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Hotel Industry

US hotels tighten belt, lay-off, make tough decisions just to stay afloat

Hazel Heyer, eTN Staff Writer  Jun 11, 2009

Pricewaterhouse Coopers’ 12th Annual Global CEO Survey reveals almost all US company chief executive officers have a bleak outlook for the year. According to the study, almost all CEOs have reduced growth expectations as a direct consequence of the economic crisis, with 90 percent of them saying the crisis has increased their costs and delayed growth and investment plans.

Hotel executives have already reduced budgets and cut-down staff; other innovations beyond these will have to be extra-creative or will hurt operations eventually. In one CEO survey, the answer goes back to the basics – honing talent, agility, reputation and customer service.

“We’re using this downturn as an opportunity to accelerate transformation of our company,” said Frits Paasschen, president and CEO, Starwood Hotels & Resorts Worldwide at the 31st Annual New York University International Hospitality Industry Investment Conference held in Manhattan last week. “We get out to the properties and appreciate the energy and sprit-de-corps our people have on-property. To get out there and look people in the eye is very important. We are counter-cyclical. When things are darkest out there, we look up. Markets will come back,” said Paasschen announcing the arrival of their 1000th hotel despite difficult times.

He added, in the current economic environment, Starwood sees the need in restructuring the organization. “We are digging deeper into the corporate structure. There is a huge opportunity to upgrade talent; we are also relocating our global headquarters to the East Coast,” he said, underscoring that the chain has gained market share in the last months. He said they want to be in the luxury business as luxury will soon be in demand again.

Communication is key. Christopher Nassetta, president and CEO, Hilton Hotels Corporation, said, “We communicate to our people what we have to do and address the situation in real time. We use times like this to find the opportunities, because when people retreat, we say to them lean into it with the people in the company.”

“This is serious business and we need to make tough decisions on management. If I can make tough decisions, I see other managers able to make those tough decisions themselves, however humanly difficult. This is what’s going on in this crisis; it is very demanding,” said Gilles Pelisson, chairman and CEO, ACCOR. He said, despite having to make some quick and dirty decisions, they must move on and find new and better ways of operating their properties from the super-structure level.

“People expect that we have our priorities focused on saving cash. We take the lead, although it becomes very demanding on people while we make tough decisions in the company,” said Pellison. Despite the meltdown, ACCOR is currently seeking to open in Germany, the UK and Spain following successfully raising Euros 600 million in convertible bonds, of late.

Reassure talents in the company. Stephen Joyce, president and CEO, Choice Hotels International said, “There should be a constant need for reassurance. The downturn presents an opportunity to upgrade talents in the company. There’s a relative lack of kindness that goes around in the business when you are surrounded by people who are losing jobs. As a result, people worry about their own personal circumstances at the job front.”

Gary Mendell, chairman and CEO, HEI Hotels & Resorts, said, “Sales people need to get together. The strength of the recovery lies in the combined effort of people in sales, and not in individual work.”

To Eric Danziger, CEO, Wyndham Hotel Group, consumers are slowly coming back and showing positive signs. He said people are starting to peek out and book online. “There will be an uptick especially in the next six to eight months.”

“We have already lost about 6 M jobs in this recession since 2007. When we ask employees how they feel about their job, they say they don’t know. Consumers in our industry feel the same uncertainty too. Until there’s some level of confidence restored, people cannot think about travelling for vacation or doing some discretionary spending,” said Mitesh B. Shah, senior managing principal and CEO, Noble Investment Group.

What is not sustainable – frozen salaries, no bonuses! Members of our team have made tough decisions. It’s not going over the fat to muscle, to muscle to bones. It’s not sustainable to keep it this lean,” added Shah.

Shah who’s an expert in private equity real estate, lodging and investment capital, said, “The question is NOT if capital will ever come back but when it will come back. Statistics show there are $300 billion in commercial mortgage lending due in the next four months and $26 billion in the next 12 months. Year 2011 may be the year when the market comes back. However, there are very savvy and sophisticated investors who fear the ability to obtain debt in the next 24 to 36 months.”

Watching the industry ride out the economic crisis through 2011 will be very interesting - considering that of all major US industries producing jobs and capital, this one has stayed afloat with no bailout just yet.

US hotels tighten belt, lay-off, make tough decisions just to stay afloat
Photo by Nelson Alcantara

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