can do better in RevPAR in 2009 even if the economy remains flat or even declines slightly.  What I am saying is and the “new normal” is ”THAT” and hotels should not accept it if they expect to substantially improve their RevPAR in 2010.

“DO THIS”
The second step a property must take is to identify different Demand Generators in their local market place which can drive rates and/or room nights volume higher than third party Internet sites.  For our purpose a Demand Generator is defined as anything that has the ability to physically bring or attract business to a market place.  Some examples of Demand Generator are hospitals, universities, airports, local companies and Interstate Highways.
After identifying the Demand Generators in their market place, a property must qualify them. Let’s say you identify a hospital as a different Demand Generator because it has been ignored in the past when times were better.
The qualification phase of a hospital is to make a personal call on each of the following departments to understand what business they have and what you can do to attain that business.

Administration Office

Visiting physicians, speakers or specialists- over night stays

Preferred Hotel Directory- advertising as generally hospitals look forfavorable rates for patient coming in from out of town plus their families need accommodations also.  Patient post operation care is another source of business when they cannot stay at the hospital but need to remain close.

Any other hospitals that they operate in the area

Names of various hospital medical directors

Educational Director – seminars and visiting instructors

Special Services Director- parties, banquets, etc.

Director of Nursing- names of  Head Nurses

Director of Volunteers- their activities

Director of Physician Relations – names of specialists

Public Relations – visiting dignitaries and patient families

Purchasing/Medical Supply – purveyors and companies that call on them

Head Nurse Station on each floor – family and friend referrals that may want to stay in a hotel rather than driving home

Admissions – family referrals

In-Patient Services – family referrals and patient referrals if they require further treatment but can not say in the hospital

Human Resources/Personnel- relocations, employee parties, meetings and banquets

Specialist Units – cosmetic, heart, cancer, etc which require outpatient follow-up care for long term stays.

Area Employee Professional Associations for monthly and annual meetings and banquets- housekeeping, physicians, hospital administrators, radiologists, etc.

Continuing Education- each specialized area will be represented in a teaching hospital.

A hospital is just one of the Demand Generators many hotels have in their market place. During my career the people I have worked with and I have identified over twenty-five local Demand Generators many of which produce a variety of business for a hotel. If we think in terms of events that occur at venues rather than just the venues, the number of Demand Generators in a metropolitan area are in the hundred if not thousands.

The third step is to develop a plan with rates, amenities/services due dates and responsibilities to be used to “attack” all of the departments/areas with in the hospital.  “Attacking” the hospital is best done through personal calls.  The personal calls should be supported by advertising and public relations should these opportunities become available.

For additional ADR and occupancy in 2010 remember………………..

“NOT THAT”
Do not accept the “new normal”.

“DO THIS”
Identify different Demand Generators in your local market place.
Qualify the identified local Demand Generator with personal calls.
“Attack” with personal follow up calls and eventually bookings/room nights will happen.

AH Spotlights Omni Austin Hotel at Southpark…

The Omni Austin Hotel at Southpark is certainly at the center of it all.  It offers an excellent location within a short commute to anything and everything Austin has to offer!  This full service, four-diamond luxury hotel offers modern amenities for wedding parties, corporate travelers, sports teams or any 21^st century traveler.  The Omni  allows you to relax in your hotel after a long flight, savor all of Austin’s wonderful live music & cuisine downtown or be within close proximity to a conference being held at the Austin Convention Center.  The Omni has 313 rooms that offer you all the comforts of home, and just a touch more!

We sat down and talked to Mary Meath, Senior Sales Manager with the Omni, to find out what makes this property so the perfect fit for your group!

How many rooms does your property have?

The hotel has 313 guest rooms total. Of those rooms we have seven different room types: Deluxe and Premier rooms; And Junior, Parlor, Governor, Presidential and Kids’ Sensory Suites.  Regardless of your room type all rooms come equipped with:  Plush robes, Foam and feather pillows, Marble vanity tops, porcelain tile floors and makeup mirrors.   Evening turndown service is available upon request in all of our rooms.  All of our guests have acess to their own fully stocked in room refreshment centers, in room coffee maker, hair dryer, complimentary USA Today delivered to your room, iron and full-sized ironing board, In-room safes and clock radio

Does your hotel have meeting space?

Yes, we have a total of 13,677 square feet worth of meeting space divided into 13 different meeting rooms.  Our largest meeting room is 7,500 square feet allowing any sized group lots of flexibility with their setup and breakout space.

What can a guest expect when they walk through the doors?

 Omni prides itself on carrying a tradition in its name.  On a management and owner’s level, there is a lot of training to make sure each and every team member is fully able to provide the utmost service and anticipation of guests’ needs. 

What sets your hotel apart from other hotels?

Each and every employee is fully able to understand just what it is they need to do to make every guests’ stay memorable.  As far as the hotel’s feel you truly feel classic luxury.  We pride ourselves on attention to detail and you will find that in anything from the sheet thread count to the quality of our pens in your board meeting.

To book your group at the Omni Austin Hotel at Southpark please contact Austin Hospitality at info@austin-hospitality.com