State of the industry
Hospitality and tourism executives discuss the challenges they face
- April 29, 2016
For an engaging discussion on the state of Virginia’s tourism/hospitality industry, get a group of C-suite executives together in a relaxed setting. That was the idea behind a roundtable sponsored by Virginia Business and the Virginia Restaurant, Lodging Travel Association (VRLTA) at the Salamander Resort & Spa in Middleburg. Some of the biggest names in Virginia weighed in on a range of industry issues – from competition with Airbnb to international investment. Participating were: Neil Amin , CEO, Shamin Hotels; Mark Carrier , president, B.F. Saul Co. Hospitality Group; Ian Carter , president, global development, a rchitecture, design and construction, Hilton Worldwide; Kimberly Christner , president and CEO, Cornerstone Hospitality; Prem Devadas , president, Salamander Hotels & Resorts; Krissy Gathright, COO, A pple Hospitality REIT; and Rita McClenny, president, Virginia Tourism Corp.
Paula Squires, managing editor at Virginia Business, and Eric Terry, president of VRLTA, served as the moderators. An edited transcript follows.
Squires: Let’s start with the state of the industry. It terms of inventory is Virginia competitive and up to date?
Ian Carter: As a general statement I would say, yes, we’re pretty competitive. You know it is a pretty diverse state. We’re close to D.C. on the edge of the northern part of the state. We’ve got beaches. We’ve got resorts. We gauge the health of the state on inventory that we already have and how that performs. In our case, we’ve got close to 22,000 rooms in operation in the state. We’ve got a pipeline of just under 4,000 rooms, meaning hotels that are going to open in the next two years. More than half of those are under construction. We see good representation of our brands and others.
We’ve seen development be pretty strong in the last really twenty-four months. We’ve seen a kind of resurgence down in Virginia Beach. We have a great Hilton there, and we’ve built [another] hotel, just a couple hundred yards from it, Hilton Garden Inn. Both are performing extremely well. So that gives you some idea of the vibrancy of the economy, generally, but two areas of not-so-strong performance would be the per diem type spending, government related or military.
Mark Carrier: Picking up on Ian’s comment, I would say because a majority of our Virginia distribution is in the Washington, D.C., suburbs we tend to over index on business related to government contractors … So areas like Crystal City, Tysons Corner, or Dulles. We have actually performed low in national trends for a number of years. We had greater stability when the market declined in the 2007-2009 timeframe, but we have not seen the same demand growth as perhaps the nation. The way we’ve gone through everything from government shutdowns to wrangling over the budget, sequester, etc. It has an inordinate impact in a flow through sense to our primary clients whether that be a company like Mitre or Booz Allen or a range of organizations like that. That combined with, let’s call it stability in the [government federal lodging] per diem, doesn’t change the pricing dynamic too effectively for us. So we’ve been a little bit caught between those realities in Northern Virginia. When we look at our data against, say, even national averages, we do recognize in our commercial hotels that that is a big, big factor. Now on one hand, when the whole industry crashed, everyone was saying, “Wow, you’re lucky because you’re in D.C.,” and now we have that as somewhat of a dampening effect on the ability to grow.
Eric Terry: Kimberly Christner, who’s at the far end of the table, is one of our board members, and she’s really doing exciting projects in different parts of the state. She’s got the Craddock Terry out in Lynchburg. She’s developing the Sessions Hotel in Bristol, and she’s done some small projects and small developments. I wanted to have Kimberly join us today to give a different perspective of what’s happening in other parts of the state. So Kimberly do you have any quick thoughts on that?
Kimberly Christner: There are a lot of great properties in Virginia. One of the things we found in what we’re doing with developing historic buildings is recreating authentic experiences. We found that we can play in the big cities with all of the other players sitting at the table, or we can go into the rural and tertiary markets and find our own piece of business there. What we found is in those markets, when the demand of the recession hits or we have a government cutback or whatever, we don’t suffer as much as they do in the city markets. Our properties are smaller. Our services are great, but the staffing is more limited, and so we’ve kind of played in the independent game a lot and we’ve partnered. We have couple of Hilton Curio hotels getting ready to come on the market, and we’re member preferred with the Craddock Terry Hotel in Historic Hotels of America with that property. Those properties, they’re 30- to 120-room properties depending on the market. These projects really are where I think the trend is going, which is why Hilton and Marriott and Starwood — big companies — are trying to pick off those little independent properties because they know that you can’t create that in a brand necessarily. It’s an independent property. It’s an authentic experience. Each experience in unique to that property. So, in all the towns and places that we go, that’s what we do. That gets us No. 1 on Trip Advisor. It gets us a $60 dollar premium on our rates. It gets us a 40 percent greater occupancy than the rest of the community. So it helps us quite a bit and, for us, that’s a great market. We have about eight hotels that will open in 2017 and 2018 that are all boutiques in Virginia, and we’re excited about that.
Terry: I went to the opening for Bolling Wilson in Wytheville, which is only what, 30 rooms?
Christner: Thirty Rooms.
Terry: I pulled into town, and the street was shut down and most of the population in Wytheville was at the grand opening. All the community support for that blew me away in terms of how excited they were.
Christner: Yeah, projects like that, we’re leveraging everything we can leverage. The traditional financing does not work, and lending does not work in those projects. So we’re going after historic tax credits, new market tax credits. We just got lucky enough to get the first tourism growth fund, where the governor gave us $150,000 dollars as a grant for one of our projects out in Southwest Virginia. All of those programs help us get these projects done … I think we’re probably the only company that’s doing multiple projects like that. I know Neil’s done his Hampton Inn in downtown Richmond, and there’s some ones and twos that people are doing. People are afraid of those little tertiary markets. It’s kind of scary out there, and it’s hard to attract business sometimes, but once people know you’re there, I mean, Trip Advisor kind of does it for us. So it’s great.
Rita McClenny: Well, I’ll say from the state standpoint, we are always trying to grow length of stay. Right now, about three nights is the average stay for the visitor. Our focus is on families, and leisure is king in terms of visitors who come to the commonwealth of Virginia. [Tourism] does have an impact, whether it’s military, government meetings and in Southwest Virginia in particular — which has been impacted by the [decline of the] coal industry — for the hotels, like Kimberly’s type of products with these unique characteristics that are very authentic, they do have a draw. It is as if you are looking through a window.
Now culinary has had a definite impact on the reason that people are traveling, and they want to go and have a lot of experiences for the entire family. During the day, mom is doing something slightly different from dad, the kids want to have their own thing to do, but at the end they come together for that evening meal, and then they have that piece of evening entertainment together. So, that draws the family back together. Diversifying this product really helps.
…From our standpoint [with] marketing, right now we’re in Delaware to Charlotte, Raleigh abd Greensboro. We desperately want to get to Boston and to New York. We just don’t have the financial resources to be in that marketplace, but where we are, we’re digital. Our buy is 99 percent digital for recruitment and getting “Virginia is for Lovers” in the marketplace. We are in all the platforms. Hulu is an example, Travel Zoo, Trip Advisor.
With all these drivers, the sports, the history, the outdoors — and the outdoors includes everything that you can think of from the beach, to the mountains, to fishing, to golfing, to biking. Cycling is something that we see as an emerging leisure time activity that families want to engage in. So trails are very popular because, again, it’s connectivity and making that experience easy for the traveler to build an itinerary based on their desires and things that they love and want to do together with their families.
We haven’t forgotten about the boomers, but the millennial really is the focus because it’s the 80 million-person market with young families who we want to create legacies and traditions for them to come to Virginia. But we need to expand, from the marketing standpoint, the markets that we’re in. We need to be in the rich Northeast, heavily populated places, because people are driving to Virginia. So are the Canadians.
Terry: Coming back here one of my impressions is that in smaller markets like Williamsburg, and even to some extent Virginia Beach, we’ve not seen the level of investment that you see in other states. Neil and Krissy, your companies have invested in the state, I’d be interested in your thoughts. How do you see Virginia today versus other markets?
Neil Amin: Virginia, unlike our neighboring states, hasn’t seen a lot of new construction or new hotel products since the last recession. We had a lot of product come in ’05 to ’08. We haven’t really had much product come in since then. So I think there is a lot of opportunity in markets to put in some fresh, new product that caters to the emerging trends in our industry. One of the things that we’re focused on is the millennials … We’re focused on providing that product along with the culinary aspect, the arts aspect, and really bringing in a different type of traveler to Virginia that may not have looked at Virginia, but may have looked at Charleston or Savannah but will now come to Virginia because we have that bundled product.
Krissy Gathright: Richmond, Virginia, is a good example of a market that we would like to invest in. There’s diverse demand generators. You have government, you have universities, you have medical, you have a stable corporate base, and you have amazing opportunities for leisure with the river, culinary experiences. Normally you don’t hear me say as an owner, “ Let’s go ahead and build a ton of new hotels,” because I always get a little bit nervous. We don’t want to get ahead of ourselves and have supply exceed demand, but for the most part, in our Virginia hotels, it’s been pretty healthy in terms of supply-demand balance. In the Northern Virginia and Hampton Roads markets, there have been impacts from cutbacks in [the federal] government and military, but you are starting to see some additional projects pick back up. With Virginia Beach, it’s really exciting to see the investment in new product upgrading that area and in the arena project [being developed in the city.]
Gong back to Richmond, Richmond is the area where actually I welcome the additional supply. We opened our Marriott Residence Inn and our Marriott Courtyard downtown … When we developed those particular assets, we incorporated the local flare and the local feel. We have a beautiful Courtyard, it’s right across from bars and restaurants, or you can go grab your Starbucks at the bistro. It’s very much a community feel. You’ve got the high-speed internet access. We’re starting to bring, you know, Netflix into your room. You can bring your own device. So you are seeing the product adapt to that, and Richmond, I believe, still has room to grow with the base that we have. I would love to see — our downtown Richmond Marriott is located near the coliseum there — so, if we had a wish list, it would be to see that facility be able to upgrade. I went to the University of Virginia, so I would compare it to “I’d like to see a John Paul Jones.” So that might be a little bit aggressive, but a facility like that, what a game changer. We have so many great things going for us, but if we could add a few more upgrades to the amenities right there in that market. You already have apartments, and it’s exciting to walk to work now and see people walking their dogs in the apartment next door and to see that life in the restaurants and the retail. So, if we can just work on adding a few additional things. It would nice maybe, even to see our Richmond Marriott — which is large for us with 400-plus units — there’s potentially opportunity to do an even bigger size, you know, a convention hotel if we can just bring that all together. We love Virginia. It’s an exciting place to be.
Terry: Prem what are your thoughts? You obviously have a big resort investment here.
Prem Devadas: Yes, but it is a one of a kind … I started my Virginia experience in Richmond, taking over the Jefferson Hotel in the ‘90s, actually taking it back from a flag property and making it an independent luxury [hotel] and, in those days, it was not as common. We have a fundamental belief that if you can really develop a special project that is from a luxury standpoint, clearly top of the market, then you can almost, in many markets, establish a rate that can make that property successful.
Squires: As you do new projects, how does it go with the financing? Also would anyone like to comment on what appears to be an increasing trend of international investment? We’ve seen a Chinese company, Anbang, purchase the Waldorf Astoria. More recently Anbang led a consortium to acquire Starwood, although it later backed away from the bid.
Amin: Lenders are looking for people who have a proven track record. Lenders are still looking for good developers, good product, good locations and of course good brands … In terms of the international, I think it’s hard to create Hilton, Marriott or Starwoods. It’s hard to create a huge organization with that much distribution, that much marketing power and scale. So it’s clearly a very attractive asset. Obviously these international companies see the value of that. I think they’re trying to get money out of their own countries, which are not doing as well, and are focusing more on higher yielding assets here in the U.S.
Carter: It’s a trend, and we see it as something that absolutely is important to us as an industry because that money could go anywhere … First of all, these are big investors who you clearly want to be aligned with if you can. They do have different ways of doing business and therefore are difficult … It’s also very important because many of these companies are also influential in terms of how they operate within China. So as we try and develop within China, our real opportunity is not just to serve Chinese guests as they move around, which is clearly massive, but it’s the outflow.
Where do the Chinese travelers go? When I sat on the [tourism board] in California, one of the most resonating statistics for me is that the average Chinese traveler into California (and this was probably in 2011-12), spent seven times the average European traveler in a one-week period. Now that’s on lodging, restaurants and in luxury goods, primarily. That’s an interesting stat, because if you can ensure that you’re the one attracting those travelers in the longer term, as freedom of movement from China and less group travel and more individual travel comes about, you can start to influence the kind of spend that you get. In our case, what we’re trying to do is attract them into our loyalty program.
Carrier: Picking up on the point earlier about capital availability from a debt perspective, there has been a greater discipline around underwriting from the lenders side that has created an interesting dynamic… If you go and look at the nationwide distribution of new hotel construction, I would say 17 of the top 20 branches of new development are associated either with Marriott, Hilton or IHG into their brand products. It’s the strong getting stronger. So if Neil or I went in and said, “I’m going to pitch a Hilton Garden Inn or a Homewood,” that passes the real smell test with the lender. If you go in and say, “Well, I’m going to do some other brand family,” you have a lot more difficulty. I have a lot of admiration for Cornerstone and what you’re doing because that independent/creative way takes a lot of expertise and work. It’s not that you’re just stitching together a normal bank loan. You’re often bringing together the public, private partnership… for the good of that community. So, we’re in an interesting place. The more solid underwriting has created a situation where you’re probably eliminating some supply growth that might not be warranted, because the hurdles to get there are just more business.
Terry: When I first got here, I started looking at reports for this market, and we actually had some contraction in the number of rooms in a lot of Virginia markets. When you look at markets like Williamsburg and others that have a lot of really old product, I think those are where there will be some opportunities for growth is to replace that with some better stuff.
McClenny: I think also world policy can impact travel. If you talk about Visa waiver programs and if the Chinese want to have their citizens be able to travel to certain parts of the world … they have a lot of control over that. There used to be these shopping trips, and they put the brakes on those, where there hundreds of thousands of Chinese coming for that single purpose that Ian mentioned, spending. The average that I heard a couple of years ago was $6,000 discretionary spending while they were traveling outside of China. So, certainly these programs that we see that the U.S. government have a say in, as well as the corresponding
Christner: Mark is exactly right. It is a big patchwork quilt by the time we get done with it, and it takes longer. I mean, it’s not like when you buy a branded property, and they basically give you a hotel in a box, you add some water, it pops up, and you have a hotel. It’s much harder to create a product that feels authentic, yet you’re manufacturing that authenticity in some way. Trying to bring that together is challenging, and it takes a lot longer to develop. It takes a lot more skill with the staff that you have to run it, and then financing, of course, is a real bear because most of our products are not in big city markets and most of them are one-off. So, you have a track record of running hotels, but you don’t have a track record of running a hotel in that city, in that location, of that particular product.
The interesting thing that we’re finding is that we’re not only giving the unique hotel experience, but the things that go with it to tell the story of the building or the community in a subtle way that creates an interest and intrigue for the guest while they’re there. So the experience overall is not just the beauty of the building or the services that are offered, but what story that comes with it and what experience they can go back and tell their friends that you can only have at that property … What we do also in the towns is that we’re changing economic development in downtown communities. We creating that welcome mat, that catalyst of growth for other things to happen.
One example that’s pretty strong is in Lynchburg and what we’ve done with the Craddock Terry Hotel. It opened about eight years ago. We were the first really big thing to open in downtown. I mean it was pretty dark down there. The city, was working on their plan. Now there are over 3,500 hundred people living and working in downtown. There are restaurants there, and it’s all entrepreneurial. It’s not your Starbucks on the corner. It’s the coffee shop, the White Hart café.
Devadas: I think along the same subject that authenticity is important. Lifestyle is … a term but whether it’s independent or soft branded you still can’t walk away from the fundamentals of very good service and quality. I think where I at least have seen some of those fail it’s been … not delivering on service, and then I think probably one of the biggest challenges in that space is that a lot of people who are looking for that experience are looking for great food experiences. So actually the level of food experience that you have to create and sustain is expected and that takes a lot more work.
Christner: I think you’re exactly right, Prem, that they’re looking for more than just a great story at a hotel. They’re looking for that service that comes along with it. The bed and breakfast community really started this whole thing. They started the whole experiential travel, and it kind of was born from that … I think that’s really where it started in those individualized services and now you have so many really, really great boutique hotels that have that service style you’re talking about, Prem, and some at affordable luxury prices. So you’ve got your luxury prices where it’s very, very, high end, and you’ve got your affordable luxury boutique hotel giving that person that is looking for that experience but doesn’t have quite the finances to do the luxury end but still gets that great experience.
Devadas: We like to think that we’re affordable luxury.
Gathright: Well, I do think it’s healthy to have that diversity of product … If I’m going in for a quick business trip, I might choose a Hilton Garden Inn, but if I’m going for a girl’s weekend, I’m going to your resort and to use the spa, and it’s very healthy for the travel industry to support that diversity of product.
Terry: My impression is that Virginia is underrepresented in the boutique and lifestyle product. I look at the opening of the Quirk Hotel in Richmond, which has really been exciting and, you know, people are gravitating towards that … What are your thoughts the boutique and lifestyle hotels across the state?
Christner: Prem’s property, like this property here, you can only have so many of this high level of quality property in the state or it becomes oversaturated. It’s not as special anymore, and I think that we have to be mindful of that in the communities that we’re in and where we’re developing properties. I think there is definitely an opportunity to build different levels of boutique hotels. So, your high-end boutique hotel that offers a much more luxurious service and your mid-scale boutique hotel — we probably don’t have enough of them, and I’m working on that. I have seven coming. Give me time.
McClenny: Given the personality of the town, like the Graduate Hotel going into Charlottesville. It’s really meant to accommodate for a college kind of town and those experiences. We have some interesting inquiries now that we see a bit of a trend with sports towns, college towns and the medical piece, and it’s some pretty robust interest in Virginia around those kinds of elements in geography.
Christner: Virginia is a historical place. We have so much history in Virginia of varying things that I think what Rita is saying is right. There’s a lot of different places you can go to experience a lot of different things.
Amin: I look at all of these new properties as assets for our state. Somebody will come to Virginia, they may stay in Lynchburg and they may stay in Charlottesville. You know, see different places while they’re here. We’re not competing with Virginia. We’re trying to bring people to Virginia, and all these things that we’re doing, all these new hotels and new experiences are bringing people from the Northeast. And maybe instead of going to Florida for, you know, spring break, they’ll come to Virginia and experience what Virginia has to offer. So I think it is all complimentary, and I think we do have a need for a few more. In some of our urban locations we probably don’t have as many boutique or lifestyle hotels. I think there is a need for some of that product.
Carrier: I would love to touch on this for our friends from Virginia Business, to think about our industry because often times the breadth, depth, size, the numbers of people we employ, all of that is a little bit lost because we’re disaggregated. It’s not one employer that you point to and that one employer is employing 10,000 people in the state. But this industry is one that is an export business, because anyone that comes from out of country and comes here and spends money, that’s an export as far as the USDA counts it. If you thought about people traveling in from New York or Massachusetts or whatever and spending money here in our state, that’s like an export, because we’re getting their money for products that we have here. It’s physically delivered here in the state.
So one of the things about hotels and tourism in particular, it’s one of the most tax accretive businesses that you can have in the location. It’s why many communities really love having hotels, because we not only pay sales tax; we pay property tax, personal property tax, BPOL [business, professional occupational licensing taxes] in many cases, transportation taxes. The amount of positive contribution to the community through taxation is highly significant, and we often get together in public-private partnerships to put together pieces of community infrastructure like a conference center or other coliseum type facilities to create benefit to the overall community. So, I do think it’s kind of important as a takeaway to recognize that the industry is big. Now tying into that and going to Eric and Rita’s work, we need to be competitive. We need to fund these agencies in a way that their voice can get out and help us compete. There’s a huge ROI [return on investment[ on doing it and not just for the business people, but also for the communities that have the facilities and the restaurants, to shopping, whatever. It’s just tremendous.
Terry: The struggle is how do you create that sense of urgency? It’s a facilities investment, too, things like the arena in Richmond … things that draw people for bigger things.
McClenny: And the competition, you know we’re ranked No. 9 in visitor spending in the U.S., and our budget is down to No. 21. You know there’s incongruency in what we’re able to do from the impact that is being made vs. the investment we’re making in the marketplace and competing with other states.
Devadas: I also think that helping to drive quality development and quality assets is really important no matter what level you’re at. I can tell you that for this resort it’s not important to the guest who is traveling from afar to come here and have 50 wineries. It’s important to have 50 really great wineries or 10 great wineries or five — the same with other types of activities. I can tell you having spent many years in Charleston that you know people marvel at Charleston today and how it’s developed and what a hot hotel market it is. I can take it back to the very early years and a decision made that assistance was going to be given to create quality activities. The marketing was going to be very focused in Travel and Leisure and Conde Nast and not skewing in a different direction. Frankly it all started to feed on each other, and it all resulted in high- quality hotel product, at many different levels, but high-quality service and great attractions that really end up driving rate. So I think that, for Virginia, we also have this great opportunity to do that, to really continue to drive a higher quality, a higher rate. You know, a longer stay, all of those things.
Terry: I kind of equate it to the tipping point, and I think Charleston is the best example. You know Richmond could be Charleston.
Devadas: Charleston wasn’t Charleston a long time ago.
Gathright: Well, continued investment in infrastructure and amenities drives the additional demand. The additional demand can support the additional hotels, and when you open additional hotels then you’re employing, you’re adding more jobs and vendors. You support, you have more business.
Terry: Where you see the workforce today? I know, Prem, that’s been a challenge for you out here in place where it’s hard to get workforce.
Devadas: Listen, it’s hard everywhere. Everywhere in the country it becomes increasingly the biggest operational challenge, and it’s going to become more difficult because of wage and benefit policies that are going to be passed. Having said that, I think it has caused us to look at our models, the way that we operate, the way that we deliver service, the flexibility that we can exercise with staff full time and part time. I think it has a lot to do with training. So, it’s just going to become a bigger and bigger challenge. It has been a challenge for years from a food and beverage standpoint, and that’s causing us to look at different policies like drug testing for example. You know I was surprised but happy to see that the Four Seasons is continuing pre- hiring drug testing.
Christner: In some of my markets, we’re not close to anything, and trying to find quality people is tough. I think with food and beverage, some positive things have happened. Cooking is now a cool thing. They have cooking shows, and you know everybody wants to be a cook, but they don’t talk about the wait staff and the people that serve and how to be a true great career service person in the wait staff industry. There are some really talented people that make a lot of money doing a great job.
Carrier: One of the secrets about our industry is that it is a fantastic business to grow in. Yes, we have a lot of entry-level jobs, but we also have management, sales, accounting, marketing, digital, human resources, you name it. Virtually any specialty that somebody has in the world of business exists in the hotel universe, and it’s an industry that rewards growth from within. You can collect a group of hotel owners and executives, and we all love telling you the stories of when we started as a dishwasher. I started as a waiter. So that’s one of the great things — we’re a tremendous pathway-to-success industry. But we do have a lot of team member needs that are at entry levels. We have challenges in our country now with public policy issues that relate to immigration, Visa programs and people that are coming in seasonally. I’ve got a brother who operates a resort hotel that in the summer they absolutely could not be in business if they didn’t have foreign folks who come in and work for the summer.
The Affordable Care Act also has been a huge issue for many of us. It has changed the dynamic around providing health care for a lot of people. We’re literally facing a wage-and-hour thing right now with these rules that may be promulgated on what makes somebody exempt or nonexempt, and it is a big hit to our industry, because many of our team members, as they are growing in their management careers, becoming an exempt manager is a big step. So, there are some mega D.C. public policy issues affecting our world of employment.
Devadas: We need to tell the story. How you start from the ground up, what you can achieve. I mean that story is a real story. It’s a true story.
Carrier: I’d say also, Eric, thank you for your service with Virginia Tech because it is one of the gems of the state. The hospitality program is one that has provided many team members for many of us. Our connectivity to the educational resources, the more we can do to strengthen that so that the voices of owners, operators and the real range of the industry can be presented to the students in a more granular way — the better.
Amin: I think our industry could do a better job of talking about the benefits and the skill sets. In India, people want to be in the hospitality industry. It’s perceived as a great career path. It kills me when I see some of our associates — if they’re leaving us they may go become a receptionist at a medical office. I’m wondering why is that perceived to be a better job with zero upward mobility than being in the hospitality industry?
When we’re recruiting, we’re educating them from the very beginning that this is not about the job that you have today. This is about the job you’re going to have three years from now or five years from now or 10 years from now.
Terry: Let’s talk about the growth of some of these alternative-lodging opportunities, you know Home Away, Airbnb. I spoke to all the other states the other day. We do a kind of a monthly call. I said, my takeaways [on a successful push to delay a state law regulating Airbnbs in Virginia during the last General Assembly session] are this: while as an industry we came together and we did a really great job -- we showed up, we were there -- we were still perceived to be the guys who wanted to keep another industry out. The folks that really resonated were the cities and counties who said, “I don’t want to regulate this kind of thing” and the bed and breakfasts who were amazingly effective at saying “I have to do all these things, why don’t they?” I don’t think we’re ever going to be able to attack this at a federal level the way we want. I think it’s going to be state by state, and we’ve got to win enough of those that finally Airbnb says, “Okay, we want to go public, so we’re going to have to solve this problem,” or whatever they’re going to do. To me that’s the trigger point of that whole discussion.
Gathright: You have to use the competition, whether it’s Airbnb or the next guy that comes later on, to innovate and as an industry find better ways to deliver high quality experience to the guest. So the competition will make us stronger. They need to play by the same rules, but the competition will make us stronger.
Terry: Expedia is the other 800-pound gorilla that we’ve got to figure out.
Carrier: Most people don’t understand that if you’re an independent hotel you’re paying something between 20 to 30 percent of that room revenue as a commission or as a margin to Expedia. So think of a retailer that’s giving away 20 to 30 percent of the revenue. Recognizing that the revenue is governed by the market forces that keep prices where they keep them, it’s really out of whack with the benefit provided, and it’s a real challenge for our industry.
Carter: It is the 800 pound-gorilla. There are times when you love them to be around and there are times when you hate them to be around. At the same time you want some equanimity on pricing and you know at 20 percent, it’s a big number for what it really delivers. Our plan is we want to try and persuade a guest that’s been conditioned over the last 15 years to disbelieve what we’re about to tell them and that is to come to us direct, and you will get the best price and the best deal. Unfortunately we should’ve been saying that 15 years ago.
Carrier: The online digital world has changed dramatically over that 15-year window, and these guys are really smart. They are focused and well financed, and they have huge stock multiples that they’re deploying to get better at what they do, which is to intermediate our business. So, I applaud the steps that Hilton have taken on behalf of their owners and franchisees and their brands … Their promise to the consumer is stronger than anyone else can make … As a consumer if you can go directly to the brand and get the best deal, what’s not to like about that?
Gathright: The way that the current model works, Expedia or other OTAs [online travel agencies], have a tremendous amount of data. That’s valuable data, but when they come through the distribution system to your hotel, they keep the data and you know they have their own programs and loyalty programs. It would be ideal if they could be more of a customer acquisition partner so that you could source customers who weren’t traditionally loyal customers, who are infrequent travelers and then have the opportunity to convert them to more loyal customers to your particular hotel. And then you pay them a reasonable fee for that customer acquisition vs. you know competing for the same guest … The hotelier at the end of the day, you control the stay, and you control the rates and inventory. You know there have to be ways as we continue to evolve through the ever-changing distribution landscape to adapt the models to be more hopefully beneficial to all parties that are involved.