Minaz Abji
Pricing power may not yet have returned in most markets, but Host Hotels and Resorts executive vice president of asset management Minaz Abji said a slight rise in occupancy, meeting bookings and demand for luxury make him cautiously optimistic. Responsible for managing 110 properties in North and South America, Abji said meetings represent about 40 percent of Host's business. The nation's largest lodging real estate investment trust and owner of many Marriott and Starwood properties, Host reported its "worst year in history," Abji told a Professional Convention Management Association conference here in January. He shared his views on the recovery, meetings, attracting millennials and more during a PCMA session on the state of the travel and meetings sectors. Ypartnership CEO Peter Yesawich and other panelists questioned Abji. An excerpt of Abji's comments follows.
As someone who looks at all the assets under your management, what's your perspective on 2010?
In June 2009, we saw leisure business pick up from where it was in first and second quarter. In September, we saw the transient business pick up. It was still negative, but no where near where it was in first and second quarter. If you look at how December finished, the 28-day moving average of occupancy for the hotel industry was almost at the same level as last year. I think there's an inflection point and business travel is coming back. It will be slow to come back to levels we were used to in '08 and '07, but I think we're on our way so that's a very, very good sign. What drives our business is gross domestic product growth, employment growth and non-residential fixed investment growth. When companies start having capital invested in businesses, that moves money around, business travel comes back and meetings come back. We see all that beginning to happen. In the second quarter, we see more small and medium-sized meetings come back with large meetings coming in third quarter. There isn't the pricing power today because occupancies are still lower. But people are going to be surprised at the end of the year that occupancy is higher than they thought it would be.
If there is demand for greater return on time, how do you deliver it?
What we saw in 2009 was very short lead meetings. A week out, a 600-room group coming in; we had to move space, do stuff we've never had to do before. We're booking midsize meetings two to four weeks out and large meetings—like 1,000 plus—sometimes 10 to 12 weeks out. Hotels have had to change their whole thinking—how they staff, how they handle things—like never before. We've also seen this electronic request for proposal, where we cannot talk to the planner. It's become very, very price conscious, more like a commodity rather than an experience. I'm hoping that the trend of creating the experience will start coming back, working as a partner and saying "how can you solve my problem and make my meeting so great that my attendees have return on time, return on investment."
Meeting food and beverage revenues are down about 40 percent for hotels. How do you deal with that and continue to provide the experience that guests expect?
The [hotel] brands and owners have been together on this. Last year was the most difficult year in our history in the hotel business. I don't think that's going to repeat. We reacted and acted as partners with you. If you didn't have the food and beverage spend you contracted for, we worked with you to build customized menus. Ancillary spend was down. We took it in the chin, so did you. Starting now, we think you'll see a lot more sponsors come back and you'll see gradual growth on ancillary spend again and you'll have the budgets. We were hurt a lot less than that [40 percent], about half of that in food and beverage spend in groups. That's huge because hotels make money in two areas: rooms and banquets/catering. The rest is for the glory to support those two areas. If we don't have revenues in those two areas, we can't make any money.
There are many definitions of a millennial today, but if you dump them all into one bucket, there are about 75 million millennials versus 78 million baby boomers. The more we look at millennials [and] try to market to them, the more elusive they become. What are the challenges of this market force?
Since we have 16 brands, I can tell you that everybody is looking at this. We have lifestyle brands that really focus on this, but traditional brands are really augmenting what they're doing. The want to make sure that they have the technology, wireless technology, bandwidth so they can deliver fast communication. You'll find this idea of a third space: they get tired of a room and want to go somewhere where they can eat, drink and work. Lobbies, rooms where people traditionally didn't go to, are becoming alive. All of these brands are now realizing that this Generation Y client doesn't want to sit in a room and watch a movie. They want to be where the action is, or go down [to the lobby] and work and not talk to anybody. When it comes to meetings, they don't want these boring meetings with panelists speaking for three hours. In the 40 minutes we've been here, half of you have checked your email three times. You are all [Gen] Xers and Boomers; if you're doing that can you imagine how they are? They don't want this kind of setup anymore. This is boring. They want to have a lounge kind of setup, to stand if they want to stand, pay attention when they want to and not to when they don't. The baby boomer was used to going to a meeting, getting a data dump, basically a one-way communication. Gen Y wants to have a collaboration, they want to network. They expect your PowerPoint presentation in advance so they could ask you questions and give you feedback of whether you're going too fast or too slow. They don't have the attention span that we did. Meetings will have to change, presentations will have to change and maybe if you have a three-day meeting, they only attend one day because that's the only day that speaks to them.
What are your resolutions for 2010?
What we're preaching to our hoteliers is to be very agile in 2010. Learn what's happening, see the trends and be ahead of competitors as demand improves. Secondly, we're asking them to get closer to their top customers--whether that is meeting planners or top accounts--so we can offer the right solutions because changes are happening too fast. This change business is going to continue; we're not going to be what we used to be.