HP Hotels Fall 19

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HP CORPORATE PARTNER NEWSLETTER- FALL 2019 THE TROUBADOUR HOTEL IN THE NEW ORLEANS CENTRAL BUSINESS DISTRICT IS A NEW ADDITION TO THE HP HOTELS PORTFOLIO A Message From the Executive Team Welcome to the Fall edition of our corporate newsletter. HP Hotels recently concluded our annual leadership conference, held this August in Orlando. This engaging and successful event focused on team building and preparing for the future of hospitality, with its fast-moving trends in technology, investment and the guest experience. We also emphasized the personal development of our people throughout their careers with HP Hotels. Our goal: preparing our managers for success. We continue to add to our portfolio, a recent addition being the Troubadour Hotel New Orleans, which we are managing for Everwood Hospitality Partners.  We already manage one property in New Orleans, and the Troubadour reinforces the value of market-specific knowledge and concentration of resources, as we have in other strong markets. Certainly, the hospitality industry is abuzz with the announcement of the merger of Aimbridge and Interstate, which were already the two largest third party hotel property managers. Despite the blockbuster nature of this merger, we believe it will afford property managers like HP Hotels additional opportunities to distinguish themselves from the competition. We discuss these issues further in this newsletter.  This newsletter also features an exclusive interview with Kirk Kinsell, a member of the HP Hotels Advisory Council who gave the Keynote Address at our Annual Conference. A widely respected industry veteran, Kirk shares some excellent insights on the basic tenets of the hospitality industry and what quality property managers bring to the table for ownership.  As always, thank you for your continued support. Charles, Joe, Kerry & Mike 2 Fall 2019 Market Overview Predict something long enough and it like large family reunions, non- may eventually come to pass. After an business conventions or local extraordinary run of quarterly gains in sports teams to help drive RevPAR for the hospitality industry, occupancy. Thus, astute operators most observers agree that the overall will continue to be disciplined and industry is finally softening.   mine market specific opportunities.  This was borne out by the STR industry Last, the Aimbridge - Interstate data for the first week of September merger, discussed elsewhere in this 2019, with albeit small but negative newsletter, creates an entity in year-over-year results in the three key many ways equivalent to Marriott- performance metrics of Occupancy Starwood and the largest brands. (-1.1 percent), Average daily rate (ADR) Similarly, Marriott International (-1.0 percent) and Revenue per available recently reached an agreement with room (RevPAR) (-2.1 percent). the Expedia Group, making it the exclusive distributor of Marriott Regardless, we are approaching an International wholesale and election cycle, a time when the promotional room rates, availability, incumbent administration usually and content.   pursues policies aimed at sustaining a strong economy. Overall, based on These partnerships reflect some of previous election cycles, the hospitality the dynamic forces impacting the industry is likely to experience modest hospitality marketplace and swings over the next 18 months. emphasize the role of property managers like ourselves in staying These developments emphasize, should alert to trends in areas that include companies rein in business travel, the booking and reservations, importance of leisure travel and other consumer preferences, technology forms of market-specific group sales  implementations and staff development. 3 LARGE THIRD-PARTY MANAGEMENT COMPANY MERGERS: HOW DO THEY AFFECT HP HOTELS AND THE OVERALL INDUSTRY? The Aimbridge and Interstate merger, subject to regulatory approval, will join together what are already the two largest third party property managers. Certainly, this is something that has been on our radar, as private equity has flowed into property management, reflecting the overall strength and investment appeal of the hospitality industry. How does this merger impact HP Hotels? Hospitality is founded on relationships, which plays to our strengths, thinking and acting like an owner and being accessible and responsive. There are many touch points in the relationships that property managers have with guests, within our own organizations, with vendors and strategic partners, and with ownership. These can get frayed or lost when hotels become “just a number.” Mid-sized firms like HP Hotels are able to implement the same leading-edge technologies and property and asset management systems as the largest entities. At the same time, we offer the ability to forge long-standing, personal relationships with ownership, as well as closer lines of communication within our organization. Moreover, any individual on our executive team is directly and instantly accessible to property owners. This merger will drive us to further cultivate the positive differences that we can offer to ownership, which we welcome. How does this merger impact HP Hotels? With time, HP Hotels believes that the full financial and operational costs of working with the combined Aimbridge-Interstate entity and other larger entities will become clearer and be compared to those that are associated with smaller, quality management companies. For example, we know that owners are becoming more sensitive — as they should — to the full range of fees to which they may be subject when working with major entities on the property management or brand side of the equation.   4 The gains made recently by negotiating better rates with the OTAs and driving more direct bookings through brand or property web sites is being offset by the full range of fees that the brands and mega-property managers like Aimbridge-Interstate are imposing. These pass-throughs (“fee creep”) beyond the basic franchise or management fee have been growing in recent years in areas like technology, human resources, reservations or sales and marketing costs.  These are not optional, but mandated expenses that dig away at profitability. Overall, an entity like HP Hotels offers excellent value to ownership through having access to industry-leading technologies and systems; in possessing quicker decision-making and problem solving; and in emphasizing transparency with and advocacy for ownership. HP MAKING NOISE IN THE NEWS We’d like to share some recent media appearances by the HP Hotels Team. Click the links to read, view and listen! Hotel Business asks HP Hotels Chairman Mike Hines for his thoughts on the Aimbridge - Interstate merger Charles at Industry Roundtable (Lodging Magazine) Kerry in Hotel News Now on Staying Creative Hotel Business interviews Kerry 5 THE TROUBADOUR HOTEL NEW ORLEANS  TAPESTRY COLLECTION BY HILTON HP Hotels is proud to assume management of The Troubadour Hotel, New Orleans, Tapestry Collection by Hilton, for Everwood Hospitality Partners. This New Orleans gem is a contemporary boutique hotel in the City’s Central Business District, just blocks from the theatre district and the high energy French Quarter. In addition to an indoor restaurant and bar, the 184-room property features a rooftop bar with great views of the city of New Orleans.   Conversion of this property to the H Tapestry Collection brand has already driven significant growth in occupancy rates and HP Hotels envisions additional revenue potential given the hotel’s location, amenities, service levels and character, which includes synergies with next - door neighbor, Pythian Market, a trendy urban food collective.  Interestingly, for the first week of September 2019, STR reported that among the Top 25 Markets, New Orleans, Louisiana, experienced the highest rise in occupancy (+22.7 percent to 59.0 percent), which resulted in the largest increase in RevPAR (+ 24.2 percent to US $69.58). In the Crescent City, HP Hotels also manages the Holiday Inn Express Downtown New Orleans. HP Hotels has also been selected to manage a new full-service Hilton planned for the Emerson Center Mixed-Use Development (Cumberland area) in Smyrna, Georgia. 6 Executive Insights with Kirk Kinsell Kirk is a Principal for Panther Ridge Partners, LLC, an investment and advisory group. His distinguished career includes time spent serving as President and CEO for Loews Hotels and 19 years with InterContinental Hotels Group (IHG), where he held several leadership positions including President of IHG Americas. As president, IHG Americas, Kirk oversaw the management of more than 3,700 hotels and was responsible for development and performance of all IHG hotel brands and properties in the Americas. He was also president for IHG in Europe, Middle East, and Africa, and served as executive director for IHG, PLC.A member of the HP Hotels Advisory Council, Kirk also is Vice-Chair and Trustee for the AH&LA Educational Foundation. 1. Please describe your Heart of House 2. Staffing seems to be top of mind for concept and how improved staff and guest hospitality organizations these days. What satisfaction also leads to stronger return on are some of the keys to identifying and investment? retaining outstanding team members, people who would be attracted to a career in The concept grew out of a walk through of a hospitality and make a positive contribution hotel that I did when I was at IHG. It was a hotel to the industry. in Dubai that we were about to acquire and it was there where I truly realized that the physical Team building requires an organization with place is really the “heart” of a hotel, where planned engagement and recognition of staff, employee engagement begins. based on genuine transparency. Once someone joins an organization, provide meaningful training Among our actions, we created a wall that and mentorship is key. As their careers progress, showed the journey of that hotel in terms of key it is extremely important to provide them with stakeholders, including the brand, the hotel opportunities to grow in their jobs and with the company, and the hotel’s leadership team. The organization. Not everyone wants a job for a wall recognized the role of our teams in lifetime, but they want lifetime experiences. delivering a great guest experience, as intended by our owners. Fortunately, today, we have many ways to reach prospective candidates who have pre-identified Ultimately, this evolved into a formal Heart of themselves as having an interest in hospitality, at House program at IHG that achieved the high school, junior college and college level. measurable gains in employee satisfaction and Also, the American Hotel & Lodging Association engagement. Higher employee satisfaction has a number of excellent programs focused drives owner returns as it increases staff around community-based career development. retention, which, in turn, lowers training costs. And the guests can feel it, because the employees are happier. 7 3. What do you like about working with the HP 5. What is the core appeal of hospitality as an Hotels Advisory Council? What are some of investment vehicle? the successes of this process that you believe distinguish HP Hotels from its competition? Hospitality entails understanding of real estate I’ve enjoyed meeting team members, seeing for fundamentals, deployment of capital for financing myself their passion and dedication for hospitality and deployment of people in an operating and their engagement with HP Hotels and with business. To be successful, you have to be owners. accomplished in all three areas. Working with my colleagues on the advisory Hospitality is one area of commercial real estate council, we have helped refine the organization’s that can offer strong returns, with smart operators focus and strategy, helping instill the importance being able to drive higher revenues. Moreover, of culture, a sense of purpose to the group’s this is a community-focused investment, which overall success. We really feel that HP has can instill a sense of purpose as an investment. embraced this sense of purpose and engagement For many owners, building and operating a and is well prepared for any challenges that may landmark hotel becomes a form of legacy to one’s come. community. 4. What are some key trends in hotel technology? Any game - changers on the horizon? New technology continues to dramatically impact the hospitality space in areas like guest check- in/check-out, guest and staff communications, business analytics, revenue management, human resources management and overall productivity. One key emphasis from a brand perspective has been the digital journey of the guest, being able to deliver the brand experience through a smartphone. Certainly, we are also in the early stages of applying artificial intelligence to the hospitality area, including in better understanding the needs and wants of guest. HP has been an innovator in technology, including with its implementation of the PurpleCloud hotel task optimization platform. PurpleCloud substantially improves the effectiveness of daily frontline staff activities like housekeeping or maintenance, while introducing modern data collection and analytics that can identify “bottlenecks” or issues and suggest remedies. An important component of PurpleCloud is team member engagement, through metrics that help drive productivity, encourage cooperation through friendly competition and reward top performers. This is a valuable next step for our industry. 8
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