Category: DIY Hotels

‘I was there’ will sustain

Main Photo: A ‘socially distanced’ Sylvan Lake (courtesy @papercandie – https://twitter.com/papercandie)

COVID-19 has been a humbling experience for tourism and hospitality owners around the world. Every design, financial and strategic consideration in the airline, hotel, sports, travel agency and restaurant industry (amongst many others) relies on the increasing wanderlust of people seeking to be the first to experience a life-changing moment in person. The post-2009 tourism boom has finally ended – and it took a pandemic to do it.

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RevPAR was slipping but COVID-19 killed things off for good

The (someday) post-Covid world will leave a lengthy shadow of fear. Many will point to these last five months as the time period that shifted mindsets from ‘I was there’ to ‘I saw it online and that’s enough for me thanks’.

I disagree. If anything, softness in the market has been developing for years.

While tourism has grown around the world, boosted by the low cost of air travel, the content marketing and digital media industries have already consumed a significant amount of investment and consumer dollars. The content marketing business will reach $107 billion dollars in 2026, built largely from people that consume entertainment electronically from home and attendance at sporting events have decreased – and continue to decrease – significantly. Tastes are beginning to change, sports (and the value of sports teams) have become increasingly expensive for the average fan (driven largely by the ego-induced bubble of the value of sports teams). The vast majority of teams, musicians, and plays are nearly completely reliant on ticket sales, especially where television revenues have struggled to keep up.

So: Is ‘I was there’ culture gone for good?

Doubt it. There are three reasons that makes me bullish:

Social distancing exhaustion is illustrative

People clearly are not interested in staying indoors – and risking health to get outside

As frustrating and alarming as the photos of people abandoning social distancing to crowd a beach or a hiking path, it’s illustrative of how the inability to achieve ‘I was there’ has reminded people of its importance. Most people, simply put, need to be around other people. An in person shared experience still activates the senses in a manner that we can’t seem to simulate without human contact. Zoom fatigue is killing us and building trust between workplaces or within a business is a constant struggle. We can maintain existing relationships digitally but promotion, trust and sales are still extremely reliant on person-to-person communication.

Near-total reliance on tourism is widespread around the world – and increasing

Thousands of businesses, teams and nations are too heavily reliant on tourism to allow it to fail. Though many airlines have consolidated or closed completely during the pandemic those that remain will see benefit in their ability to capitalize on pent up travel demand around the world. Hotels – with significantly stricter and more reliable cleaning programs than short-term vacation rentals – will benefit from increased consumer trust. Sports teams will continue to work tirelessly to integrate the digital experience into the in-person one. Entertainers don’t have much of a choice; there’s little revenue in streaming music sales, concerts remain the most profitable way to earn money. All these stakeholders will be incredibly aggressive in dragging consumers back and it is working. Even cruise ships have convinced people to get onboard (with predictable consequences) – if anything that should be evidence enough.

Content marketing unsurprisingly needs unique content

Online content marketing requires content – and even this generates clicks

Most importantly, however, in my mind? The most digital of businesses – online content marketing – is reliant on new content and the differentiation necessary to ‘stand out’. As the space gets busier this will require a larger investment in travel, clothing and camera work to be noticed. Flaunting wealth, even in the strangest ways, will still be used to create the envy, fame and popularity that brings the sponsorships and payments to ‘influence’ that makes those stars money. Outside of talent, of course, tourism, travel, and entertainment are still the simplest method for experiential content development.

The tourism industry’s focus needs to be melding the digital and in-person experiences to create reliance on both. I imagine restaurants interactive VR guests that you can interact with at your tables or virtual cocktail creation with the ability to precisely refine ingredients to your whims. Our business will change in creative ways that we have to embrace.

People will still value ‘being there’. If we are to survive, however, we need to embrace technology and ‘level up’ our investment in interactive experiences.

(C) Malcolm Denemark/Florida Today

It’s time for self-reflection, hotel brands

I wrote an article at the end of 2018 about the “Soul of Hospitality”, hoping that our hotel brands would see fit to support franchisees by managing supply growth and reducing the expensive – for ourselves and our clients – brand specificity of their new brand approach. Hotel brands are rewarded by shareholders for lean, often exploitative, growth to sell franchises and saturate markets. Hotel owners are a tool of the game. I never envisioned, however, that our brands would ever achieve that particular self-awareness.

I thought COVID-19 and the protests around George Floyd’s criminally wrong death had changed that drastically. Our brands are grasping desperately for liquidity to satisfy shareholders waiting to jump off the boat. Hilton (here) and Marriott (here) pre-sold billions of dollars worth of loyalty points to Amex (and will undoubtedly tank the value of those points further) in order to stay alive. Do what you have to do and all, I don’t blame them, but surely its purpose should be to support, throughout all their associated hotels, those that the hospitality business employs. Maybe this was the time.

Franchise responses have lacked focus, sympathy for their hundreds and thousands of employees

Sadly, their message to hospitality students – per Adweek’s summary of the virtual NYU CEO roundtable for students and Hotel Management’s discussion summary, at least – were a little hollow.

“All of us, as leaders, have a lot of people looking to us… what they need to have is hope, … a light at the end of the tunnel and it’s our job to give them that”

– Christopher Nassetta, President and CEO, Hilton

“We need [governments] to step in to help our hotel owners, most of whom are small business, navigate from where we are until… we can be going forward”

– Arne Sorenson, President and CEO, Marriott

Both of these individuals have accomplished a significant amount to be in the position they’re in. Both have added plenty of new brands to create more brand supply in major markets. Shareholders are happy, undoubtedly, and I don’t deny the importance of that. In June 2020, however, hotels are gasping for air and their largest variable expenses are directly associated with these brands. I do commend the leadership that Hilton, Nassetta’s company, and Best Western have taken in response to COVID-19. It’s something. After all, others have been downright negligent.

What they have not done, neither before or now, is address the value destruction that their aggressive franchise sales tactics have encouraged or the crippling effect that liquidated damages, excessive franchise fees, and restriction that ‘approved’ suppliers (those suppliers that can pay the brands the commissions and access fees that they desire) can have. Hotel franchises don’t quite see it the same way:

“Not every brand is going to make it to the other side… not to be harsh, but there are going to be winners and losers, and some in the middle”

– Christopher Nassetta, Hilton
No more ‘picking horses’

Our hotel brands need to take the ownership they profess themselves to desire. They dictate who the ‘winners, losers, and some in the middle’ will be this year (and every year, really). Hotels support the livelihoods of millions around the world, many of whom are visible minorities. The success or failure of our brands is critical to this goal, absolutely, but hotels themselves need to survive to support them. Organizations like NABHOOD and AAHOA exist because hotels provide growth meritocratic opportunities for so many to grow and thrive.

If we are serious about supporting hotel owners we need to focus on the survival of our hotels. We need to refocus on fair franchising and supporting aspiring minority hotel owners to get their ‘foot in the door’. We need our hotel brands to help ensure that jobs can be supported sooner rather than later. Like so many of us in quarantine, I hope our hotel brands follow the same self-reflection path that so many of us have taken. Our industry depends on it.

The next wave in hospitality

Investment in the hospitality business is booming. We continue to see constant transaction activity across the United States. The industry has chosen its darlings – the select service upscale brand collection – and they continue to form most of the pipeline of new rooms on market.

These years have been exciting. Good for business. But as the same hotels transact over-and-over-and-over again, the ceiling is inevitable. The next evolution of hospitality is overdue. The market is wondering ‘what’s next?’

The past 10 years’ economic cycle has risen tides for thousands across the country, and social media has (depressingly) created FOMO in all generations. It’s not just snowflake-entitled-lazy-avocado toasters seeking adventure on mom-and-dad’s money, it’s mom-and-dad spending their own savings with a hope to experience the world they provided their children before they die. The wealth gap is increasing yet all Americans – liberals and conservatives alike – are seeking the exact same thing.

The entire hospitality business – I count Airbnb in this as well – hasn’t been ready for the individualized emotional experience our guests expect at all points on their next journey. Hotel brands have responded by adding sub-brands and piles of select-service rooms, most of which loosely following the same hyper-current aesthetic, to try and prescribe these emotions for middle-class patrons. Different brands but still the same, homogenous look, feel and experience at all of them. Not the goal.

Airbnb has pushed to grow revenues too as the ceiling beckons, featuring ‘curating’ units to increase commissions on room sales while trying to convince customers that they are still focused on experience. It hasn’t worked. Room tax issues, expensive units, and the lack of security has hurt but, most importantly, the host-individual interaction that created the feeling of a personally guided ‘visiting the place the locals do’ trip Airbnb built their business on has been lost. Your Airbnb host is rarely an individual with a vacant house, but rather a professional with many guests to look after. Another upscale select-service hotel brand, basically. The magic that made Airbnb special is fading.

Both have missed the target. The affordability and appeal for an exploding demographic is missing.

The opportunity, to me? Economy and lower-midscale brands for the modern traveler.

The economy pipeline, outside of the Motel 6 monster, has been empty. Best Western ceded their territory by kicking economy properties to the curb. Super 8 (Wyndham) and Quality Inns (Choice) are dominant in their franchises but belittled by modern travelers as ‘not for them’. The task, if we choose to take it, is simple: create unique and affordable offerings.

Of all the fluff brands created in the past 10 years, IHG is the only one to commit to an economy/midscale brand. This is shocking to me. This segment can and will grow around the world. There’s demand for hostels for a reason. I can’t understand why the commitment has not been made. Millions of travelers seek affordable rooming and find nothing newer than 1980.

That’s the opportunity I see. First one of us to do it wins.

Understand the Risk: Asbestos

There are plenty of things we don’t want to think about in the hotel business. We don’t want to think about what happens in our stairwells. We don’t want to think about how dirty your hallway carpet gets when it’s been raining outside.

Hotel construction is no different. Hotels requiring renovations are generally old buildings, and old buildings have skeletons. I implore you though – If you’re in one of these buildings, you must know about asbestos.

Asbestos is a compound that has been mined and used for thousands of years. On the surface, it’s a miracle material: it’s sound absorbent, an outstanding insulator and extremely cheap. As such, manufacturers, builders and safety clothiers used it everywhere.

Unfortunately, it’s hazardous.

Asbestos is fibrous and breaks down easily. Those asbestos fibres, when inhaled, cause inflammation and scarring in the lungs. Long term exposure can lead to numerous serious and fatal illnesses: a variety of cancers – including mesothelioma and lung cancer, COPD, thickening of lung canals and reduction of lung capacity. These issues began to be identified in the 1800s but no actions were taken to restrict its use in the United States until 1973. Even still, asbestos has not been banned completely and, as of 2018, the new EPA regime has inconceivably resumed allowing it.

An early indictment of asbestos (and an absolutely fascinating read) – An excerpt from the ‘1898 Annual Report of the Chief Inspector of Factories and Workshops for 1898, Part II.’, prepared for the British Home Office / http://ibasecretariat.org/workshop-report-1898.pdf

Now – I’m not saying rip apart your hotel looking for it. Quite the opposite. Undisturbed asbestos poses little threat. Asbestos fibres are released into the air during degradation, damage and disruption of asbestos containing materials. Knowing is what’s important.

We strongly suggest the following:

1) Identify potential problem areas

Asbestos was used in hundreds of different materials within hotels, but some common items to be aware of (a more comprehensive list can be found here:

  • Any plaster applications – especially walls and mortar
  • Mechanical equipment, especially those from before the 1980s
  • Insulation throughout the property especially around turns, joints or elbows (it will feel especially hard to touch) and within block walls (gravel-looking substance within the cavities of hollow block walls)
  • Drywall and drywall mud applications, especially those from the 1980s and earlier
  • Floor and window levelling compounds
  • Roofing felt
  • Small 9” vinyl floor tiles

2) Get it professionally tested

Educate yourself. Hire an environmental engineer to assess asbestos risk prior to starting work. Test the areas that you’re asking contractors and staff to disturb. Testing costs money, but the liability of a negligence claim is even more expensive. Not knowing is not a defence.

Bring in the experts!

 

Do they look like serial killers? Yes. But they’re the good guys in this story. (iStock)

3) Follow a designated asbestos working environment plan, encapsulation plan and/or abatement (removal) plan

You have three broader options to manage ACMs in your property – a good engineer/consultant should explain all three and make a suggestion on any one or combination of approaches.

a) Abatement/Removal

Pretty straightforward. You have asbestos, bring people in to remove it. When possible, it’s the safest solution.

Keep in mind though – this can cause significant business interruption and put your staff and guests in more danger if the ACMs being removed are difficult to access, cover a large area or require extensive demolition of ‘good’ material to get to.

Removal is certainly ideal but isn’t always the safest option.

b) Encapsulation

‘Encapsulation’ refers to limiting most or all contact with ACMs by covering or hiding them to prevent disturbance or deterioration. Encapsulation can include things such as:

  • Placing a new plywood subfloor above asbestos containing vinyl tile and/or leveling compound
  • Covering an asbestos plaster or ‘mudded’ wall with another layer of drywall on top of it.
  • Installing an acoustic tile ceiling inches below the existing ACM containing ceiling
  • Completely restricting access to mechanical rooms that have significant amounts of asbestos.

Bury that asbestos, lads.

A skilled contractor and strict process is required to install materials over ACMs. Areas being disturbed must remain slightly damp (the asbestos fibres attach to water particles to prevent fibre release into the air). Require your contractor to specifically acknowledge – either within a purchase order, waiver form or executed notice – that asbestos is present on site and their commitment to ensuring safety precautions are mitigated. Have an engineer present to monitor air quality during and after work is complete. Most importantly, once the work is done, compile logs and a map of all work done, precautions taken and all contractors and engineers on site during the work.

c) Strictly follow working plans and procedures for working around asbestos

Ensure that your environmental engineer prepares a working plan and that those most vulnerable – especially maintenance (given that they are frequently tearing things apart and rebuilding them) understand and acknowledge it. Formal training is readily available throughout North America – your local construction association can point you in the right direction. Trained maintenance can protect your staff and guests best. Also, critically, ensure that all employment contracts include reference to the asbestos on site, their locations and procedures for new staff to review and sign.

Be smart out there!

Carpet is not the Devil. Promise.

If you’ve ever hired us for hotel procurement you know that we’re quite particular about carpet. As operators we fear it; it stains, wears, and discolors. Our franchises want us to change it constantly. It’s like a car – the minute you drive it off the lot (or in this case, install it) it’s worth significantly less than what you paid. And ugly. It’s tempting to go in another direction. Our brands have agreed.

However, I’d argue the opposite. Carpet is necessary, practical, even. It provides a better guest experience.

Consider the following:

Torlys’ Everwood Premier LVT tile installed in Entourage sur-le-Lac in Beauport, QC. I never said it wasn’t nice, just that it wasn’t necessarily the best idea for the incremental cost.

1) Doing things properly takes time

Brands generally suggest (and I would concur) that carpet needs to be vacuumed daily and deep cleaned 2-3 times per year. Any more and the wear from shampooing tends to discolor the flooring; any less and stains become irreversible.

LVT is meant to be the solution. LVT doesn’t stain, true. I’d argue, however, that the time it takes to do things properly – vacuum, mop and hand scrub any particularly sticky liquids – costs time on a day to day basis. I know wet vacuums exist and yes, if you have a busy enough wood grain pattern maybe you get away with some stuck-on gum. The diligence required to do it right can increase the housekeeping minutes required per room over time (hours of housekeeping per month/total occupied room nights per month).

Will guests see a wear pattern or staining? No. But dust, dirt, and anything sticky will present itself proudly. Our guests notice, though, and let us know about it.

2) The impossible quest for ‘clean’

Imagine the hard surfaces in your home (or, if you don’t have them, in the gym floor of your elementary school). Imagine wearing nice, clean white socks on those floors (even Youtube knows that this is a thing). If you have hard surfaces now (or even walking on them as you read), you know your socks will have the gray/black outline of dust on them. And it makes sense, really. Without any fibres to hold it, dust sticks to the next soft thing it touches. A clean floor begins accumulating dust the instant the mop is removed.

We know our HVAC units – especially PTACs – don’t filter the small particulate matter in the air well. We also know that our average guest checks in around 3-4 hours after housekeeping is complete. How much dust accumulates during that time?

Additionally, the sheen on a relatively flat/lightly textured LVT in low light situations will always give the appearance of the floors being dirty. That trendy dark wood shows footprints, dust bunnies and hair. All this regardless of housekeeping performance.

3) Noise, noise, noise

This one is self-explanatory. Hard surface is just noisy. At best, you have a hard surface on a 1/8” (maximum) underlay. Carpet has a ¼” pile (approximately) with a ¼” underlay. Hard to compete on sound. Our guests complain bitterly about sound from the hallway, sound through party walls and sound from the bathroom to the guestroom. The value of the additional noise would have to be significant to justify the additional investment.

 

Creative Matters, Inc’s beautiful inset rug. Before it starts getting mopped.

Rug areas in bedrooms – set into the LVT or above – have been the brands’ countermeasure. This doesn’t change much – I’d argue it’s worse. The more transitions of flooring type the greater the risk of water staining on carpet or lifting or cracking of surfaces at the point of transition through repeated impact of vacuums and mopping floors. I never feel it makes sense to add complexity to a housekeeping job – it’s tough enough as is. One or the other is better than both.

 

I don’t hate LVT. A bit of LVT or tile in the entry area? Or public areas? Absolutely. Properly installed in a bathroom? I think this should be considered more often – no grout cleaning of grout and can last equally long if installed correctly. LVT is a fraction of the cost of tile (in most places) and we ourselves (and our clients) have used it with great success in bathroom settings. LVT holds up better to pet and smoke odors and damage. Just needs to be used in the right places, and I don’t believe the bedroom area is that place.

 

If you’re convinced, three things we look for when picking carpet for our clients:

1) A face weight and underlay suitable to the use (rather than simply the brand)

https://www.mohawkgroup.com/detail-durkan/Carpet/8692/144446/Cosmos-Tile

Mohawk’s lovely Interstellar Cosmos tile

*Nearly* every brand has the same guidelines: 32 oz in guestrooms, 36 oz in public areas. One hurdle to be cleared, that’s it. Reality is it’s like saying that every hotel needs an apple. There are hundreds of varieties of apples, each with a different character, sweetness and skin.

We worry less about the weight and more about use, pattern and color. Exterior corridor guestrooms should be extremely busy– with a hard surface entryway to keep some of it cleanable. Interior corridor guestrooms can have less variations of color or pattern but should have a variety of mid-gray or brown tones to keep eyes away from dust and dirt.

 

Don’t do this in your corridors. Or anywhere.

2) Pattern is key

 

Hospitality carpet is different – quite different – than residential carpet. The day to day wear is significantly higher and its importance to the overall character of the room (especially given the size of the space) is pronounced.

A few tips to knowing whether your pattern is suitable:

1) The coffee test. If a carpet sample can hide these stains well then you’re on the right track – coffee causes the most stains in a guestroom (after dirt and dust from shoes).

2) A small repeat. Every carpet sample will tell you how large the ‘repeat’ is – the height and width of the repeating pattern in the carpet. Aim for repeats less than 36”x36” for guestrooms – if you need to seam in patches of carpet it’s significantly easier to hide with a smaller repeat (plus creates less waste on installation). Corridors are required to be more artistic but keep your door drops – the area between sets of doors – a smaller pattern in an accent color. This will get dirty fastest (water staining from hard surfaces inside, wheels sitting while guests enter the room, etc. Good to have something you can readily change.

3) Pile height matters

Tandus Centiva’s surprisingly affordable Change II tile. Doesn’t have to be expensive to be nice!

Residential carpet is much taller than hospitality carpet, generally. We like our carpet at home to wrap around our toes and be extremely soft on our feet. This does not work in a hotel setting.

Look for carpets that have a lower pile height – say 3-4 mm. These will give you the best compromise between comfort and wear. Multi-level pile (‘textured’ carpet) can create another distraction for the eye – but make sure that the pattern this creates remains less than 48”x48” and the difference in height is small.

And, lastly, ensure that you have commercial grade flooring. I know so much of the time this is a farce – and I usually agree – but the finishes and densities of commercial flooring tend to be radically different from household quality flooring. It doesn’t make sense to spend the extra amount in a house but does in a hotel.

Hope this helps! I’d love to get some feedback on your experiences with this. Please contact me through the incorporated form or on LinkedIn at https://www.linkedin.com/in/alim-nizar-somji-133a257/!

Microbrands (and the fight for the soul of hospitality)

Hotel conferences are meant to be relaxing. Spend time with suppliers and friends. Get the ‘rah rah’ speeches from executives. Stay out late. Go home.

‘Networking’ or ‘partying’, depending on who’s asking.

The prevailing feeling this time, coming home from the Best Western Convention, was different – as a Member, as a hotelier and, to be honest, as a guest I was simply concerned. And it wasn’t just a dodgy cocktail.

Just prior to convention, Best Western announced their 12th and 13th brands – ‘Aiden’ and ‘Sadie’. They’ve gone from 1 brand in 2005 to 13 brands in 13 short years. They were absolutely thrilled by it. This blew my mind, especially as market penetration of BW’s existing brands continues to be exceptionally poor (my opinion, of course). And they’re one of the small ones.

Marriott has 30 brands.

Think about that for a moment. 30 different value propositions (theoretically), target customer segments (theoretically), design guidelines (theoretically), brand standards (theoretically), brand scents (theoretically; this was a big, extremely annoying Starwood thing), and logos on napkins (less theoretically – definitely different logos on napkins).

There’s an annoying amount of ‘theoretically’ there.

Think of how many things you have 30 of. Fun fact: that is more than, despite the 101 Dalmatians promised, the number of dalmatians ever named in the original book (6), animated film (8), unreleased early draft of the animated film (10), book accompanying the original animated film (19), live action movie (17), and the entire animated series (29). (the internet is a truly wonderful, random place).

“One of us is named ‘Hyatt House’ (probably)”; Copyright Disney, found https://goo.gl/images/fosNHV. The article it connects to is fascinating.

30 brands to support. 30 development pipelines to service.

FOUR soft brands. It defies reason.

Marriott, Best Western and <insert your chain here> folks are far smarter than I am, of course. They’re worth billions, I’m not. It is unfathomable to me, though, that each can be supported equally. It’s simply not possible.

My argument:

I call these ‘microbrands’ – it’s the best description I can come up with without being offensive. Brand messaging to franchisees on these is simple. Our customers can and will be as loyal to our microbrands as they are to our chains’ major brands. Our customers have specific needs and wants. Once they are trained on the extremely specific value proposition of our brand they’ll stick to it, and that microbrand will be the next Hampton Inn and Holiday Inn Express once distribution picks up. Get in on the ground floor.

Bullshit.

I accept that there are certain brands in every chain that people will go out of their way to find. Hampton Inn for Hilton, Holiday Inn Express for IHG, Courtyard for Marriott (ehh), Best Western (core) for Best Western (a stretch), Comfort Inn for Choice (a bigger stretch), Super 8 for Wyndham (best you got, I’m afraid, but it does dominate economy) and Country Inn for Carlson (I’m including Carlson here because I feel I have to). When those brands defined their subset of the market – the apple of their parent chains’ eye – their evolution was shepherded through by the top minds looking to innovate in how customers interacted with hotels.

Not so much anymore.

Rationally, though, we know why there’s a new brand every two weeks. It’s so Marriott can have 30 brands and 100 hotels in Times Square in NYC. So Choice Hotels can have every one of their brands on the I-10 in Phoenix. So Carlson can have a Country Inn next to a Radisson (that’s really just a hypothetical) somewhere in the country. Franchises have fundamentally moved away from hoteliers. Every new franchise agreement tends towards a marketing exercise rather than a bet of success or failure. The operator is less and less important because market valuation in hospitality doesn’t consider it important.

The valuation process that underpinned the purchase of Woodspring Suites, La Quinta and Knights’ Inn (so, so baffling) should show hoteliers the truth: a brand is worth the value of the committed contracts, liquidated damages and owned assets available to dispose of – no more and no less (I absolutely despise the Motley Fool but this is a decent discussion of it). Marriott unceremoniously dumped Starwood’s prize assets in New York City. The Waldorf Astoria is becoming a residence. We can’t even be surprised.

You’d hope – based on the ‘commitment to mutual success’ we’re told a franchise agreement means – that franchises would be laser-focused on creating the unique experiences microbrands promise but they simply have not. The continuing success of Airbnb and the successes of Solden and others similar are an indictment on our inability to perceive the individuality of our consumers and provide an experience that, when combined with the creature comforts of a hotel, will entice customers back ‘into the fold’. No brand – outside of the W concept, Ace Hotels perhaps – has come anywhere close. The consumer simply doesn’t not connect with microbrands and no matter what any franchise salesperson tells me, increased contribution of new microbranded properties has significantly more to do with the loyalty program and the promise of a new-build hotel than any connection with the brand, period. And, as we’ve already discussed, hotels don’t last forever.

This – this is hospitality done well, kudos to Ace Hotel, NYC; image sourced at https://goo.gl/images/tgmxGj. This link is far less interesting.

Our franchises used to represent more than a model room in a basement in Bethesda or Rockville, Maryland (other head offices are equally applicable). They carried hotels that represented the vision of what brands could and should be. Less brands made this significantly easier, for sure. If the franchise has no exposure to the day to day customer experience, though, they make decisions without context. How can we reasonably expect a franchise to appropriately support a hotelier and brand when the ‘new hotel smell’ is gone? What makes us reasonably expect our franchises’ support of their microbrands – with such limited distribution and (next to) zero risk capital outlaid – will ever truly hold enough attention to evolve?

Microbranding is simply bigger than the money, occupancy and ADR; the soul of hoteling is at stake. Dilution erodes customer loyalty. We may be ‘listening’ (or pretending to listen) to our customers but we’re certainly not hearing their feedback. Our losing market share proves it. Until we start to do so we’ll never earn them back.

Here’s hoping that our chains see it the same way.

A (New) Contradiction in Albertan Entrepreneurship

We’ve changed as a city.

A quick story – a long way to get to my point, but bare with me and I’ll get there:

On March 23rd, 2018, the City of Edmonton voted to permanently shutter and – in all likelihood demolish – Northlands Coliseum.

As our Mayor put plainly:

“The city considered dozens of different scenarios for the building, Iveson said. But the cost to retrofit a building from the 1970s, he pointed out, with a lot of asbestos and other building materials that were popular at that time, which is essentially a big cylinder with awkward structural elements that hold up the stands, is not going to be inexpensive.

“At best we get a buck for the building,” he said. “Lots of people have lots of zany ideas. They would have all cost tens of millions or hundreds of millions of dollars that we don’t have.”

I can understand why the City wouldn’t want to pursue this. Creativity is challenging. Zany ideas are expensive and time-consuming. It takes daring, confidence and brazen stubbornness.

Fortunately, Edmonton is built on that. We built 5,300,000 square feet of shopping mall in marshland. This same City Council has green lighted an 81-storey building – at a time where office, hotel and apartment vacancy are at 10-year highs (I’ve written about this here). We have an actual, 600-acre farm in the centre of this city.

This is Edmonton. Don’t question our stubbornness.

So Ben Gardner of Gardner Architects – had one of these zany, entrepreneurial ideas led a team to create Agora Borealis, a concept that epitomizes that confidence. That ‘big cylinder with awkward structural elements’, after all, is also a large clear-span open space (arena interior) together with well-supported and structurally sound floor elements with decent ceiling heights (concourse levels) and exceptional access to public transit. Use what you can get. Combine this with a massive chunk of transit-oriented development and instantly we’ve hit every major box in the ‘Modern Urban Planning’ checklist. We should be salivating.

Plaza de Toros de Las Arenas, Barcelona (http://blog.apartmentsbarcelona.com/arenas-de-barcelona)

This could be ‘Las Arenas’ of Barcelona or ‘Highbury Square’ of London. At least ‘Stadium Lofts’ in Indianapolis. The building already exists – awkward or not, there are spaces, well below replacement cost, for people to be able to afford.

But we’re not, of course. Council has seen to that, and maybe they’re right.

I’m biased, for sure. I believe adaptive reuse is the highest art of construction. This goes further than that though.

This goes to the heart of how Edmonton business has traditionally worked. Organic growth necessitated by little outside investment. Reutilization and repurposing of existing assets to start along a different path. Every tradesperson, machine shop and construction company embody that commitment. We build businesses, hustle like hell to sell product and services and grow employees that venture out to do the same. Business grows in iterative steps – start and succeed in one vertical or business then start and succeed in the next one. This isn’t just about ‘Wayne’s House’ being demolished rather than reborn into something bigger and better, it’s about a shift in the way we expect businesses to operate.

We have plenty of Edmonton success stories that have lived this organic growth model. Companies like PCL, the Wheaton Group, Stantec and Rexall have transitioned that success into other cities with that same Edmonton work ethic and commitment. They started purchasing other businesses to grow, but the strength of their business was built organically.

We’ve stopped believing that this is the case, though.

Over the last month, the EEDC, Startup Edmonton and TEC Edmonton have come under well-publicized fire for their management of funding for entrepreneurs. Millions of dollars spent yet Edmonton entrepreneurs are still complaining of non-existent support. It’s easy to blame the snowflakes for not being able to figure things out for themselves. But they’re right.

Facebook, Google and Twitter weren’t borne into existence at the top of their fields, yet we’ve funded bureaucracy like our start-ups are already there. Our entrepreneurs are busy discovering fire and our Government institutions are trying to fund spaceships. The tech revolution doesn’t render the ground-up methods that have borne the greatest of our homegrown businesses obsolete. We need to get back to the core of what makes Edmonton business successful.

All businesses live and die on the strength of their founders, management, teams and ideas, just as they have in the past. Our (and our government’s) support and contribution needs to ensure that is the case. Let’s help entrepreneurs set up corporations, payroll and GST numbers. Let’s ease the tax burden with local or provincial SR&ED tax credits that are constructive rather than punitive. Let’s encourage existing property owners to create affordable space for start-ups through waiver of a percentage of property tax.

If there are groups (and there are) that will take on the challenge, then sell the Coliseum for a dollar and see what happens. If there are aspiring entrepreneurs in any field (and there are) that want to try something big, then simplify their cost structure to do so. They may fail, of course. But – if they succeed – they’ll be Edmonton strong.

Exterior Corridor Hotels

Alim’s Unprompted, Unrequested and (potentially) Ill-considered Opinion on: Economy Brands (and why do people sh*t on them)

From time to time I want to use this platform to bitch, complain or otherwise moan. This is one of those times.

Writing the PIP primer – specifically the ‘your brand doesn’t hate you’ section (they don’t – read the post) – got me thinking about the obscure differentiators brands try to steal market share, which got me thinking about a brand that we know and sometimes love that culled a bunch of ‘mom and pop’ exterior corridor hotels in rural markets (and subsequently tried to bring them back without looking like they were trying to, failing, adding their brand to try and further entice hotels – as they should have done in the first place – back and still failing as far as any of us can tell).

People like to sh*t on economy brands. That brand did it. We’ve all done it. We all looked at Choice (confirm) buying Knights’ Inn and thinking a) we didn’t know that was still a thing, b) what pathway to growing that brand could there possibly be, and c) for real – they got real money for that? (with all due apologies to Knights’ Inn franchisees that might be reading this; I assume the 4-6 of you know you still exist).

But why?

Economy hotels are not sexy. Hotels with ‘managers’ quarters’ are (generally) not sexy (apologies to those that live on property). I get that. Yet those friends of ours (that friend of yours that is always complaining about how much work he/she does on property but you know is hungover every morning and starts work at 2 PM) continue to make the money that we turn down.

I think of brand-who-must-not-be-named Harley Davidson partnership here, for example. They took a hard look at the core customer – blue-collar, older demographic, transient road-tripping business – and the hotels they had at that time – highway hotels, exterior corridor, drive to your door rooms – and found the perfect partner for it. And then – inexplicably – gave those customers and properties up to Choice (Quality Inn), Wyndham (Super 8) and Motel 6.

We’re all missing something.

I understand that people don’t necessary want to live in the middle of New Mexico desert anymore (my apologies to New Mexicans – other vast empty spaces with giant grasshoppers and empty highway towns are also available). I know financing is hard to get. I know the customers are extremely hard on rooms. Totally get it.

However – when we measure customer loyalty we can’t ignore the typical extended-stay customer. I would argue that they are the most loyal. People get used to a particular place. For better or worse, those properties have a following all their own. Why say no?

SO – to all of you that are making money on your economy properties: kudos to you. To those of us that are not – it might be worth a second look. And to those of you that own Knights’ Inns – good luck to you hardy few. The grass is (hopefully) greener on the other side (if, indeed, you haven’t all become Rodeways, Travelodges or Quality Inns yet).

</rant>

Your ‘teenage’ hotel – evaluating franchising options

All good things must come to an end.

You’ve made massive (hopefully) amounts of money in your brand-new. Your guests have beaten it to hell, but it still spits out cash like a camel. But you, I and the brand know that the arbitrary ‘we feel that your hotel looks old’ clock is ticking. And, when that point arrives, your franchise sales rep, designer, contractor, general manager, children etc. will be happy to tell you) that everything needs to be replaced. Your guest reviews are slipping. Pressure is building.

The first thought is – let’s do it all. It’s simple – “I can’t afford to lose this brand”.

I disagree.

I understand the ‘protecting the strength of your portfolio’, the ‘I get satisfaction from owning a higher end property’, and the ‘I don’t want to explain to my bank how this brand will make money’, and the ‘this <insert name of other individual that you’re polite to in person but desperately want to beat> will build a <insert upper midscale brand here> next to his and take all my business’ arguments. I get that these hotels to me – Holiday Inn Expresses (especially in the US), Hampton Inns and maybe Courtyards by Marriott (in certain markets) in my mind – are desirable.

I’d also argue that it’s also time to consider selling the property in the 18 months preceding your first major PIP. You know that area and that property – will you truly have a strong return on investment; in many, many cases I simply don’t think it’s there. Get your franchise PIP and comb through it; you know your rate structure (and don’t be afraid to, if you choose to carry out the PIP, try and get a discount). Most importantly understand the revenue contribution that brand brings. Project those revenues and profits out. It doesn’t always make sense.

Ask yourself these 4 guiding questions:

1) How has my customer changed?

 A franchise agreement covers extremely long periods of time. Neighborhoods can change quickly. A ring road can change traffic patterns drastically. The local mine or factory can shut down. The Detroit hotel market flourished, wilted, died and has been reborn in the matter of 50 years.

Consequently, your customers will change. Examine your market mix (comparison of number of guests per market, parking lot counts of yours and similar hotels versus number of rooms sold, changes in vehicles per day count on the supply roads around you. Even the types of cars in your lot can indicate the type of guest you have and give you a good sense of changing customer demands.

Be honest with your assessment. If your business-heavy clientele is migrating to vacationers or industrial workers, work to accommodate them and execute on their required experience. The path of highest profitability will be looking forward rather than fighting with newer hotels to recapture what you’ve lost.

2) How has your market changed?

The past few years have seen unprecedented hotel construction throughout the United States and Canada whether it seemed financially viable or not. Every property in North America has been affected by new supply without question – if you feel yours hasn’t, I’ve got some magic beans to sell you. This product tends to be upscale and above, limited service, and small-to-midsize boxes (75-150 rooms).

A business school staple – a SWOT (strength, weaknesses, opportunities, threats) analysis – for hotels in your regional market works a treat here (instructions on how to do this can be found here). Of the hotels that have entered your market, what segments have they filled? Which hotels have left? What segments have opened up?

New hotels and changing markets shift demand upward and downward. Franchise aside, your renovation should match that emerging market accordingly.

3) What’s the damn hotel made of – literally?

It’s extremely easy to move a wall on paper. You erase them, cross them out or draw around them and they no longer exist. Good times.

Stupid as this sounds, those existing walls are actually real.

That said – what may be achievable on paper may be prohibitively expensive in the real world. Contractors, architects and consultants can be creative, but some miracles are more expensive than others. If your franchise is requiring significant exterior work, load bearing interior walls or adding floors. Plan for the big numbers; if it happens to be cheaper, happy days.

Also – and I can’t stress this enough:

Many of you have heard of asbestos. Most of you should be familiar with black mold. If you have a hotel from the 1990s or older you need to understand whether either of these two things will be a problem.

Know what you’re getting into. Remember – liability for contractors, guests and employees that interact with damaging materials is borne by the Owner primarily.

Protect yourself and do what’s right.

4) Honest Quantitative Unemotional Assessment: Does maintaining your franchise still make sense?

The scariest question in a PIP situation.

The pressure from banks, partners and franchises to stay in a system can be insufferable, but what truly drives an investment decision? We’re in business to make money, and the status quo isn’t always the best.

Let’s consider a base case: an older upper midscale hotel (say three design generations old). 100 room, 3-storey interior corridor hotel. Franchise wants a massive overhaul; the total dollar amount is $20,000 per key. If not, you’re out and finding something new. You currently do $1,780,000 in revenue – $75 ADR, 65% occupancy – at a 30% margin, equating to profits of $534,000. A midscale franchise offers to convert your property with minimal changes – carpet, paint, artwork, signage and linens – at $3,000 per key.

What’s the best way to evaluate this?

Option 1: Stay Upper Midscale

At $20K/door your renovation costs $1,700,000. You fund your renovations through an interest only loan at 5%.

You estimate that the renovation might bring back a few old corporate accounts and sneak the occupancy up to 70% and pull up your ADR to $80 even though the brand and target customer are still the same. New revenue of $2,044,000 and $613,200 in profits. That, less the $85,000 in new interest per year, takes us to $528,200.

Option 2: Move to Midscale

Your midscale renovation, at $3K per key, costs $300,000. You borrow these funds at 5%

You estimate your occupancy at 65% but drop your ADR to $70. Revenue goes down to $1,660,000 and $498,000. That, less the $15,000 in new interest per year, takes us to $483,000.

At these numbers we have an overall difference of $1,400,000 ($1,700,000 – $1,400,000) in construction costs yielding an additional $45,000 ($528,200 – $483,000) in income. A quick, back of the envelope return rate of $45,000/$1,400,000 is 3.2%, notwithstanding the additional risk of taking on a larger loan.

I understand the math will be different for each case, but is it truly worth it?

If you choose to stay with your current franchise, talk to your contractors and compile a list of the big-ticket items of their plan. Walk your franchise or PIP representative through your math. Your franchise should want you to make money; if they understand the pain points then they can do something about them. Push for additional time or a lower fee structure to get them done.

 


 

You have a decision to make. I don’t envy it. Insofar as possible take the emotion out of it and make the best decision at the point you have it. Projecting the future can be a fool’s game, anyway. If it wasn’t, Greg Oden would be a superstar, Britain would still be in the EU, no one would have purchased Knights’ Inn and I’d be dining out on my Amazon stock from my high school days ($13/share!!!) and not writing this.

Surviving Your PIP

PIPs make people upset. They’re scary. They’re uncomfortable. They’re emotional.

Current franchisees, you love your property. You’ve enriched your brand on the back of your blood, sweat, tears and mental well-being. Suddenly it’s not good enough anymore. New purchasers, you’ve taken a massive risk to purchase a property and the brand wants every penny from you. Designers like expensive things. Construction gets delayed. Customers are upset.

And all the while, with deadlines coming, you must decide which of the 18 shades of blue to put on an obscure back of house wall.

It sucks.

I’ve ‘shot’ many a brand messenger selling their brand’s new initiatives (though I bet I was always right). Franchises arrange PIPs to achieve maximum consistency. Whether we agree with this point or not (and I don’t, necessarily), our brands design their businesses around our customers wanting it. I won’t argue that the PIP process is fair, even-handed or always beneficial to the owner or the franchise (I will address in the future).

Unfortunately, we agreed to the process when we excitedly signed our franchise agreements. So, since this process is unavoidable, always remember these 7 key points:

1) A PIP is not a malicious attack on your property. Honestly.
Designers are passionate people. They’ve spent months trying to translate your brand’s positioning in carpet, tile and artwork. That’s what they get paid to do. They don’t hate you.

But speak up. You know your property better than anyone else. You know your guest feedback. You know guests like to slam the barn doors your brand requires shut. You know If your guests will track mud into your Super 8 prototype light gray carpet (someone explain to me honestly, why? Have a look at the pictures if you don’t believe me).

Help your brand designer and representatives make their case. Show why a standard item or colour won’t work. Offer a trade. Franchises may accept an improvement to an item not called in your PIP (or overbuilding one that is) in place of implementing something prohibitively expensive (damn cast iron tubs, for example). We learned that lesson the hard way. I am still paying for not fighting a brand designed room package that we knew was stupid.

A designer’s objective is to find common products for all hotels in their system, not just yours. Certain things will financially unfeasible or impractical for your hotel. It’s on you to prove that.

2) Use your consultants, contractors, subcontractors and suppliers – they have the experience to help

Shameless self-plug, I know, but still –

I’ve wasted a ton of time looking at for better priced alternatives to brand designs or items. Every time, without fail, my contractors, suppliers and designers have found alternates significantly quicker than I have. That’s what you pay them for.

Every minute of interest, customer disruption and out of order rooms costs money. Your time costs money. Lean on the people that you’re paying to do the job. Ensure that your contractor has hotel (or at least multi-family) experience. If you’re intent on self-performing your PIP, push your subcontractors and suppliers to recommend possible alternatives.

Most of all, look at the big picture and focus on finding margin in your biggest ticket items. Pick your battles – financially or otherwise – and ensure your contractors know you want options. If they can’t or won’t, find new ones.

3) Shop around to all the approved (and unapproved) vendors on your lists

Brands will generally provide you multiple approved suppliers for every item on your PIP. These items tend to be similarly priced.

Don’t settle. Different suppliers have different promotions, capacities and backlogs. Some suppliers will need your business more than others, some will want to get approved for the brand you’re building. Get pricing from as many as possible for your key big-ticket items.

Procurement companies (we do this too – shameless plug #2!) – can save you money over and above their fee. Be careful, though. Check their references. Talk to your brand representatives – if they frequently work with your chain your brand will know them.

4) Create a model room – fast

I know this is expensive, but I can guarantee that a model room will save you time and money. Materials perform differently depending on location. Dust levels, weather conditions and even housekeeping cart style can impact performance or longevity of the items you’re using. It’s always better to see it and walk through it up front. You, your general manager, housekeeping, maintenance and customers will all have an opinion on whether a product will make sense in your hotel; why discount that?

Furthermore, renovations can be exercises in uncertainty. Age, market conditions and availability of construction materials will range widely from property to property. There’s no way of preparing a full scope of work without understanding the full breadth of a job. Your architects will thank you – more accurate drawings and less rework. Your contractors will thank you – a good model room will make installation heights idiot proof. Your brand will thank you – pictures of a renovated room will make asking for that 3-month extension that much easier.

5) Walk your rooms – often

You test drive a car before you buy it. You inspect a house before you purchase it. Your hotel renovation can dwarf the cost of both of those. Walk your rooms and itemize changes in writing (even if your contractor is making changes for free!). After awhile all rooms begin looking the same. At some point details start to blur together and items get missed. This way everyone is on the same page.

Regardless of fault, get what you intended. You don’t want to bring contractors back. Pay for the things that you missed, have your contractor fix the things that they missed and walk the rooms with construction staff prior to accepting rooms back and checking in guests. Multiple eyes are better than one.

6) Keep your customers, employees and brand informed

Customers come and go at all hours of the day. The average construction day, however, is fairly well-defined. Our guest surveys tell us that these are not always the same.
Guests have common expectations regardless of brand; they need working toilets, beds and showers (generally in that order). Construction will impact all of those things at some point. Be honest with your customers and let them know what’s going on.

No one likes surprises, but everyone likes shiny new things. Your hotel renovations will excite them. Show them pictures and drawings of your beautiful new rooms. Keep them informed and set expectations at check-in. Your Medallia will thank you.

7) Renovations will always take longer than expected. Count on it.

Every stakeholder in a construction project use best case scenarios in their renovation timelines. Everyone wants to be done as quickly as possible. Surprises are unavoidable though – items don’t fit, lighting needs to be rewired, mold needs to be removed. Things happen.

Accept that the renovation will not go exactly as planned. Accept that you’ll have unforeseen issues. Accept that it’ll take longer than your contractor’s optimistic timeline while still pushing them to keep tight on it. But don’t sacrifice. You’re paying for a renovation that should last many years. The result will be worth it in the end, I promise.

 

As always, I am happy to answer any questions or concerns you might have about your hotel renovation! Reach out to me via the contact page and I’ll get back to you as soon as I can!

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