Why hospitality is the best place to work, invest, and innovate now (and in the years ahead)

“We have massive demand for hotel rooms today, and we’re not even at half of the business and international travel we had pre-pandemic yet. That’s coming soon.”

IHG Americas CEO Elie Maalouf

The optimism at the 2022 NYU Hospitality Investment Conference this week in New York was palpable and backed by data that shows a strong year ahead and tailwinds for years to come.

Investors, operators, brands, and bankers shared details on why hospitality is the best place to work, invest, and innovate today – and how to take advantage of the opportunity ahead.

Hospitality as the best place to work now

The labor market remains hot, but the hospitality industry is evolving to become a more attractive career option than ever before.

For those on property

98% of those in the hospitality industry work on property, and attention and resources are being directed towards improving the work experience there.

“We’ve been dipping into the relationship bucket for two years and now we’re focused on replenishing the relationships with our associates on property,” said Heather McCrory, CEO of Accor’s North and Central America group.

Accor CFO Jean-Jacques Morin talked about how their leaders have been reminded that the people they hire to take care of guests are as important as the walls of the hotel itself.

“My lens for thinking about anything is through the associate experience. Whatever I can do to enhance that, I’ll do.”

Andrew Jordan, CMO at Aimbridge Hospitality

The Boston Consulting Group previewed new research they did on the biggest reasons people haven’t wanted to work in hospitality in the past. Near the top of the list was scheduling flexibility, and hotel groups like Aimbridge are now offering solutions to address this – using their scale to offer flexible scheduling in places like Houston, where the company manages 65+ hotels.

Historically, hospitality been a way a way for anyone – regardless of experience – to build a high-impact career. Kevin Jacobs was the first in his family to attend college, and started his career as an hourly hotel employee. Now, he’s CFO of Hilton Hotels. “The opportunities are immense,” he said.

But it’s clear not all hospitality jobs lead to executive experience. You often need need finance and real estate development exposure, Maaloof pointed out. IHG and other companies are implementing more programs than ever to provide this to those who want it.

For those supporting those on property

The opportunity isn’t just for those working at hotels. For those working at hospitality brands or at companies providing services to hotels, boom times are ahead as well.

During the pandemic, not all industries were impacted the same, with entertainment, finance, and technology companies posting record growth. “Now, hospitality has tailwinds,” Maaloof said. “Even if we face a prolonged recession, I expect hospitality to do well.”

This is why hospitality isn’t just the best place to work, it’s a great place to put money to work.

Hospitality as the best place to invest now

Leaders across the hotel ecosystem made the case for investment.

Bullish in a bearish macro environment

“It’s a great time to be investing in the hospitality industry,” said HVS CEO Stephen Rushmore – a sentiment shared by many others.

Why? “The micro economy of hospitality is decoupled from the macro economy,” said Jay Shah, CEO Hersha Hospitality Trust.

Blackstone’s Head of Strategic Investments, Tyler Henritze, agrees: “The fundamentals around hospitality are incredibly strong. We are looking at how we can invest more in hospitality.”

Investors in office, retail, and other types of commercial real estate are having hard conversations now, but “the outlook is much clearer with hotels,” he said. “There are very powerful technological and demographic trends that show the short-term and long-term potential in hospitality.”

STR President Amanda Hite shared data pointing to continued growth in the years ahead. “We do not expect an upcoming recession to impact the hotel and travel industry the same way last recessions did.”

“There’s no better place to be in a recession than in hospitality,” said hotel financier Michael Lipson.

What’s different in hospitality

How do we know these leaders aren’t just sticking their head in the sand and ignoring the economic challenges unfolding now?

Lonny Henry, Global Chairman of Investment Banking at JP Morgan, said group segments, business travel, and international travel are just starting to come online. “Most travelers haven’t begun to travel again, there’s still a lot of untapped demand out there,” said Jeffrey Horwitz, Proskaur.

Michael Bluhm, Morgan Stanley’s Global Head of Gaming and Lodging Investment Banking, mentioned his clients are seeing 20% higher revenue this year so far, and expecting to see another 15% growth in 2023.

Revenue technology is helping hoteliers benefit from that demand. “We have tools today that we never had before,” said Noble Investment Group CEO Mit Shah. “We can push rates – and drive earnings.” Wyndham CEO Geoff Ballotti agreed, saying they are seeing higher profitability in their HotStats data than pre-pandemic.

Another benefit of dynamic pricing? It’s a great inflation hedge, Shah pointed out. “We change rates daily.”

“There’s a lot of capital looking for a home in hospitality”

Global investors have confidence in the US lodging market’s recovery specifically, with capital coming in from Europe and the Middle East.

“If you have conviction now you can act on it and benefit before anyone else,” said Bluhm. “There’s a lot of capital out there looking for a home.”

Access to investment is opening up

Finally, we are starting to see efforts towards diversifying the hotel investment ecosystem.

Marriott announced a $50 million hotel development program to help provide underrepresented groups with more access to investment opportunities that have unfortunately been limited historically.

Hospitality as the best place to innovate with technology

The opportunities today with technology were a recurring theme across remarks made by owners, brands, and operators.

Stakeholders are evolving

“Technology used to be evaluated only by how it serves the guest,” said Virgin Hotels CMO Doug Carrillo. “Now it needs to be evaluated in how it serves hotel staff – and the owners.”

Why? “The magic happens at the property” for getting the benefits from hotel technology.

A massive shift to cloud technology is taking place

And it’s not just driven by technology leaders – leading brand CFOs made this a central point of their remarks.

Wyndham CFO Michele Allen talked about transitioning their on-premise technology to the cloud. Accor is doing the same. “We’re moving everything to the cloud by 2025 to move faster and be more flexible,” said CFO Jean-Jacques Morin.

Other expected benefits include efficiency and cost savings, security, and future-proofing their tech stacks with greater connectivity.

Moving to the cloud is “like moving from the slow lane to the fast lane for guest engagement,” said Oracle Hospitality General Manager Alex Alt.

Data matters more than ever

Larry Cuculic, CEO of Best Western Hotels, asked the audience why Elon Musk is interested in buying Twitter when he is already running multiple companies. “It’s all about the data.”

It’s the same for hotels, he said. There’s a bigger opportunity than ever before in hospitality to responsibly and securely collect guest preferences to provide better service and increase revenue and profitability.

Partners will be needed to support tech innovation

“A lot of what we deliver to our guests we couldn’t do without our technology partners,” said Carrillo. Morin agreed that the opportunities ahead will require partnership. “There is more we want to do with technology than we can do ourselves.”

Hospitality as the best place to innovate with experience design

The most fun hotels to stay at have always been the ones with great experience design. But the financial returns from these has been mixed for many – until recently.

Accor CEO Sébastien Bazin is now seeing his lifestyle hotels deliver 15% better RevPAR now. Virgin Hotels is seeing outperformance as well.

“The focus on well being is off the charts,” said Hyatt CEO Mark Hoplamazian.

Food & beverage as a priority

F&B provides more touch points to engage your guests and improve their experience than the check-in or elsewhere on property, said Margaritaville CEO John Cohlan. “It’s a point of high leverage.”

While you might expect that from Margaritaville’s leader, Hoplamazian is also seeing this opportunity across his brands at Hyatt. “It used to be that room service was the most assured loss-making service at a hotel, but that’s changed. We’re offering a lot more variety.”

Renovations are paying off

“When owners invest in renovating their properties they’re seeing a disproportionate return on that investment right now,” said Marriott’s CFO Lenny Oberg. Allen at Wyndham agreed: “Owners that are focused on the guest experience and are adding value are the ones who will come out of this winning.”

The opportunity ahead

The past two years have been brutal for the hospitality industry, but the outlook is bright for the years ahead. Based on more than just wishful optimism, the opportunity is really about demographic trends that are much bigger than short-term demand cycles. In the words of Jacobs:

“We are setting ourselves up at Hilton to take advantage of the massive mega trend of the growing middle class. This has doubled over the past 20 years, and it will double again in the next 20. It’s why I’m long travel and don’t really care about what happens in this market cycle.”

Kevin Jacobs, CFO, Hilton Hotels

Taking advantage of the opportunity ahead is going to require smart operations and capital allocation, but those who do this will be in a strong position to significantly outperform not only others in the hospitality industry – but those in other industries as well.

If you liked this, you may enjoy my 2023 hotel conference calendar, which includes the best events for hospitality professionals.

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