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Hospitality Pros on the Industry's Future

October 9, 2001, 12:00 AM EDT

By Suzanne Ito

One thing was clear at the Hospitality Sales and Marketing Association International's (HSMAI) Hospitality Trends and Forecasts panel discussion last Thursday: People are concerned about the industry, but they remain optimistic. The aftermath of the September 11 attacks on the World Trade Center sent the already-suffering hospitality industry into a near-panic state, with airlines operating at fractions of normal capacity and corporations placing bans on business travel. But industry associations such as NYC & Company and companies like Delta Airlines are taking aggressive steps to lure business and tourism back to the city, and success is already evident.

The discussion at the Yale Club was attended by approximately 200 HSMAI members and guests, and covered topics such as industry changes to expect, what people can do to help New York tourism bounce back, and how we'll be able to tell if the industry rebounds. The discussion was moderated by Dr. Lalia Rach, associate dean and director of the Preston Robert Tisch Center for Hospitality, Tourism and Travel Administration at New York University.

TRAVEL SAFETY
The discussion began with the issue of travel safety. Richard Chambers, president of Hospitality-Marketing.com, said that airports in New York and other major cities in the U.S. will have to become as security-conscious as airports in England and Israel, where terrorism has been considered a threat for decades. Lesly Rehaut, meeting sales manager for Continental Airlines, added that nothing will persuade people to get on planes and travel unless they feel secure, and airlines are addressing these fears by resizing operations and launching new safety campaigns.

THE RIGHT STAFFING LEVELS
Mary Ellen Murphy
, national director of sales for the Smith & Wollensky Restaurant Group, said the hospitality industry should not rush to lay off employees. “Service industries need to keep people to maintain service levels, so when business does pick up, you're fully capable of providing the level of service that's expected,” she said. Murphy suggested trying pay cuts, unpaid leaves of absence or cutting hours as alternatives to layoffs.

Chambers offered a different perspective, saying that the past five years have been prosperous for many companies, and brisk business covers up weaknesses and flaws within the company. In a weaker economic climate, “these sins will be exposed,” he said. “Businesses will have to focus on these hidden problems, and will be forced to be smarter, leaner and make better decisions.”

THE PRICING DILEMMA
The issue of falling hotel room rates raised a question that went largely unsettled: Do lower rates increase or decrease demand? “It depends on what's scaring people away,” Rehaut said. “Is it the price? Or are they afraid to fly?” If high prices are scaring customers away, then demand will increase with falling prices. But if it's a fear of flying, there isn't anything the hotels can do and it's an issue the airlines need to address. Sean Hennessey, director of the hospitality and leisure practice at PricewaterhouseCoopers, cautioned against massive room markdowns. “You need to have a system that realizes when you're underpricing and when demand surges,” he said. “You need to watch it daily and set prices accordingly.”

SIGNS OF RECOVERY
All panelists had differing notions of what signs will indicate the hospitality industry is rebounding. Hennessey felt that consumer confidence, overall employment trends and hotel occupancy rates would be the indicators, and even predicted a rebound by late spring of next year. Lynda Schrier Wirth, of Schrier Wirth Executive Search, agreed, pointing out that the first quarter (usually a soft quarter most years) of 2002 will be strong because of new demand. Tom Fisher, vice president of real estate investment house Jones Lang LaSalle Hotels, believed that the stock market would be the telling indicator, and added that he felt all the damage to the industry from the attacks will be contained in September and October of this year, and in a year the industry will see a “significant improvement.”

NEW YORK'S APPEAL
Schrier Wirth suggested that hospitality folks remember that it's always good to appeal to Americans' current feelings of patriotism. The city needs to “show that people can come to New York affordably, and that everyone's in this together,” she said. NYC & Company proved that this is a valuable tool when they persuaded several conventions to move their events to New York. Or as Mayor Rudy Giuliani said in a now-famous and oft-repeated statement, “I encourage people from all over the country who want to help, I have a great way of helping: come here and spend money...The life of the city goes on.”

Posted 10.09.01

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