HHOA Newsbriefs | February 2007

INDUSTRY HEADLINES

"Hotels Don't Expect Big Hit From Higher Wage"
"Newsmaker: BET Founder Succeeds With Hotel Funds"
"Ordinance Targets Businesses That Hire Illegal Immigrants"
"Business Notes: The South Florida Hispanic Chamber of Commerce"
"Hotel Boom, No Bubble"
"Minority-Owned Businesses on the Rise in KC"
"Hotel Rooms Scarce in Winter Hotspots"
"Insystcom, Inc. Announces the WiFiLynx? System for Hotels, Resorts, Timeshares and Recreational Properties"
"To Woo Gen Y, Marketers Push Culture, Not Language"
"How to Be a Latino-Ready, Latino-Friendly Employer"
"Resort Developers Brand Alert: 11 Essential Tools to Build a Solid Brand Identity"
"Blueprint/Orlando, Fla.: Trying to Diversify Beyond Tourism"
"Report: Hotel Profits to Slow in Next 2 Years"
"Take the Hotel Room Home"
"MGM Mirage Gamble: Luxury Hotels Sans Casinos"
"Hilton Reunites With Foreign Namesake, Aims to Rule the World"

"Hotels Don't Expect Big Hit From Higher Wage"
Denver Business Journal (01/22/07) Moore, Paula

A recent survey of members of the Colorado Hotel & Lodging Association found that 74.4 percent of hotels in the state do not expect significant changes because of Amendment 42, which increased Colorado's minimum wage from $5.15 an hour to $6.85 an hour. Just 16.6 percent of hotels said they planned to absorb the added cost from Amendment 42 by raising prices, while 3.8 percent said they planned to stop hiring new employees. When asked what they thought the total cost of Amendment 42 would be for their hotel, 65.4 percent said they believed it would be less than $10,000 a year, while 16.6 percent said the measure would cost them between $10,000 and $50,000 annually. The survey also asked hotel operators questions that were unrelated to Amendment 42, including what their booking pace has been for this quarter compared to the same quarter last year. Roughly 60 percent said their booking pace had increased, while 29.5 percent said it was about the same. Only around 10 percent said their booking pace had decreased.
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RLJ Development plans to create a third hotel fund in January. The real estate investment company founded by Robert L. Johnson in 2000 has used the strategy to accumulate most of its 117 hotels, which offer 17,647 guestrooms. Johnson, who also founded Black Entertainment Television, created his first hotel fund after purchasing 11 hotels with his own capital, and Fund II allowed RLJ to raise $743 million, acquire the White Lodging portfolio of 100 hotels, and become one of the larger Marriott International franchise owners. Access to capital remains an issue for minorities, he says, and hotel funds have allowed him to use his own money as well as money raised from corporate and public pension funds. "I believe there is a strong desire among the Marriotts, the Hiltons, the Westins and the others to have minority owners, but the capital is not there in the hands of many minorities who would look at it, and not many minorities understand the hotel real-estate business," he says. Johnson believes the creation of an industrywide pool of capital for co-investing with minorities who can come up with some money, as well as an advisory group, would help improve the prospects for minorities. RLJ President Tom Baltimore, a former top executive at Hilton, introduced the idea of a hotel fund to Johnson, who encourages minorities in the industry to find someone like him who understands how to manage assets, buy hotels, and raise capital.
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Dorchester County, S.C., has passed an ordinance that cracks down on the employment of illegal immigrants a month after Beaufort County passed a similar law. Local authorities will be able to audit employer records to determine the immigration status of workers, and businesses that have illegal immigrants on their payroll could lose their licenses. The ordinance takes effect in July. The Beaufort statute has come under fire from the Puerto Rican Legal Defense and Education Fund in Washington, D.C., which threatened to sue the county on grounds that it oversteps federal law.
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The South Florida Hispanic Chamber of Commerce plans to distribute the latest edition of its Business Guide and Membership Directory in hotels, as well as restaurants, retail stores, and professional buildings. The chamber is scheduled to print 5,000 copies of the guide in late January. The guide will feature information for members, businesses, tourists, and residents of South Florida.
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Investors can't seem to get enough of the hotel market. The acquisitions of La Quinta and MeriStar by Blackstone and CNL Hotels & Resorts by funds controlled by Morgan Stanley Real Estate highlight last year's $32.4 billion worth of hotel deals. But unlike past property grabs, experts say that convergence in the current market should prevent a bubble. "Low interest rates, strong industry fundamentals, a glut of capital and less attractive opportunities in other asset classes, will remain constant through 2007 . . . [while] lodging demand is expected to remain ahead of the escalating supply pipeline," says a new study by Jones Lang LaSalle (JLL). Whereas similar real estate investment booms of the past led to a corresponding boom in construction, "nobody's talking about a glut of construction" in today's market, says JLL Hotels CEO Arthur Adler. Though the cost of hotels is climbing, it is doing so at a slower pace than construction costs, making new development less of an option. As investment continues to rise along with GDP, overseas buyers--drawn by lower yields for longer-term deals--may begin to enter the market.
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The number of Hispanic-owned businesses is increasing in Kansas City, Mo., but owners still face many obstacles, insiders say. For example, minority business owners need to contend with companies' long-standing relationships with suppliers in addition to companies' use of aggregators to access subcontractors, says Marilyn Breitenstein, president and CEO of TWG Consulting, which helps firms target Hispanic consumers. She adds that minority owners must have a good idea of supply chain management and place extra emphasis on expanding their network of relationships. Miguel Meneses, president and CEO of the Hispanic Chamber of Commerce, says the growing Hispanic population is encouraging municipal officials to be more open to minority-business ownership. "There's power in numbers," says Meneses. "Municipalities have new employers coming in that need that work force." From 1997 to 2002, the number of Hispanic-owned businesses in the Kansas City metro area grew to more than 2,300 businesses, according to U.S. Census data. Sales amounted to more than $439 million, a roughly 70 percent increase since 1997.
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A number of factors has helped boost travel to Mexico and the Caribbean, making it difficult for travelers to find hotel rooms there this winter. Antonio Pitta, regional director for Mexico and Latin America for Orbitz and Cheap Tickets, says some $2 billion in private and public funds were invested in 2006 in Cancun, Cozumel, and Rivera Maya after Hurricane Wilma struck in 2005. "The hurricanes are a thing of the past in this part of the world," he says, noting that the short distance from Mexico and the Caribbean from major U.S. cities helps boost the regions' popularity. Additionally, more Europeans are traveling to these regions, especially as they enjoy a favorable conversion rate for euros. Most hotels in Mexico and the Caribbean quote hotel rates in dollars, which fell 10.3 percent against the euro in 2006. Hotel executives say demand has not been affected by new rules requiring air travelers to carry passports if they travel between the United States, Canada, Mexico, Central and South America, the Caribbean, and Bermuda. Orbitz and Cheap Tickets report that bookings at both these online sites have increased 40 percent year over year. Meanwhile, the average daily hotel rate in Mexico increased 7.9 percent to $107.82 in November 2006, the most recent month for which data is available, according to Smith Travel Research.
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Insystcom has taken the wraps off its new WiFiLynx system for resorts, hotels, and recreational properties. The recent agreements for Green Mountain Cabins, Holiday Marina, and Treasure Bay all use the system and its cutting-edge Internet access technology. WiFiLynx protects against the most frequent problems reported by guests, including an inability to easily "Log In;" Internet accessibility in one room but not another; connection loss every few minutes; a slow and inconsistent information rate; and 800-number advice that does not offer a solution. WiFiLynx fixes these problems by employing ASDL distribution through each property's current telephone system to permit access point placement in every room or suite. The technology also boasts a 54-Mbs information transfer rate with a number of user controls and ResortLynx security for the user.
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Advertising agencies and media companies that cater to Hispanic consumers have been recording double-digit growth for the past several years. Now, though, experts say that growth could slow with the narrowing of the so-called "digital divide." Indeed, Jupiter Research reports that 68 percent of Hispanics and 69 percent of African-American households will be connected to the World Wide Web as of this year. With those lines now blurring, marketers will need to pay closer attention than ever to such sites as AOL Black Voices and BlackPlanet.com. Even MTV is having to take a closer look at how it markets to minorities, particularly Hispanic viewers. Carl Kravetz, chairman and president of the Association of Hispanic Advertising Agencies, remarks, "It's not just about language and music, but about connecting with youth with relevant lifestyle issues important to them." The Selig Center for Economic Growth's recent Multicultural Economy study puts the buying power of Hispanics at $798.3 billion, just behind that of African Americans at $798.9 billion.
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In order to do a better job recruiting Hispanic workers, the hospitality industry will have to use recruiting tactics that are different than those used to recruit members of other ethnic groups. Advertising on stations such as Univision or Telemundo--which offer free exposure for open positions--is an obvious way to tap into the 81 percent of Hispanic hospitality workers who speak Spanish at home. A less obvious way to recruit Hispanic workers is to use their families, communities, and churches. Recruitment flyers placed in a church have a certain degree of credibility, as does the recommendation of a parent, sibling, or cousin. Hotels, restaurants, and other hospitality-related businesses can also use word-of-mouth advertising to spread the message that they are Latino-friendly. Once businesses have attracted Hispanic employees, they need to do several things to earn their loyalty and their performance, including providing company and safety information in Spanish. Finally, businesses should remember that Hispanic employees want the same things that everyone else wants from their employer: to be respected, recognized, responded to, and rewarded.
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As vacation ownership businesses proliferate, it is important for resort developers to create a strong brand. The International Society of Hospitality Consultants lists branding among its ten leading concerns for 2007. Hefler International President Lawrence Hefler urges businesses to focus on such things as brand association, which involves people's feelings and beliefs about a brand. The marketing consultant adds, "A shared ownership brand, whether it's a timeshare or a condo-hotel, needs to tell a story explaining who they are and what they stand for in the hearts and minds of consumers. These stories provide a competitive advantage, as they translate information to consumers into accessible emotional terms that ensure a confident purchase." Businesses should also focus on brand essence, or expressing their positioning through key words--for instance, how Disney is connected to the word "magic." Other important branding strategies include incorporating human traits like friendliness or being trendy into a brand and making sure the brand is represented through guest services, uniforms, and room amenities as well as internally via human resources, training, recruitment media, and call-center scripts.
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The Orlando metro area is on the verge of a hotel and commercial development boom. Property & Portfolio Research Inc. reports that nearly 15,600 new hotel and condo-hotel rooms are in various stages of planning and development locally, the second-highest total of 54 markets surveyed by PPR officials. Many of the new additions will appeal to more upscale tastes, building on the city's growing status as a convention destination. Hilton Hotels Corp. alone is planning for three new hotels to begin construction in 2007. In downtown Orlando, meanwhile, non-tourism-related construction is on the rise. Mayor Buddy Dyer's office reports that approximately 3 million square feet of offices, another 670,000 square feet of retail stores and some 8,000 residential units are now under construction. Additionally, the city is funding a new $480 million arena for the Orlando Magic NBA franchise, along with a performing-arts center and a $175 million renovation of the Citrus Bowl Stadium.
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PricewaterhouseCoopers forecasts that growth in profits from hotel rooms will slow in 2007 and the following year, as the lodging industry faces a surge in new hotel construction and a flattening in room demand. The firm's forecast predicts that revenue per available room will increase 5.9 percent in 2007 and 5.4 percent in '08, a decline from the robust 8 percent growth posted during the current year. Finally, the report expects hotel occupancy at U.S. lodgings to be flat in the next couple of years, averaging 63.9 percent next year and 63.8 percent the year after. Historically, the average has been 66.5 percent.
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Hotels offer a great many products to guests and other customers through retail locations and partnerships with other stores. Among the branded items being made available for sale are beds, linens, terry cloth robes, and jewelry. Montage Hotels and Resorts CEO Alan J. Fuerstman says that the program allows guests to take "home an emotional reminder of a memorable stay, and the hotel plants a marketing seed where he or she lives, literally." Weston Hotels was one of the first lodging chains to market itself in this way in 1999 when it began offering its "Heavenly Beds" in Nordstrom's stores. Other hotels are taking steps appeal to all five senses with scented oils, candles, and music filling the air of their lobbies. In fact, marketing experts note that the strategy has become so effective that guests often negotiate prices for items that are not supposed to be for sale, including portraits, leather furniture, and other items in lobbies, rooms, and elsewhere.
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MGM Mirage is looking to make a name for itself in the intensely competitive luxury-hotel sector. In the planning stages are a number of lodgings that will open without casinos, which have been MGM Mirage's core business in the past. MGM Mirage expects to enter into a joint venture with the Mubadala Development Co. in next year's first quarter to operate new luxury properties in such markets as Abu Dhabi, Las Vegas and the United Kingdom. The proposed hotels likely will borrow their names from MGM Mirage's portfolio of upscale brands, including MGM Grand and Mirage. At press time, it was not certain where the venture would erect a new hotel in either Vegas or the U.K. It will face competition from such established luxury hoteliers as Four Seasons Hotels and Ritz-Carlton as well as Harrah's Entertainment Inc., which has embarked on a plan to expand the company's Caesars Palace brand. MGM Mirage ranks as the second biggest gambling operator, trailing only Harrah's.
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Hilton Hotels Corp. spun off its international operations in 1964, giving the new firm--Hilton Group--exclusive rights to use the Hilton name when developing and opening lodgings abroad. Last year, Hilton re-acquired Hilton Group at a cost of more than $5.7 billion. The reunified firm's main goal is to aggressively expand the Hilton chain in overseas markets. With Hilton Group back in the fold, Hilton Hotels now manages nearly 2,800 properties in 80 countries. In recent years, Hilton's strategy has been to sell its hotels and then ink management or franchise accords with the buyers. In moving from a real-estate business to a fee-based operation, Hilton has managed to garner a more consistent source of revenue from management and franchise fees. In addition, Hilton has formed partnerships with other developers in order to share the costs associated with building new lodgings. Looking overseas, Hilton likely will sell off Hilton Group's newer properties to pay off its debt from the Hilton Group acquisition. It will then use the strength of the Hilton name to target such up-and-coming hotel markets as China and India.

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