Gina Deary – Industry Executives Discuss Business for the Year Ahead
January 9, 2023
As 2022 comes to a close and the hotel industry moves on to 2023, there are many positive feelings toward the recovery from the pandemic. However, there will still be some lingering challenges-inflation, supply chain issues, the labor crisis-that will carry over into the new year.
Moderated by Glenn Haussman, founder/host, No Vacancy Live podcast, the recent Hotel Business Hot Topics session, “The Time is Now: Prepare your business for 2023,” in partnership with Entegra, offered a discussion on what the year ahead may look like from a trends perspective, and provided a forum for a panel of industry leaders to provide advice to navigate what lies before them.
The panel included Damien Calderini, president/CEO, Entegra; JP Ford, SVP/director, global business development, Lodging Econometrics; Denis Klurfeld, VP, procurement, North & Central America, Accor; Vineet Nayyar, president/COO, owned division, GF Hotels & Resorts; and Rob Smith, divisional president, full-service, Aimbridge Hospitality.
Hausmann first asked the panelists what they thought will be the biggest issue in 2023. Before providing his answer to that question, Calderini brought up the topic that is likely on every hotelier’s mind at the moment-inflation.
“No one can predict the future, but we really believe that inflation is here to stay,” he said. “Inflation is global and it’s driven by factors that will not go away overnight. People were wondering whether the election might have an impact on it one way or the other. I will tell you that we don’t believe that will be the case.”
He added that the causes of inflation are “the war in Ukraine, which everybody understands the impacts that it has on the grains that are not being transported; labor issues, whether it’s just simply not finding truck drivers to be able to move the goods, or it is back or front of the house [on the property level].”
However, inflation is not the most concerning issue in Calderini’s eyes; instead, it’s the weather and avian flu.
“The biggest impact to the supply chain challenges and the food challenges we’re seeing today is the weather,” he noted. “Quite frankly, we should all look at how the weather is going to be in early 2023 and hope that we get the weather that we need because that is going to be the main driver. The second one is avian flu. Every year you see avian flu spiking once, but what are we seeing this year? It’s coming, it’s going, but it’s coming back and it keeps coming back. That’s going to have significant damage.”
Nayyar believes the biggest thing the industry is dealing with is the uncertainty of what will happen in the future. It’s certainly something that hasn’t left since the pandemic began.
He offered a way to deal with the uncertainty. “We can control ourselves by being proactive [and] efficient,” he said. “Two years ago, we were talking about isolation; now we’re talking about inflation. Margins are going to be tough… You’re paying more and you’re getting less.”
Smith pointed out that there is so much uncertainty going forward that you can’t plan for just one outcome.
“All these factors that have been noted are all variables,” he said. “They’re all things that are sitting out there that have the potential to take what we see today and wreak havoc tomorrow. A lot of things that we’re doing now as we build budgets, we’re building them for the things that we know we can affect-the things we see today. And we’re building four or five contingency plans behind those so that as things do change, we’re able to react quickly and nimbly.”
Hoteliers will also have to deal with travelers whose priorities have changed as to what they expect from a hotel stay. Haussman asked Klurfeld if he is seeing the products that are going into the properties reflecting the demands of today’s guests.
“We had to rethink everything from the ground up in terms of what people care about, what they expect and what they no longer want,” said Klurfeld. “And that really focuses the procurement on what really drives value. All of the non-value-added products and services, you either eliminate, automate or outsource. So, we’ve essentially been really focusing the procurement efforts on identifying what really is going to drive value in the next two to three years, and really focusing on those aspects of the guest experience.”
Going back to the issue of inflation, the moderator asked Ford, whose company monitors hotel construction in the U.S. and internationally, how the increase in interest rates is affecting the pipeline.
“It’s really causing developers to pause, sit back [and have a] wait-and-see attitude,” said Ford. “There are about 985 hotels under construction in the United States right now. Prior to COVID, we were well into a thousand under construction. We have [more than] 4,000 hotels that are either going to start in the next 12 months or are in the early planning [stage]. Supply chain issues are also a problem. You can’t find the products that you need as fast as you need them. So, with interest rate increases and supply chain issues, the movement of projects through the pipeline isn’t going as fast as what it did pre-COVID.”
Flurry of renovations
The U.S. renovation and conversion pipeline right now, he pointed out, is as high as it’s been in as long as Lodging Econometrics has been monitoring it, with about 1,900 projects and 240,000 rooms.
“And I’m not talking about small renovations,” said Ford. “I’m talking solid, seven-figure renovations. What I always say when people come to me and [ask], ‘What should we do?’ I say, ‘If you are a supplier in the hotel business and you’re looking to find an owner that will be open to talking to you about your products and possibly making a change, the best time to do that is when [the owner] is going through or planning a renovation or converting from one brand to another, brand to an independent or independent to a brand because that’s when an owner is most open to talking about changing what’s currently on the site right now.”
Nayyar noted that owners are trying to get these renovations done because their loans have “a great interest rate currently that are three to five years out.”
He added, “There’s [also] the pressure from the brands. They’ve been sitting and giving waivers for the last two to three years, and those milestones are about to expire. To be competitive, you have to do it.”
Wellness travel is one of the trends that gained traction coming out of the pandemic and will likely continue to be a focus of hotels in the new year. Haussman asked Klurfeld about the ways Accor is adding wellness features at its properties.
“There’s been a lot of conversations within our guest experience team as far as what we define wellness as moving forward,” the Accor executive said. “I think, at the end of the day, it’s trending towards meeting the customer where they want to essentially be from the custom solution that they’re expecting. So, it’s whether or not we are partnering with yoga instructors, offering bespoke spa services depending on customer preferences before they arrive or at at-request training sessions within the gyms and really reinventing what the gym looks like. But, it’s really around understanding what the customer needs are and making sure that we are staying ahead of the curve. There isn’t a single solution to address that.”
For Aimbridge’s full-service portfolio, Smith noted, wellness programs “are really table stakes in our resort operations these days,” adding, “Folks during the COVID period went through a period where they stayed at home and gained weight, and then went through a huge wellness program on their own at home. Now, when they travel, they want to enjoy and do all the best things they can, but they also want to make sure they don’t fall off those programs. So, we make sure, as part of our resort fees, that we include things like sunrise Tai chi, pool aerobics and things that they won’t typically do as a form of wellness at home so that it’s new things they’re learning. It’s not only wellness but it’s enrichment, and it just helps the overall satisfaction of the guest’s stay.”
Ford has also seen wellness experiences being added during the renovation process with the hotels in the construction pipeline.
“They’re renovating hotels with those concepts in mind and allocating the appropriate spaces through renovation to allow a lot of that wellness activity to take place,” he said. “The other thing that we’ve seen, too, is there’s been a plethora of new brands that have been announced into the industry over the past five years-some are new-construction and some are conversion brands-but the industry has really segmented itself into collection and lifestyle brands, which are somewhat synonymous with wellness.”
Nayyar also noted that “we cannot go past the cleanliness component [as the] starting point of wellness. What we learned in that last two-and-a-half years is we cannot go out of the box unless the hotels were clean. That’s the No. 1 thing that we cannot forget with all the stuff that has happened.”
The food that is served at a hotel’s food and beverage outlets can certainly fall under a wellness discussion, as Calderini brought up.
“I think it’s relevant because it addresses wellness, and it can also help on the cost side,” he said of offering more plant-based items to menus. “Putting more vegetables on the plate and reducing a little bit of the meat portions [can do] a lot for the wellness of people and do a lot to improve the costs.”
He continued, “A lot of thought goes into how to prepare the meats. There are so many ways-smoking, broiling, grilling, roasting, etc. You can do the same thing with vegetables and get an amazing outcome. You’re doing a good service for your clients, and you’re doing a good service to your P&L.”
Architects and designers are optimistic about 2023. While the uncertainty of the economy and supply chain issues still linger, there are exciting projects in the pipeline and a lot to look forward to. Hotel Business spoke with Meghann Day, president, The Americas, HBA; Lauren Rottet, founding principal/president, Rottet Studio; Linh Tran, director, architectural design, Premier; and Gina Deary, principal, KTGY Simeone Deary Design Group, for their insight.
What design trends are you forecasting for 2023?
Day: We will continue to see wellness being incorporated into the design of hotels and resorts in 2023 and beyond. In the guestrooms, wellness amenities such as workout mirrors, free weights and sauna mats will look more like curated accessories that are cohesive with the design of a space rather than randomly placed fitness equipment. Further driving sustainability, also look for the use of regenerative materials in hospitality design, such as timber, bamboo and sisal.
Rottet: The whole “great outdoors” trend will continue, with more indoor/outdoor inventions and more product that can go outside. More portable lighting that gives more lighting output, and ones that can hang in the trees or overhead like an outdoor dining table light. More interesting and contemporary planters for inside and out. Firepits that look like real flame, give out heat but can be used in non-fire-allowed areas. More plant types for indoor and more specialists who know how to care for them. Color and pattern-color that is more complex and routed in color theory. Colors from the 1940s which were never pure but multiple colors mixed with white and black to give it that dreamy hue/nostalgic hue.
Tran: The rise of bleisure travel, a blending of business and leisure travel, is going to continue having a huge effect on hospitality design in 2023. Accommodating guests who need both business and leisure amenities will mean more business centers and areas throughout the hotel for people to work outside of just their room. Health and wellness will also be at the forefront of hospitality design, which goes hand in hand with the rise of bleisure travel. Guests want to have options after their workday is done to unwind and relax, whether that is at the pool or in the fitness center.
Deary: I always say that great design is not about the next trend, it’s about how a space makes you feel, and the experiences that unfold when you are in it. For 2023 and beyond, we will continue with our goal of elevating interior design by considering sociographics, demographics and past and future for the neighborhoods in which our projects are located. Always focusing on the communities that will experience the space, as well as collaborating with incredible artists, architects and clients.
What about design challenges for 2023? How should architects and designers work to overcome those?
Day: A challenging and changing economic landscape will continue to impact a project’s bottom line, from design fees to product budgets. Some of these challenges can be overcome by rethinking sourcing looking at suppliers closer to a project’s location vs. China-and strategically building a cushion into project schedules to account for potential shipping delays.
Rottet: The good news is that freight costs have gone down, but the interesting news is that pent-up demand is getting worse, and it will be difficult to supply all the needed product in time for projects. So, supply continues to be a challenge. Hotels that had to put off renovations will not be able to put it off much longer, and this will exacerbate the situation. The other challenge is “on and off” projects-bank lending and others affect this and the uncertain nature of the economy. It seems one day a project is stalled and the next, they want it immediately or vice versa. All we can really do as architects/designers is stay flexible and nimble. The best advice I have is to make sure you can ride a roller coaster and not get sick, as it will be a good bit of up and down and up again.
Tran: Building material shortages and supply chain issues will continue in 2023. We need to be creative in how we manage challenges like delayed delivery of materials, labor shortages and demanding schedules. And that means being creative in securing financing for a project. While there is not one clear-cut solution to overcoming the restraints of the supply chain, we need to find creative financial solutions for the lack of available materials.
Deary: The biggest design challenges of 2023 will be the uncertainty of our economy and navigating the lingering results of COVID on our industry. The best way we can do this is by making thoughtful decisions that are best for our clients, and being honest about what lies ahead and making sure that any risks we take are calculated and well thought out.
What are you most excited about for the coming year?
Day: Having completed the design of four new-build resort projects in 2022 and with three currently in progress, we are most excited about the advancement of resorts internationally at HBA Americas. The resorts sector is seeing monumental growth globally and expansion in the upscale and luxury segments. Resorts are large-scale, complex assets that require skilled teams to operate and design in order to keep guests engaged for the duration of their stay.
Rottet: Creating amazing product for Rottet Collection with wonderful artisans, craftspeople and others in the U.S. and around the world; learning to blow glass and make large-scale ceramics for our projects; making new friends with these amazing makers and factories; and working with our existing and new clients who are trusting us to help them ride the wave of this unusual time in the design industry and the world.
Tran: The global pandemic has forced people to re-examine the density of public spaces, raising concerns about the ongoing spread of COVID-19. This new approach to public interactions gives master planners new opportunities to conceive mixed-use neighborhoods that foster health and well-being in the built environment. I am excited to design and plan communities with expansive outdoor spaces connecting people to nature and wellness spaces to improve the way of life for users.
Deary: A project I’m most excited about is the VAI Resort, a 600-acre resort property in Glendale, AZ, consisting of multiple hotels, 200-unit residences, a spa, restaurants, bars, night club and a mini-Mattel theme park surrounded by the world’s largest sand pool. The Music Hotel is the primary five-diamond flagship resort on the property that surrounds a 360-degree stage for all types of live performances. Skybox lounges and most of the guestrooms face the stage for a one-of-a-kind guest experience. Our firm has the privilege of designing all the public spaces in the hotel including the lobby and guest arrival experience, the VIP lounge, the performer’s green room suite, coffee and retail store, multiple sky box lounges, a cigar lounge, the signature steak house, a champagne lounge, guestroom suites and multiple bars throughout the resort. The anticipated opening is late 2023. Internally here at our firm, I’m excited to grow the place-making and branding department focused on the hospitality, entertainment and multifamily markets.