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Tourism boom: A bigger bite at the Big Apple

December 25, 2011

New York City reported and feted a landmark that was achieved well ahead of schedule - the arrival of its 50 millionth visitor with 20% of those coming from overseas. Britain topped the list as a source for international arrivals at 1 million strong and, unsurprisingly, the City chose a British couple for the honor by showering them with a jackpot of prizes amounting to $25,000.

The gush of visitors had New York's Mayor somewhat justifiably gushing about the "quality of life" contributing to the uptick in tourism. Seemingly in endorsement of that,  a survey by NewYorkHotels.org, a hotel booking site, found "73% of New York City Visitors Happy With Their Hotel" giving the lie to alarmist headlines from a few months ago about bed-bugs that may have served to deter tourists.

However, the growth in visitation to New York City has also served up unprecedented growth in hotel rooms in most of the city's five boroughs. Official statistics put room inventory growth at 25% in less than five years. What has not kept pace with that is the hotel industry's holy grail - revpar growth that is prefereably exponential. For the same period, in real terms, it is barely treading water at $185.

Almost at the same time but at the other end of the globe, Hong Kong was celebrating its own tourist arrival landmark: the 40 millionth tourist. However, the former British port harbors under 65,000 hotel rooms. New York, in contrast, has the added and unwanted distinction of having the highest operating costs (fixed and variable) in the country.  The Big Apple's hotels also have some of the largest and most prominent hotel debt defaults such as the Westin Times Square reported by CMBS mortgage info provider Trepp with many more to come. Earlier in the year owners of two upscale hotels, The Mark and The Alex, found themselves without the keys to their properties. Clearly, the spate in room supply has been a boon for New York's visitors as real rates remain firmly in check. What is less clear is the fall out from hotel CMBS loans coming due in 2012 particularly if the macro outlook remains choppy or even takes a turn for the worse.

 

 

Virtual vs actual travel. Out of touch with reality?

December 18, 2011

ON24 a provider of cloud-based webcasting and virtual communications solutions recently conducted a survey of of delegates to its annual VUE2011 virtual events conference about the state of business travel and came up with a litany of complaints against virtually all purveyors in the field from airports and airlines to hotels. Worst hit was Houston mostly because of its hot and sticky weather but at second from the bottom was Los Angeles due to its traffic snarls and the airport besides other factors.

Executives at ON24 siezed on the results of their survey to tout their wares. The company's Chief Marketing Officer declaimed that "these results demonstrate that virtual communication is more 'in sync' than physical events with how people today prefer to work." Elided from the announcement was the fact that the nearly 4000 participants were a self-selected and, one might add, biased group given the focus of the conference: "webcasting and virtual environments for corporate communications and demand generation". In other words, the respondents were gun shy when it came to travel for a variety of reasons ranging from pecuniary to corporate restrictions and perhaps also included some weary road warriors.

The reasons for shunning business travel were varied and included legitimate beefs like "winding up with the middle seat on a plane, to security lines, to traveling next to a sick person." Other somewhat dodgy  grouses were "annoying children, arm rest hogs, snorers and overly amorous couples (who) were also called out for their irritating behavior."

Hotels were hammered for a "round of concerns" that oddly, given the fact that the over-wrought epidemic has largely been contained, "potential" bed bugs, noisy guests and one seldom, if ever, heard in real hotels: dirty linens.  ON24 went on to exhort all executives to "avoid the hassles of traveling altogether and instead opt for virtual events and meetings that allow everyone to stay put."

The pitch for greater use of virtual tools is only fair given ON24's focus on "live virtual events" as well as perhaps a real need on the part of many of its clients. Less fathomable is a need to drum up business by unfarily and somewhat disingenuosly hammering the travel industry given the fact that the firm's growth is not predicated on a zero-sum game.

Much like the initial purveyors of video-conference technology who loftily predicted the demise of business travel only to find that businsess embraced both, webcasting and virtual conferences can work more by supplementing  rather than supplanting business travel. Business relationships separated by locales are enhanced, sometimes considerably, by virtual technology.  As in similarly situated personal relationships, they are likely to do better when in touch, physically.

 

 

 

Five star budget hotels

December 11, 2011

Star ratings in hotels have long been an essential and easy rubric for customers to assess the quality of hotels.  Frequent patrons at five star hotels often find that not all are created or operated equally with some lux hotels boasting outrageously expensive and outlandish finishes such as a gold plated Ox statue at the Longxi International hotel in China while others up the ante for service levels by offering "couples" massages where the partner is the guest's pet.

The foregoing is often true for hotels with fewer stars which, predictably, garner less attention. Guests often find that fewer stars do not necessarily mean fewer amenities with many offering give aways such as free wine and Tees on their facebook or twitter campaigns.  However, a new survey by Expedia affiliate, Cheaphotels.org has found that budget hotel quality is a function of its locale.

The report from the "leading provider of budget accommodations worldwide, evaluated budget hotels of the 25 biggest cities in the United States on their overall quality" and found that Washington D.C. topped the list with 60% of the capital city's hotels in the budget category receiving a positive rating. The company based its ranking on feedback from hotel customers who rated 2 and 2.5 star hotels over the past year. Los Angeles ended up at the bottom of the stack at number 25 but not far from the pit lay the nation's two leading cities for room rates, New York and San Francisco at 22 and 23 with an anemic 39 and 34 percent of respondents going for the +ve button for the two cities .

Cheaphotels offered no analysis for the fairly strong divergence, based on location, in positive ratings within the budget hotel class. That has prompted some speculation on why the nation's capital topped the charts. In the immediate aftermath of the financial crisis of September 2008, Washington DC's hotels were full with rates briefly topping the nation's leading hotel city, New York prompting some to remark on the, premature as it turned out, shifting of economic capital to the seat of government.

An op-ed in Digital Journal plausibly suggests that "there is a greater demand for affordable rooms. It is a hub of political activity, drawing great numbers of average Americans throughout the year for the purpose of participating in the political proces." However, a greater demand need not translate into greater quality. The more likely reason for the lower levels of satisfaction for New York and San Francisco is that they have higher, sometimes significantly, rates.

A search for New Year's eve rates on Cheaphotels for the three cities shows San Francisco's rates, on average, at nearly double while New York comes in at triple those of Washington DC. Sticker shock can and often does lead to dissatisfaction. Overlooked is the fact that fares are necessarily higher than those of the rest of the country owing to the significantly higher acquistion and operating costs in the Big Apple and The Golden Gate City.


 

 

Leadership in a digital marketplace

December 04, 2011

The McKinsey Quarterly, a publication from the consulting powerhouse, McKinsey & Company, recently put out a practice brief entitled "How centered leaders achieve extraordinary results" in an effort at understanding the "extraordinary stress" on leaders caused by a fast-paced, complex and volatile work environment. 

The report identified the "five dimensions of centered leadership" as "meaning" as in infusing a sense of meaning both at work and home; "positive framing" in terms of how leaders frame the world - optimistically or pessimistically;  "connecting" with folks "across the ecosystem" rather than linearly down a chain hierarchy;" engaging" to lead change and "managing energy" to sustain change. All great macro points that are brought to bear on a specific example in another report from the Quarterly entitled "Inside P&G's digital revolution".

The article notes that the consumer giant led by CEO Robert McDonald wants to make the company the world's most technologically enabled company. McDonald is instituting a system wide "application of digital technology and advanced analytics across every aspect of the firms—from the way the consumer goods giant creates molecules in its R&D labs to how it maintains relationships with retailers, manufactures products, builds brands, and interacts with customers".

The changes with regard to interacting with customers are probably the most profound and potentially rewarding. The firm uses what it terms as  "consumer pulse" which uses continually updated (based on new information) analyses "to scan the universe of comments, categorize them by individual brand, and then put them on the screen of the relevant individual. This allows for real-time reaction to what’s going on in the marketplace". Leadership then knows that if something happens in a blog and is not responded to  immediately and avoid a situation when they don’t even know about it resulting in it spinning out of control before anyone intervenes.

P&G's view is corroborated by a recent survey from NYSE Euronext which found that both CEOs and MBA students agree that social media will have a profound impact on how companies do business in the future, although CEOs of emerging companies and MBAs are more convinced of this than well-established companies. Most executives supplement digital fact-finding with peer conversations and reading print publications, while emerging-company CEOs and MBAs are more likely to access business blogs, twitter streams and TV. Virtually all see ssocial media as an effective mechanism for customer relationship management.

The digital revolution may lead to Institutions of all stripes reaping significant benefits from leveraging enterprise value at many levels, not least by heightening customer-enterprise awareness. But it also arguably leaves them open to greater negative consequences stemming from miscues such as leaked records of intra-institution missives that were not necessarily for open consumption as happened when a University of Missouri leaked classroom video went viral and triggered an uproar.

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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.


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