335 | ‘Waking Up A Giant’: Armed with fresh data that reveal members’ economic might, AAHOA leaders see new day ahead

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COAST-TO-COAST INFLUENCE: AAHOA’s 20,000 members own hotels throughout the United States, which the association breaks into 22 regions. Results of a new study by Oxford Economics unveiled at AAHOACON21 on Aug. 4 in Dallas, Texas, shows members own 60 percent of the hotels and motels in America and have invested billions of dollars in their businesses and communities.

Fair franchising, technology adoption, legislative change part of recovery strategy

With 20,000 members, AAHOA is the largest hotel owners group in the world. But it has not regularly exercised the power commensurate with its size.

That is about to change.

A new study by Oxford Economics reveals the membership’s stunning combined economic strength, including the fact that members own 60 percent of America’s hotels.

AAHOA Chairman Vinay Patel and other AAHOA leaders say the association plans to wield its might in forging a post-pandemic recovery that ensures everyone in the hospitality industry a more profitable future.

AAHOA had planned its 2020 convention in Orlando but shifted to an all-virtual event that summer as COVID-19 ravaged hotel businesses. In the first few months after world health officials declared a global pandemic, AAHOA’s hoteliers saw their occupancies drop as low as 10 percent, revenue plunge to historic lows and millions of employees laid off.

But the industry is on the upswing.

STR on Aug. 18 reported business performance metrics for July when occupancy was 69.6 percent, a decline of 5.5 percent compared to July 2019. (In its reporting, STR compares 2021 hotel performance with 2019 metrics.)

When adjusted for inflation, STR said, average daily rate and RevPAR were lower than all-time highs reported in 2019. On a nominal basis (not adjusting for inflation), July ADR was $143.30, an increase of 6 percent over July 2019, and RevPAR was $99.71, a nearly flat 0.2 percent increase over July 2019.

“WAKING UP A GIANT’: Vinay Patel, 2021 chair of AAHOA, speaks on Aug. 4 at the association’s convention and trade show held at the Kay Bailey Hutchison Convention Center in Dallas, Texas. During the opening session, AAHOA unveiled ground-breaking research by Oxford Economics that quantifies the economic power of the association’s 20,000 members. Episode 335 of Lodging Leaders podcast features Patel and Ken Greene, interim president and CEO, who share the association’s strategy in shaping the hotel industry’s post-pandemic recovery.

Essential Businesses

As a sign of the ongoing recovery in lodging, AAHOACON21 drew 6,000 members Aug. 4-6 to the Kay Bailey Hutchison Convention Center in Dallas. Although the pandemic is far from over, convention goers were eager to socialize and talk about their business challenges and triumphs over the past year.

In the opening session, 2020 Chairman Biran Patel told the audience that America’s hotels proved their worth as they were essential to helping the country battle the COVID-19 outbreak.

They extended hospitality to first responders, health care providers and other indispensable folks such as construction workers and truck drivers. They provided shelter to people at risk of homelessness as well as transitioned their properties to help hospitals manage patient overflows, COVID testing and, finally, vaccine rollouts.

“This has been a very difficult time for all of us,” Biran said. “This is exactly the type of time when AAHOA thrives. Hardships like these highlight the true power of our association.”

The Oxford Economics’ two-year study of the association’s economic impact revealed another level of strength.

It’s been more than a decade since AAHOA studied the economic power of its members. In 2010, the association had 10,000 members. Today it has twice that many.

Vendors, including franchisers and suppliers to the industry, can become members but 2021 AAHOA Chairman Vinay Patel said every one of the 20,000 members the association touts is a hotel owner.

AAHOA members own 34,000 of the nation’s 56,000 hotels. The U.S. lodging sector has 5.3 million rooms, according to the American Hotel & Lodging Association. AAHOA members own 3 million of them.

Kalibri Labs recently reported that more than 1,300 hotels and 3.1 percent of rooms remain closed since March 2020. It’s unknown whether any of the closed properties are owned by AAHOA members.

ECONOMIC IMPACT: Oxford Economics study also revealed how significantly AAHOA members’ hotels contribute to the U.S. economy. This infographic breaks the findings into bite-size pieces.

Shopping Trends

AAHOA members have buying power.

That was evidenced by the AAHOACON trade show, which was the largest such event in the association’s history. Nearly 800 vendors filled an area the size of eight football fields.

In an interview with Lodging Leaders, Vinay Patel said the strong showing from attendees and vendors is a positive sign.

Vendors were eager to get in front of owners, Patel said. And owners were interested in learning about what’s new in product development.

They were especially keen to find out what technological resources were available to help manage the cost of operations. That includes the double-edge sword of not being able to recruit enough employees and the inevitable increase in wages.

“You talk about labor; it’s been a big issue,” Patel said. “And how do you solve some of those issues that we have? And the technology may be a good opportunity for us to kind of move in that direction.”

The conference hosted its first series of tech pitches that showcase new tech products for hotel operations, for both back of house and guest services.

Patel said many owners are reticent to buy into technology if it doesn’t make good business sense and especially if they’re not sure it’s the right solution for their business.

Patel is founder and owner of Fairbrook Hotels in Chantilly, Virginia. The company has 10 hotels and two restaurants in its portfolio. It has three hotels in development.

He understands the stress owner-operators face in learning about advanced tech solutions for new business challenges, especially amid a crisis. That’s where the collective power and influence of AAHOA can help.

“As an owner myself, I’m hesitant. I get nervous about new technology. I’m probably one of those people who are in the middle, where I’ll let somebody else adapt first and then once it’s perfected, I’ll use it.”

But AAHOA’s job,  he said, is to introduce members to vendors who might have solutions to modern-day business problems, no matter the price segments of their hotels.

TOGETHER AGAIN: AAHOCON21 audience on Aug. 4 the event’s opening day at the Kay Bailey Hutchison Convention Center in Dallas, Texas. The convention and trade show drew 6,000 members and nearly 800 vendors.

Education is Tops

Along with connecting members with products is educating them about business best practices and how current events can impact their investments.

Almost from the start of the nationwide pandemic shutdown in mid-March 2020, AAHOA launched an online newsletter called The Daily Digest that features news on legislative activities as well as advice and webinars to guide members through the fog of economic uncertainty and the maze of COVID compliance.

Last year, AAHOA offered more than 240 webinars that generated more than 50,000 views.

Keeping members informed has been AAHOA’s top priority since it formed 32 years ago, Patel said.

Vinay Patel was elected as an AAHOA secretary in 2018. Once elected, an officer moves up in rank and responsibility each year, ascending to chair in year four.

The pandemic slightly altered the pattern of officer succession. Jagruti Panwala was inducted as chair in 2019, making history as the first woman to chair the association.

Panwala served as chair a couple months longer than intended when the AAHOA 2020 convention set for April was postponed and eventually went virtual in August.

PANDEMIC LEADER: Biran Patel, a hotelier in Dallas, Texas, and 2020 chairman of AAHOA, speaks on Aug. 4 during the opening session of the 2021 AAHOA Convention & Trade Show or AAHOACON21 at the Kay Bailey Hutchison Convention Center in Dallas.

Post-Crisis Recovery

Biran Patel assumed the chair in June 2020.

He told the Dallas audience about the predicament he and the association faced at the time.

“When I became AAHOA chairman last year, most of America was shut down,” he said.

“AAHOA’s board of directors faced a unique challenge: How do we lead an association with no physical connection to the leadership, the members and the industry? Nobody had a model for conducting business as usual in the midst of a global pandemic.”

The association’s leaders adapted, he said, and came up with ways to serve its members. “It was clearly a team effort.”

AAHOA’s board of directors includes 22 elected regional leaders as well as heads of Young Professionals and Women Hoteliers committees.

Panwala and Biran Patel were chairs for 14 months and Vinay Patel will serve for eight months – until AAHOA’s next convention in April.

But a chairperson’s tenure – no matter how long – is not supposed to throw AAHOA’s mission off course. The association operates under a years-long strategic plan.

For the past 10 years, AAHOA followed a five-year plan. This year, it revised its strategy to a three-year plan and launched it in January.

WATCH: NEW PLAN: In February, Cecil Staton, then president and CEO of AAHOA, in a video announced the association’s three-year strategic plan. It is a shift from its usual five-year program, which expired at the end of 2020. “The road to recovery runs through AAHOA,” Staton said.

Staton addressed hotel owners but he also targeted the companies that do business with AAHOA’s members, saying the association “provides access to 20,000 hoteliers.”

“And when you bring that talent and entrepreneurial skill together with our industry partners who serve them and serve our industry, we can certainly do great things that will drive the changes that will come from our industry in order to make it more successful as we go through the recovery of the next several years.”

Staton resigned in June and AAHOA named Ken Greene interim president and CEO.

Greene is a former hotel franchiser who most recently was president of the Americas at Radisson Hotel Group, parent of Country Inns & Suites franchise, a select-service midscale brand that grew its U.S. footprint through licensing agreements with Asian American hoteliers.

In an interview with Lodging Leaders, Greene said the change in leadership at AAHOA and its new three-year growth strategy signals a new day is ahead for the association and the U.S. lodging industry.

“Anytime you have a new team coming on board, new leadership … we always talk about how you can do things better, what are the most important priorities,” he said, “and what can we do differently to be more efficient, more effective.”

Greene said AAHOA’s board is searching for a permanent president and CEO and he is among the candidates.

Another AAHOA executive resigning was Rachel Humphrey, chief operating officer who served as interim president and CEO in 2019, before Staton was hired.

Humphrey, a lawyer, served the association for seven years, mostly leading its franchise relations.

People of Influence

While AAHOA shifted to focus more on government advocacy over the past decade, many members say they want the association to spend more energy on influencing franchiser-franchisee relationships and business models.

Greene said the Oxford Economics study revealed AAHOA’s strength not only to the political and business sectors but also to its own members, who in the past may have doubted their own power to bring about change.

“What I’m most excited about as it relates to our strategic plan is that Oxford Economics study and how impactful it is not just for AAHOA but for the industry in general.”

The data provides a picture of AAHOA’s over-arching influence in the national lodging industry, but it also breaks the information into congressional districts and the communities where members own and operate hotels.

With that knowledge comes power.

“We all intuitively knew how big AAHOA was and how influential it could be, but we never really had the data to support that at the most local level and now we do,” Greene said.

“In terms of political advocacy, franchise advocacy and educational efforts, all of that allows us to be more impactful. So stay tuned.”

With regard to wielding collective power to influence government decision making, AAHOA and AHLA in June announced they joined forces to form the American Hospitality Alliance.

Also in the alliance are the International Society of Hotel Associations and 40 state associations. Representatives of major franchisers Hilton, InterContinental Hotels Group and Marriott International serve on the advisory board.

The alliance is focused on lobbying federal, state and local government officials who often do not understand the hospitality industry and its impact on the economy.

One of the strongest tools today to lobby politicians is the new research about AAHOA’s members.

You know the saying, “You can’t fight City Hall”? Now hotel owners can say, “Yes we can.”

“This emboldens people as well,” Patel said. “It’s almost like a waking up a giant.”

Franchising in the Fore

While AAHOA leadership is prepped for political advocacy, an area where members have asked for more intervention is with franchisers.

Fair Franchising Initiative, featured in previous reports, is made up of AAHOA members frustrated by what they see as the association’s lack of leadership in negotiating more reasonable licensing agreements for members.

Franchisee dissatisfaction with the hotel brands is not new but the coronavirus crisis exacerbated long-running issues and owners want fundamental reform in brand licensing. Complaints include brands mandating vendors, fees charged for third-party reservations, changes in licensing agreements before the contract terms end and fear of retaliation if an owner challenges the licensing agreement.

Check out Lodging Leaders’ recent series on franchising issues.

  • Episode 332 features leaders at Sonesta International Hotels Corp. and Advantage Hotels Inc., who talk about how to make franchising a win-win for both sides even in the worst of times.
  • Episode 333 features leaders at Hospitality International Inc. and FairBridge Hotels International who share how the pandemic forced them back to the drawing board to build stronger and more sustainable businesses for themselves and their franchisees.
  • Episode 334 takes a look at how hoteliers’ dissatisfaction with franchise agreements is leading them to take drastic steps through the courts as well as turn to state and federal lawmakers for reform.

Patel said he understands members’ perspectives. After all, he’s a franchisee, too.

Organizations such as FFI are the result of frustrated owners determined to solve the problems, he said. “If you have a problem, you find your way to a solution. And so that’s the route that they have set, and there’s nothing wrong with that.

“They’ll do what they can and we’ll do what we have to do to make sure that the interest of our membership is protected.”

“These are all legitimate complaints,” he said. “All the issues that they’re facing this year, all of our board members, even myself as an officer, feel the same pain because we’re all in the same business in terms of the pain that we’re feeling from brands. Obviously the COVID situation doesn’t help much and that puts additional pressure on us. As an association, it’s our responsibility to make sure that our membership issues are our concerns.”

Patel said he and other AAHOA leaders are talking with franchisers. He noted they met with Marriott International representatives this summer.

Patel said with 20,000 members comes thousands of different opinions on how to reform franchising.

“As an association, it’s no one size fits all. And so we’d really have to dive in deeper. That’s why it becomes a little bit of a challenge. And that’s why you see a lot of the frustration out there.”

As a former franchising executive, Greene said he’s familiar with the issues owners face in meeting the terms of the licensing agreements. Greene and association officers will travel to each AAHOA region to meet with members and hear the issues that challenge their ability to do business.

“Having come from the brand side, these are very similar challenges and the discussions that we had with our franchise owners,” Greene said. “In fact, a lot of our members were customers of mine when I was running brands. These are conversations that always happen between franchiser and franchisee, and it’s in part why we are out in the field for the next 90 days at regional events and listening to our members.”

The main goal, he said, is to improve communication between franchisers and franchisees.

“Our role on the advocacy level with the brands is to facilitate communication and to avoid big issues from happening to the (owner) community. And whether the noise is based on a real issue or a perception, a communication plan needs to happen to correct one or the other.”

Hotel profit margins are shrinking under the current business model, Greene said. “Labor is getting much more expensive and something has to give.” Hoteliers either hire fewer employees at higher wages or cut back on services, which could weaken a franchisee’s ability to maintain brand standards.

“Something as to give on the business model,” Greene said. “We are looking forward to engage right now with a lot of the brands on how do we increase profitability by 5 or 10 percent. If it doesn’t start to happen, then it doesn’t pencil out for some folks to keep their hotels open. And it certainly doesn’t pencil out for some owners to expand their portfolios and they’ll start to look at different industries.

“It’s a big issue; it’s a broader issue. But it’s one that we all as an industry need to be focused on.”

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