Blog Posts By Author: Howard J. Wolff

I recently spoke on a panel at The Lodging Conference in Phoenix on the subject of "Practical Green Concepts in Design, Construction and Conservation Practices." The session moderator, John Scaggs of HVS Eco Services, noted that we have the technology to monitor energy and water usage in individual hotel rooms. If we can do that, why not provide an incentive to guests to conserve resources by letting them know at check-out how their usage compared to the average and offering them a rebate if they used less water and electricity.  

I made this suggestion, and fellow panelist Bill Weinaug of X-nth took it a step further: Why not build it into a hotel's guest rewards program? You can earn conservation points that can be converted to a free night's stay.

If there are any hoteliers reading this, feel free to steal this idea and run with it.

Guest aren’t motivated to save a hotel's money by not having their bed linens and towels laundered each day of their stay. They view the practice somewhat cynically. But if they are saving their own money, it could change behavior and be a win for the environment, a win for the property, and a win for the guest.

When times are good, hotel owners don't want to impact revenues by taking rooms out of circulation and embarking on a renovation program. Paradoxically, today, poorly performing properties in need of a facelift lack the necessary revenue to do anything about it.

Alas, a Catch-22: If your property is making money, you don't feel the need to renovate.  But when occupancies are down and you feel the need, you don't have the money to renovate.

So, when is a good time to renovate?

John F. Kennedy once said, "The time to fix the roof is when the sun is shining." In terms of the economic climate, these are cloudy times at best (even stormy, in many locations). So, what can a hotel owner do today who is strapped for cash?

Find some money. Invest in capital expenditures and make decisions with an eye on ROI.

WATG has coined the term "RevPAD" to refer to the impact that creativity can have on a hotel's top- and bottom line: Revenue Per Amazing Design.

The most obvious advantage of renovating in this environment is cost savings. Now is the first time in the 30 years I've been in the business that construction costs have actually come down. Historically, they have gone up steadily, if not sharply. Today, in many parts of the world, costs are down by over 10% from just six months ago. According to statistics compiled by Rider Levett Buchnall, construction costs in cities like Denver and Seattle declined by as much as 8% in the first quarter of 2009 alone.

A second advantage: When business is slow and occupancies are down, there is less disruption to guests and less impact on cash flow from operations. On top of that, construction can proceed more quickly, and property owners can get the word out that their hotel is newly renovated and open for business.

Properties that have been newly renovated will be in the best position to restore and/or raise rates and increase occupancies. Hotels that defer needed maintenance and refurbishment and wait until times are better will miss being able to take full advantage of the inevitable upturn.

When planning a trip, travelers seek out hotels and resorts that are either new or newly renovated. Data from a study conducted by STR and Hospitality Advisors LLC shows that, over a five-year period, revenues for renovated properties increase at three-and-a-half times the rate of un-renovated properties.

Bottom line: Hard times are good times to prepare for better times.

The story of Four Seasons Hotels and Resorts is a tale of remarkable expansion, continual innovation, and a single-minded dedication to the highest of standards. WATG has had the pleasure of designing a dozen built Four Seasons properties around the world, including the recently-opened Four Seasons Resort Mauritius at Anahita.

Despite their stellar reputation, Four Seasons has not been immune to the troubles that luxury hoteliers are experiencing in these economically turbulent times. As everyone struggles to emerge from this downturn, we can learn something from Four Seasons in terms of their uncompromising commitment to maintaining the service, quality and culture that distinguish their brand.

Isadore (Issy) Sharp, founder, chairman and chief executive officer, wrote a book this year entitled "Four Seasons: The Story of a Business Philosophy." MSNBC.com's Christopher Elliott interviews the respected hotelier about how luxury fits in the global recession. The interview - and the book - are worth a read. There are lessons in it for all of us.

Having just returned from the NYU Hotel Industry Investment Conference (1-2 June), I can tell you the sentiment seems to be that this is as bad as it's going to get. Now the question is: When will it get better?

Individuals at this conference seemed less depressed than they were five months earlier at the Americas Lodging Investment Summit (ALIS) in San Diego, when the general sentiment seemed to be, "It sucks all over."

In town for the NYU conference, Arne Sorenson, president and chief operating officer of Marriott International, offered his thoughts to a CNBC audience, suggesting that hotels in the US will start to see improvement in occupancy and RevPAR in the second half of this year (aka as early as next month).

Frits van Paasschen, president and CEO of Starwood Hotels & Resorts Worldwide, agreed that the panic seen during the past eight months is waning. "We see the beginning of confidence," he said. "There is major pent-up demand; there will be a rebound."

Gilles Pélisson, chairman and CEO for Accor, said he couldn’t be as optimistic as his fellow chief executives. "We don't yet see a very high level of recovery," he said, adding that European countries that have been hit hard, such as Spain, still are in dire straits. He also said France and Germany, which have been two of the strongest economies, now are slowing down.

Steve Rushmore, president of HVS, suggested that there is some good news in our current state of affairs. In his opinion, the relative lack of new hotel supply in this downturn will lead to a "rapid and strong recovery." Hotel real estate values (down as much as 50%) will lag, however, and are not expected to recover until 2011.

When it comes to looking down the road, everyone seems to have limited visibility. Predictions are, at best, educated guesses. All we can say with some certainty is that - no matter what the pace and how tough the journey - things will get better. Even the pessimists reluctantly agree.

I’m not an expert, but I play one at conferences.

Last week, I was invited to speak at a "Marketing Now" conference in San Francisco. The organizers presented WATG with a first-place Marketing Excellence Award for the design of our web site, and I was invited to speak on two panels on "new media."

Thanks to Dean Kawamura, WATG's marketing resources manager and webmaster, I was able to share some useful bits of information:

Web traffic – Of the 60,000 visitors to www.watg.com so far this year, half find us through search engines, a quarter from referring sites, and a quarter from direct traffic. Those who find us directly arrive through over a dozen variations of our name, including misspellings of Wimberly Allison Tong & Goo.

Search engine optimization – There has been a four million percent increase in web pages on Google in the last decade! 68% of searchers don't go past the first page of results. So, if you're not on page one, you're virtually invisible. The key to high rankings is regularly adding keyword-rich content.

Global differences – www.watg.com has had visitors from 171 countries and territories. While most spend an average of four minutes on the site – usually searching for information about our projects – those who linger the longest are from Azerbaijan and Lichtenstein (13 minutes), Bahamas (14 minutes) and the Seychelles (17 minutes). Those who view the greatest number of pages are from China and South Korea.

Twitter – According to fellow panelist Vik Duggal, "Twitter is word of mouth on steroids." Last year, Twitter was #475 on the list of referring sites to www.watg.com. This year, it has risen to #17. We are following over 1,700 clients and thought leaders, re-tweeting their tweets and sending them information of interest anytime we post something new to our web site.

By the way, Hyatt, Marriott, Fairmont, and Aqua Hotels & Resorts are among those who have found very creative business uses for Twitter and other social networking sites.

Other topics of interest to attendees of this conference included e-newsletters (the best day and time to send them, apparently, is Friday morning); video on web sites (www.fliptv.com and www.vimeo.com); blogs, podcasts and a host of other new technologies.

What I learned is that there are very few "experts" in new media; there are simply those who are embracing it (and learning as they go) and those who are neither.

I first asked and answered the question in relation to incentive travel that might be perceived as frivolous – or worse – fun.

Now, we have the so-called swine flu to contend with – the H1N1 virus. It strikes me that the general public is handling this in a reasoned and reasonable way, unlike the media, who seem intent on alarming us. "Is it time to panic yet?" asked one news reporter last week. And government officials, in many cases, have been fueling the hysteria around the world.

"This is kind of the one-two-three-four-five punch," says Jan Freitag, a vice president at the hotel-tracking firm Smith Travel Research. "You have a global recession; business travel has been severely curtailed; leisure travel is curtailed because people are not sure they're going to have jobs; you have a lot of new hotel supply in the pipeline; and oops, now we have the European Union suggesting that travel to the United States is a mistake."

I am impressed that ordinary citizens seem to be going about their business. They are taking common-sense precautions, like frequent hand-washing, and staying home if they have flu-like symptoms. And, yes, they are continuing to travel.

Last week, I was on five airplane flights – all full – and people seemed to be taking all the hysteria in stride. I suspect there are three sorts of travelers: those who are immobilized and have decided to stay home; those who are cautiously proceeding with their travel plans; and those who see this as a terrific opportunity to snag great deals on hotels and flights. It seems hospitality investors can be grouped into three similar categories: those waiting on the sidelines; those embarking on well-thought-out capital expenditure programs; and those ready to snap up properties at bargain prices.

We're working with clients in the latter two categories, helping them evaluate the best opportunities for investment. Those looking to buy, renovate and/or develop seem to be heeding the advice of Rahm Emmanuel, President Obama's Chief of Staff, who recently said: "Never allow a crisis to go to waste. They are opportunities to do big things."

I remember, following the attacks of 9/11, that Japanese tourists stopped coming to Hawaii because they felt that it would be insensitive to be enjoying themselves when America was grieving. Very thoughtful. But not very helpful.

Today, many companies are cancelling meetings at hotels, not because of finances but because of the perception that such travel will be viewed as frivolous. Call it the AIG effect.

Case in point: Goldman Sachs reportedly paid a $600,000 cancellation fee recently and moved a technology conference from Las Vegas to San Francisco, a more expensive city in which to meet. Even companies not receiving federal money are now afraid to travel for fear of being criticized.

Destinations like Las Vegas and Hawaii are particularly hard hit – despite the great bargains they are offering – because of the concern over how it looks to travel to leisure destinations when times are tough. The cancellation of travel plans is having serious negative economic consequences. The loss of business is exacerbating the loss of jobs ... housekeepers, dishwashers, servers, florists, event planners, even designers.

Hilton area vice president Jerry Gibson watched $12.4 million in business evaporate within the last 45 days, when several companies cancelled corporate incentive meetings at their Hawaii properties.

Recently, some of the biggest names in the hotel industry wrote a joint letter to the US Congress with the message that a "robust travel industry is a powerful economic stimulus."

When "Saturday Night Live" resumed broadcasting a couple of weeks following 9/11, they had Mayor Giuliani on to open the show, along with the firefighters and police officers of New York, declaring that despite the terrorist attacks, New York City will run as normal and Saturday Night Live will go on as planned. Lorne Michaels, the producer, asked the mayor, "Is it OK to be funny?" and Giuliani replied, "Why start now?"

The bottom line: It's OK to travel. It’s good for business and essential for the economy. Pass the word.

Here's a little exchange I had with a banker at ALIS (Americas Lodging Investment Conference) recently in San Diego. We were among the 2,300 in attendance.

HJW: Why are you at this conference?

He: I just wanted to get a sense of how bad things are.

HJW: And?

He: Things are even worse than I thought.

HJW: So, are you making any loans for any projects at all?

He: No. If I make one bad loan in this economic climate, I'll get fired. When times are good, we have more leeway.

HJW: Well, forgive me for saying so, but it seems you're a big part of the problem. Bankers get a bailout and then are afraid to lend money. A deepening recession becomes a self-fulfilling prophecy.

He: You're right.

Awkward but honest.

Seems to me that smart money would be going into viable projects now. These properties will open ahead of the competition, when the economy inevitably rebounds. Any brave bankers out there?

I'm speaking this month at a hospitality conference in San Diego - ALIS (Americas Lodging Investment Summit) – on a panel entitled, Design as a Differentiator. The subtitle is: "Why do some hotels outperform others? Because catering to the lifestyle of your customer matters." Bad copywriting, I'd say. Why even bother to show up at that session, when you've already got your answer?

Taking for granted that design can be a differentiator, and assuming that catering to customers' lifestyles can be achieved through design, what are the drivers?

Today's travelers are looking for four things: a connection with people and places; physical and psychological comfort; a greater choice of guestrooms and amenities; and convenience. And they want to feel that they are getting these things at a great value. Owners, operators, and developers who understand the public's changing demands stand the best chance of capturing the lion's share of business in this competitive environment.

Successful destinations mirror co-existing desires of their guests - providing settings for  privacy as well as for connection. Choices for social interaction abound. Wireless Internet access is offered in lobbies not just in guestrooms and business centers. Lobbies are being outfitted as casual living rooms. At night, pools are being transformed into al fresco nightclubs. The numbers demonstrate that people are leaving their rooms, even when they don't have to. They are using fitness facilities, spas, and restaurants and lounges on the property.

As a counterpoint, guests sometimes want to cocoon themselves in an insulated, private world; and guestrooms and bathrooms are growing in size as a result. In the luxury market, bathrooms are approaching 50% of the square footage of guestrooms. Hoteliers are providing more luxurious amenities and more sophisticated technology for guests. They are also waking up to the fact that 85% of Americans consider themselves environmentally conscious, so more and more hotels are going green by design.

In today's uncertain economic times, traveling professionals feel like they have to stay in touch, even when on holiday. In a survey of 5,000 executives, four out of five confessed they end up working during their vacations. Others are shortening their leisure travel getaways. Those who are choosing not to forego the family vacation are finding that children and teenagers can wield veto power over destination choices.

To appeal to kids, the emphasis is on interactive "experiential" programs. To accommodate the whole family, more connecting rooms are being designed into resorts. At luxury properties, the trend is toward two-bedroom villas, so kids and their parents can both enjoy "togethering" without sacrificing privacy or a sense of space.

Today's resort guests want the feeling of comfort and security they left at home. In fact, home, comfort, and security are paramount concepts in current hospitality design. Post 9/11 – and with every subsequent terrorist attack as a reminder – safety is on the minds of international travelers. The nature of hotels is to be open and welcoming; the design challenge is to help hoteliers and their guests feel safe and secure without turning their properties into fortresses.

The desire for convenience starts with having the right location and then extends to making every guest interaction with the property an easy, expedient and positive experience. Convenience is often taken for granted and, therefore, more apparent when it is absent - noticed through feelings of frustration, annoyance and aggravation when things don’t function as smoothly as they should.

Differentiation by design is much more about substance than style. Delivering enduring quality, functionality and impact in hotels and resorts is the over-arching goal. We and our clients need to take a long-term view of their investments, focusing on trends rather than trendiness. If we do our job well, our designs will be both timely and timeless... and sustainable in the broadest sense of the word.
 

Steve Wynn, our visionary client, is an optimist. In spite of declining occupancies at Las Vegas hotels and construction projects cancelled and delayed, the $2.3 billion Wynn Encore is on course to open by the end of December and set new standards for luxury.

In a year that has brought layoffs at some Las Vegas casino hotels, Steve Wynn has been taking applications for 5,300 jobs (from over 67,000 applicants) at the new 2,034-suite Encore. "It's sort of like dancing at a funeral. I feel guilty that my company is in such good shape," the 66-year-old Wynn was quoted as saying in a recent Wall Street Journal article.

I had the privilege of visiting the property recently, getting a tour from Bill Vendenberg, a member of WATG’s construction administration team. It’s looking good!