Recently, we had the pleasure of attending the International Hotel Investment Forum (IHIF) in Berlin, Germany. This annual event brings together some of the most influential leaders in the hospitality industry to discuss the latest trends, challenges, and opportunities in the market. With over 2,500 attendees from more than 80 countries, the IHIF is a must-attend event for anyone looking to stay ahead of the curve in the hotel investment world. In this blog post, we'll share some of the highlights from the Hotel Asset Managers Association panel we participated in at the IHIF event. Here are the questions posed to the panelists and insights that came from the discussion.
- All numbers are up, even accounting for a higher inflation environment. Yet when we saw a moderate dip in revenue, in January 2023, profit dropped off dramatically - what does this tell us about the operating environment for hotels, and what can the industry do to prepare for the effects of another drop-off, e.g., one potentially caused by factors such as loss of meetings & events revenue and consumers squeezed hard by a recession/big cost of living pressures? What are some of the other "warning sign" numbers and trends we should pay attention to?
• The dip in revenue and the subsequent significant drop in profit serves as a reminder that even in a positive economic climate, hotels are still vulnerable to market fluctuations and external influences. To prepare for future drop-offs, the industry should focus on building resilience through proactive measures. This includes closely monitoring key indicators such as occupancy rates, booking lead times, and market demand to identify potential warning signs. Additionally, leveraging workforce management technology with advanced analytics and labor forecasting tools can automate scheduling and create optimal staffing to cover occupancy and service standards.
- Deeper dive into the data: As an industry, are we right to still compare our revenue numbers with 2019 metrics, or is it time to move on to new metrics for comparisons (e.g., year over year or quarter over quarter)? Analysis of rates in different hotel segments - which are performing strongest, which weakest? What accounts for the differences?
• While 2019 metrics provide a benchmark for comparison, it's essential to embrace new metrics that reflect the evolving dynamics of the industry. Year-over-year and quarter-over-quarter comparisons offer a more accurate assessment of current performance and help identify emerging trends. When analyzing rates across different hotel segments, it's important to consider factors such as location, customer preferences, and market conditions. Luxury and boutique segments have shown resilience due to their ability to command higher rates and cater to specific target audiences. Economy and midscale segments may face more challenges due to increased competition and price sensitivity among consumers.
- Sizing up revenue trends next to cost trends, and profitability: If revenues are up, why all the worry about the future? If revenues are strong, is bottom-line profitability also as strong as owners, operators, and asset managers would like? Why or why not?
• While revenue growth is undoubtedly positive, elevated revenues may be accompanied by escalating costs, particularly in labor-intensive industries like hospitality. Rising labor costs, supply chain challenges, and operational inefficiencies can impact bottom-line profitability, even when revenues are strong. To mitigate concerns about the future, the industry must prioritize sustainable profitability by implementing advanced workforce management solutions to optimize labor utilization, streamline operations through automation and process improvements, and identify cost-saving opportunities without compromising guest experience.
- People, people, people. The rise of AI and other advances have raised the possibility that all functions at properties – from Revenue Management to Labor Management even to Guest Service – might soon end up being managed by machines. What does the group think of this trend? Real or not? Good for the owner? The asset manager? The consumer? What is the one area in property management you would like to see more fully automated – and one which you would like to see kept in the hands of people? How far are we away from seeing a "fully automated" hotel?
• The rise of AI and automation in the hotel industry is an undeniable reality. While technology can enhance operational efficiency and elevate guest experiences, a balanced approach is crucial. Automation can streamline repetitive tasks, optimize revenue management, and improve labor utilization, freeing up employees' time to focus on more meaningful guest interactions. However, the human touch remains irreplaceable
• While the rise of AI and automation brings significant advancements to the hotel industry, the complete automation of all functions remains more aspirational than immediate reality. Machines can undoubtedly assist in various areas, enhancing efficiency and accuracy, but the human touch and personalized service will continue to be invaluable in the hospitality sector. The group should consider this trend as a means of augmenting human capabilities rather than replacing them entirely.
• From the perspective of different stakeholders, the benefits and implications of automation differ. For owners, automation can lead to cost savings, increased productivity, and streamlined operations. Asset managers can leverage automation to gain real-time insights, optimize resource allocation, and enhance decision-making processes. However, it is crucial to strike a balance and ensure that the automation aligns with the brand's identity and the guest experience.
• For consumers, there is a nuanced perspective. While automation can expedite certain processes, such as check-in/check-out or room service requests, guests still crave genuine interactions and personalized experiences. A hybrid approach that combines the efficiency of automation with the warmth of human interaction is likely to be the most desirable for guests.
• When considering areas for automation, operational tasks that are repetitive, time-consuming, and data-driven can benefit from technology. This may include tasks related to inventory management, data analysis, and routine administrative processes. On the other hand, areas that require emotional intelligence, creative problem-solving, and personal connections, such as guest service and concierge functions, should be kept in the hands of skilled professionals who can deliver personalized experiences.
• While we are witnessing significant advancements in automation, achieving a fully automated hotel is still a distant reality. The complexity of guest preferences, the need for adaptability to unpredictable situations, and the importance of human touch in hospitality all contribute to the ongoing relevance of human professionals in the industry. However, we should continue to explore and adopt automation selectively, leveraging its potential to enhance efficiency and guest satisfaction without compromising the core values of hospitality.
- Managing the managers: Will revenue managers and the revenue management function disappear in the future, to be replaced by machines? A good thing or a bad thing? What about asset managers?
• The role of revenue managers and the revenue management function is evolving with technological advancements. While AI and machine learning can automate certain aspects of revenue management, it is unlikely that revenue managers will disappear entirely. Instead, their role will shift towards higher-level strategic decision-making, leveraging data-driven insights provided by technology. This collaboration between human expertise and intelligent systems can yield optimal results, enabling revenue managers to focus on driving revenue growth, analyzing market trends, and implementing innovative strategies. Similarly, asset managers will continue to play a crucial role in overseeing the financial performance and long-term value creation of hotel assets. Technology empowers asset managers by providing real-time data and analytics to make informed decisions, ultimately leading to better operational efficiency and profitability.
- Maximizing revenues through Total Revenue Management strategies - what are they, how can they be implemented - and how can they help?
• Workforce management technology plays a crucial role in maximizing revenues through Total Revenue Management strategies. Here's how:
○ Optimal Staffing and Resource Allocation: Workforce management technology enables accurate forecasting of demand patterns and customer behavior, allowing hotels to align their staffing levels with the expected demand. By efficiently scheduling and deploying the right number of staff members in each department, hotels can ensure that service levels are maintained while minimizing labor costs. This leads to improved operational efficiency and cost savings, directly contributing to increased revenue.
○ Demand-Based Pricing and Yield Management: Workforce management technology can integrate with revenue management systems to analyze historical data, current demand, and market trends. By leveraging this data, hotels can implement dynamic pricing strategies and yield management techniques. This includes adjusting room rates, optimizing ancillary revenue opportunities, and managing inventory to maximize revenue potential during peak demand periods. Workforce management technology can provide real-time insights into labor costs and staffing needs, enabling hotels to align staffing levels with demand fluctuations to maximize revenue potential.
○ Enhanced Productivity and Operational Efficiency: Workforce management technology streamlines various workforce-related processes, such as scheduling, time and attendance tracking, and task management. By automating these tasks and reducing manual efforts, hotel staff can focus more on revenue-generating activities, such as providing exceptional guest experiences, upselling opportunities, and cross-selling services. The improved productivity and efficiency lead to enhanced revenue generation and profitability.
○ Real-Time Performance Monitoring and Analytics: Workforce management technology offers real-time visibility into key performance indicators (KPIs) and analytics related to workforce productivity, labor costs, and revenue generation. Hotel managers and asset managers can access comprehensive dashboards and reports that provide insights into labor metrics, revenue per available room (RevPAR), labor cost percentage, and other performance indicators. This enables proactive decision-making, allowing hotels to identify areas of improvement, optimize operations, and drive revenue growth.
○ Forecasting and Planning: Workforce management technology leverages historical data, demand forecasts, and other variables to generate accurate labor forecasts. This enables hotels to align staffing levels with anticipated demand and avoid overstaffing or understaffing situations that can negatively impact guest satisfaction and revenue. By effectively planning and managing labor resources, hotels can optimize workforce utilization, reduce unnecessary labor costs, and ensure the right staff members are available at the right time to meet guest needs and drive revenue.
The IHIF event in Berlin was an incredible experience that provided us with valuable insights into the current state of the hospitality industry. From discussions on the impact of technology to the importance of sustainability, the event covered a wide range of topics that are crucial for today's hotel investment landscape. We look forward to attending future IHIF events - hope to see you there!