Upside-down forecasting: What won’t happen in 2018
 
Upside-down forecasting: What won’t happen in 2018
26 FEBRUARY 2018 8:41 AM

Understanding what won’t happen is just as important as thinking about what will.

Eliminating trends and big ideas that you know are likely to not impact decision-making is a good way to bring a clearer focus to forecasting for 2018.

For hotel management professionals, the ability to see what’s next—both for the broader marketplace and for the industry—is a big part of the job. The beginning of the year is the perfect time to do just that: to look ahead, to identify emerging trends and new developments and adjust your strategic planning accordingly.

But forecasting is a tricky business, and sometimes it can be a little too easy to let optimism and entrepreneurial vigor influence your predictions. As a result, it might be helpful to reframe the question. Instead of asking what’s next, try thinking about what’s not next.

Because sometimes knowing what’s not likely to happen is just as valuable and informative as knowing what is likely to happen.

With that in mind, here are a few things that we likely won’t see in 2018:

Plenty of qualified, affordable labor
Considering how much this industry relies on motivated, experienced talent, it’s frustrating to consider the fact that staffing will continue to be a sore point. Building a strong team isn’t likely to get any easier in the foreseeable future, and recruiting and retention challenges will continue to be an issue in 2018.

With low unemployment, rising salary demands and the evolving preferences of an influential millennial generation, the hiring landscape looks very different today than it did a few short years ago.

Hotel owners and operators have had some success bringing in recruiting and retention specialists—professionals with demonstrated recruiting expertise and the ability to deploy the kind of priorities, programs and practices that connect with both prospective and existing employees.

But consistently attracting and retaining top talent in this environment also requires strong messaging and leadership, a robust presence on social media platforms and other places where you can boost visibility to prospective candidates, and proven interviewing, onboarding and employee retention programs and processes in place. This is something we’ve paid great attention to, and it works.

Soaring RevPARs
While 2017 was yet another strong year for the hotel industry—and revenue per available room has increased every year since 2009—the pace of growth has slowed in the last two years. Year-over-year change in 2017 was the lowest it’s been in a long time, and—in conjunction with staffing challenges—the slower pace of growth is beginning to put some pressure on the bottom line.

Official 2018 RevPAR forecasts are between 2% and 3%, and the predicted occupancy growth in 2018 would make it nine consecutive years of rising occupancy, which hasn’t happened since the 1990s. Still, we are not likely to see the kind of RevPAR spikes that characterized the post-recessionary boom in the wake of the late 2000s economic slowdown. If anything, predictions for 2018 may even be somewhat optimistic, and hotel owners and operators would be wise to plan accordingly.

Surging profits
Given the marketplace dynamics described above, it seems likely that there will be some inherent limitations to profit growth in 2018. While we may see an uptick, it almost certainly will not be at the same rate as we have seen in recent years.

There is more uncertainty here than usual, with the yet-to-be-answered questions about how the recent tax changes will play out, and the troubling news about the decrease in international travelers (and tourist dollars) in 2017. But it’s safe to say that profit growth will not be setting any records over the next six to 12 months.

Fewer brands
A crowded hotel marketplace isn’t getting less crowded anytime soon. The success of new brands—particularly specialized, boutique and niche concepts—means that we will continue to see more brands (which means more choices and also more market saturation).

Select-service is a particularly active segment, with hoteliers getting more creative about finding ways to give consumers affordable options while still providing them with some of the extra features and amenities they are looking for.

The proliferation of new brands is a healthy part of an evolving industry in the midst of an extended period of prosperity, but it will be interesting to see which concepts thrive and survive when the next recessionary cycle emerges. Speaking of which …

The beginning of the next downturn
Industry analysts and observers have been warning about the end of the current growth cycle and a subsequent downturn for several years now. That obviously has not yet happened, but the slowdown in growth in 2017, some early warning signs of oversupply and some potentially concerning hints/macroeconomic indicators have renewed talk that the expected downturn may be happening sooner rather than later.

I don’t buy it.

The hotel market—like any other industry—will always be susceptible to a global economic crisis or an international event/marketplace disruption. But there is no real reason to believe that 2018 will be the year that things start to go downhill. While there are legitimate questions about how much more industry expansion is realistic, the next 12 months seem likely to continue a positive, if slowing, arc of growth.

As hotel owners and operators plan for the next six to 12 months (and beyond), having a sense of what isn’t on tap and what they can’t expect to see going forward will remain an important part of the predictive toolkit.

Chris Green is the COO of Chesapeake Hospitality. He brings more than a quarter century of successful hospitality operations experience to Chesapeake’s corporate team, including nearly a decade in the field at various Chesapeake-managed properties. For more information, visit https://www.chesapeakehospitality.com/.

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