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The State of the Lodging Industry in 2014

The State of the Lodging Industry in 2014

The state of the industry is good, but it could be better. So what are the major impediments to growth? We asked Four industry experts to share their thoughts on the biggest issues facing hotels this year. Here’s what they had to say.

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Ron Vlasic, 2013 AH&LA Chair and Regional Vice President of Hotels at Kimpton Hotels and Restaurants

Lodging: What issue facing the lodging industry do you think is the most crucial to address?

Vlasic: The biggest thing coming up is this whole living wage thing. I was recently in Australia, addressing the national association and a few of the state ones, and their government has been dominated by the labor party and politics for so long that it has changed their work rules and their living wage. So if you’re a waiter there, you typically don’t receive tips and you get an hourly rate of like $25. Then what the government put in place is this penalty rate—for when an employee works weekends or evenings outside of that 9 to 5 shift—that’s almost double time, which means the same waiter now makes $50 an hour. And if it’s a holiday, the rate is triple. Now in Australia everything is closed during off shoulder hours, and there isn’t a whole lot of development going on down there. They want to get the hotel industry going but American developers don’t want to go down there because the operating costs are so ridiculous. Now this living wage thing is starting to creep up in the U.S. and the Australians said you have to be careful about this because it happened to us down here and now it’s really killed businesses, and we’re having a hard time attracting developers down here.

Lodging: So how do you think the new AH&LA membership model is taking shape?

Vlasic: It’s going well. Probably my biggest anxiety was how do you get an entire industry thinking the same way you’re thinking? How do you convince all of these stakeholders that what we’re trying to accomplish can’t be done without them? Historically it’s always been maybe 20 percent of the hotels in America had an active role and the other 80 percent benefited. What’s interesting is we put together this whole model and the big brands like Marriott, Starwood, Hilton—all those guys said, we’re in support. It was a bit of a gamble, but I think it’s paying off.

Lodging: Last year you mentioned that you wanted AH&LA to work with other associations. Can you talk a little bit about that?

Vlasic: Yeah, I think AAHOA is probably still the most important one to align ourselves with, and it seems like they’re open now more than ever to try and partner with us. We’re also talking and working with the National Restaurant Association on how we could figure out how to do some co-ops or something like that. They’re really open too, so we have a good dialogue with those guys.

Lodging: How about the health of the lodging market, industry-wide?

Vlasic: The East and the West Coasts are still on fire. New York and San Francisco have some strong projections and other markets like Seattle are going to be strong next year too. Cities like St. Louis, Minneapolis, all of these second- and third-tier cities are seeing some growth. So developers are seeing that there’s some big upside to what’s going on in the middle of the country. And other cities benefit from that too. Milwaukee does well, Indianapolis, St. Louis, all those feeder markets, back and forth the trade really picks up so it’s cool to see.

Also, I think Brand USA has done a great job in trying to promote tourism externally. What we’re trying to say is take that same brand effort and then use it internally in the states to try and get people to do those old fashioned road trips—go see the parks, go check out what else America has to offer. I think that might have some legs going into 2014 as well.

Lodging: How’s your hometown Chicago looking?

Vlasic: Chicago has on the radar like 20 hotels being developed in 2014-2015. So the demand is there. And the Choose Chicago initiative combines the efforts of city hall and the convention bureau to create one entity that goes out and markets the city. Basically they’re trying to steal some market share from the coasts. They have the right leadership over at the bureau bringing in the international business, and they’ve had some nice short-term bookings, which are filling in the gap months where we’re usually slow here.

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