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Counter-cyclical Capex

May 30, 2010

The hotel industry is not known for rolling out capital expenditures during a downturn and the ongoing recession is turning out to be no different than the first of the new millennium. During that downturn, a report (Capex 2007) from three agencies (International Society of Hospitality Consultants, the Hospitality Asset Managers Association & the American Hotel & Lodging Association) underscored the truism that successful hotels require ongoing and growing capital investment for product improvements to stay competitive but also found that capital improvement between 2001 and 2003 dried up, constrained by the age old malaise of cash-flow shortages stemming from revenue drops.

A counter-cyclical strategy is even harder to execute given the fact that the bottom line for the hotel industry has touched new bottoms per a recent report from PKF which noted that "hotel profits declined 35.4 percent". Therefore, it is unsurprising that history seems to be repeating itself. Nevertheless, the hospitality industry can, perhaps, swim against the tide as cash flows are not as constrained owing to unprecedentedly low interest rates and draw lessons from an unlikely source: the airline industry. In the 2001 downturn budget airline carriers including JetBlue, Ryanair, easyJet and IndiGo from India quite literally took off as a consequence of bulking up their aircraft inventory in a big way at the depth of the slump in 2001 and 2002. and were rewarded handsomely when travel resumed.

Around the world, a few are heeding that self-evident, if seldom followed, truth. These include hotels in far-off corners such as Zimbabwe's Meikles  spend US$53 million by end-March 2011 to revamp its hotels to the recently completed $150m restoration of the Washington Hilton.

The need for investing in renovations in markets with double digit growth in new supply such as New York City is particularly compelling as customers are unlikely to return to aging hostelry when there is a wealth of choice. With hotels opening almost at the rate of one a week (the latest being the Trump SoHo), failure to do so could even result in the hotel going under the jackhammer as was the case with this former Holiday Inn in Delaware.

Predatory advertising

May 22, 2010

Iceland's volcanic eruption has spawned more than a few creative marketing ideas in a travel left devastated by its trail of ash including several that seek to thrive on the woes of others. A group of hotels in Britain is looking to cash in on the aviation sector's troubles with an advertising campaign that could be termed as "predatory". The campaign essentially exhort consumers to stay away from flying!

Premier Inn, a division of Whitbread, the UK's largest hotel and restaurant company, along with National Express and Virgin Trains are  preparing to took on British Airways as they geared up for strikes and a continuation of the volcanic ash being belched from Iceland's eyjafjallajokull volcano.

Virgin Trains rolled out a' £6m ad push, attacking the ‘hellishness' of other forms
of transport, showing people transformed into ‘frustrated zombies' by traffic jams and queues at airports. The company reported that a record number of airline customers have turned to its Trains, with a 250% increase in passengers travelling between Glasgow and London alone.

Premier Inn, which counts 578 budget hotels, has run ads that feature Lenny Henry, a British comedian of Jamaican origin. In a departure from previous campaigns, which have promoted features of its hotels, the work seeks to convince consumers to take a holiday at one of its UK outlets.

The head of marketing at Premier Inn was quoted as saying that the flight disruption had been ‘beneficial' for his company's hotels and that it was its ‘biggest opportunity' to enlarge its already considerably slice of Britain's leisure market.

Premier's efforts are neither new nor without precedent. Four years ago, in an effort that took on travel destinations and traveling, a New York magazine sought to push the benefits of the Big Apple and promoted the idea of a "staycation" by encouraging people to spend their vacation exploring what the city has to offer instead of leaving town.

Adversity Marketing - Facing upto disasters

May 15, 2010

The immediate effects of April's volcanic ash are well known with most hotels around the world suffering considerable losses (although Dubai's hostelry had a 25% spike thanks to their airport hub being away from the ash cloud).

Fresh on the heels of volcanic ash is yet another disaster, this time human-made, caused by the oil spill. Incredibly, it's effects are being felt as far as afield as resorts in the Florida pan-handle on Pensacola beach. The Wall Street Journal reports that despite "no waves of oil have washed ashore on Panama City Beach, where the sea remains emerald green and the sand sugar white" hotel occupancy is down 30% from a year with experts fearing occupancy in the teens during the normally packed Memorial Day weekend in May. Yet here, as in the aftermath of other disasters, savvy hoteliers have reacted to thus far unfounded fears of oil spoiling a beach holiday by putting up web-cams on their sites that show in real time the pristine condition of surf on the local beach. The expectation is that it will revive bookings that had tapered suddenly. 

Louisiana which is in the eye of the oil "storm" has its share of resilient marketers ready to take on adversity as exemplified by Sterling Resorts, a company that rents out condos from Biloxi, MS., to Panama City, Fl. Sterling put cameras on beaches to broadcast images to its website while also rolling out a "clean beach" booking guarantee whereby customers can cancel reservations without paying a penalty if beaches were to be closed. The company was quoted as saying "It's allowing our guests peace of mind." Prior to that, the firm's phones had stopped ringing for new bookings.

A crucial element required for a rapid return to "normalcy" after a disaster is the a single source that co-ordinates information with regard to the real-time status of locale. In the case of hurricane Katrina five years ago, despite a well-documented case of government failure, New Orleans Convention and Visitors Bureau (CVB) reps quickly appeared on national TV programs to inform the public of how New Orleans was  recovering from the devastation and within six months hosted its annual Mardi Gras event.  The BP oil spill, on the other hand, is yet to see co-ordinated action from local CVBs. Should the spill do more damage as is expected, the task will only get harder. 

Subsequent to the terrorist attack on hotels and other public places in Mumbai, India, some marketers have actively launched a disaster marketing program where some enterprising (some would call them opportunistic) guides offer versions of "what really happened". Since the affected hotels have been largely rebuilt and relaunched, it allows for a fair degree of interpretation that caters to interests, prurient and otherwise.

Electric ideas

May 07, 2010

The Crowne Plaza in Copenhagen came up with a novel idea to generate electricity by installing "electricity producing bicycles in its gym for guests to use."  The hotel claimed to want to create "a world first by giving guests the chance to help power the hotel whilst getting fit at the same time."  The payoff for the guest is a "locally produced complimentary meal encouraging guests to not only get fit but also reduce their carbon footprint and save electricity and money." They can also use the new electric bicycles "to monitor how much electricity they’re producing via iPhones mounted on the handle bars. Avid fitness fans can also, from June, race against the hotel’s solar panel system in a bid to produce the most electricity."

In a similar vein, Crowne Plaza hotels all over (with a test run in Europe) are embarking on a " new drive to save energy by reminding businessmen and women to switch off laptops and mobile phones in the evening." Guests choosing the "service" will receive a call to their room "reminding them to turn off their technology at 7pm." A not so ancillary benefit to guests is that by turning off gadgets they get a good nights sleep as when left on  through the night the gadgets are only "a physical disturbance but a constant reminder of work that needs to be done." Evidently, in the incessant chase for productivity guests end up being less productive as a consequence of sleep deprivation.

Other chains are not to be outdone in the endeavor to reduce one's carbon footprint by enlisting their guests. The Hilton in Nagoya, Japan announced earlier this week that the hotel "has started offering its guests free use of bicycles to get around the city, part of an experiment that the company hopes will be adopted by its properties around the world." 

Some cities around the world have already successfully implemented the free bicycle idea; these include Paris, Barcelona, Geneva, Stockholm, Montreal and finally, London which plans on rolling it out in July of this year. Two other Japanese Cities (Kyoto and Nara) have already launched a tourist tricycle which "features washi doors (a traditional form of Japanese paper) and lithium-ion batteries. The latter enables the ‘car’ to travel at up to a heady 25 mph. The former adds to the quirky appearance." While many resorts around the world have offered cycles for guests, incorporating both as a fitness and energy saying idea that reduces the carbon footprint in an urban setting is likely to catch on in many more places. Manhattan next?

Booking rooms via a virtual Jeeves

May 01, 2010

Ask Jeeves, a search engine launched over a decade ago drew its name from the fictional character, Jeeves, in P.G.Wodehouse's books who was a gentleman's personal gentleman guaranteed to provide answers to any question asked. While Ask Jeeves or Ask as it is known outside the UK languishes as a search engine, a tech start up, Siri, has come up with an app for the iPhone that "allows users to speak or write natural-language requests into the device"  that caters to a variety of personal needs from restaurant requests to other location based information needs such as information on movies at neighborhood theaters.

Siri is touted as a "virtual personal assistant" with software that uses natural language processing and semantic analysis to know people's interests and needs thereby helping them find personally useful things for them on the Internet.  The genie like app makes use of GPS that is de-rigueur in smartphones and cloud computing systems to satisfy personal needs. Artificial intelligence software enhances that process by enabling the smartphone to be taught not only what one might expect of it but also to anticipate one's needs.

For now, the app works with specific sites such as Opentable for restaurant requests and Google to deliver on other information so, Siri, is not really a search engine but one that makes use of resources available on the internet. It is a question of time before Siri incorporates a hotel search function using one of many OTAs or Google to do so. Potential hotel guests can then merely "ask" their iPhone to point them to the nearest hotel room based on their location and even include parameters such as star ratings in the request.

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  • President of Apple Core Hotels, a chain of 5 midtown Manhattan hotels offering value and comfort in the heart of the city.

    Member of the board of Directors - Hotel Association of New York.



  • The views expressed in this blog are my own and not that of any company, association or organization.