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2016 - 03 March

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Guest Service Gold

Glorietta Bay Inn Earns Certified Guest Service Property Designation

Glorietta Bay The American Hotel & Lodging Educational Institute (AHLEI) has presented the historic Glorietta Bay Inn in Coronado, California, with the designation of Certified Guest Service Property. This designation is awarded to properties that train their employees using AHLEI's Guest Service Gold® program and certify all guest-facing staff as Certified Guest Service Professionals (CGSP®).   

According to Kelsey Roberts, CGSP, sales and marketing manager for Glorietta Bay Inn, the property has won previous awards for best guest relations and decided to offer Guest Service Gold® training to employees to maintain and improve upon their already high standards.  

"We have a low turnover rate among our staff. Some have been here 10 or 20 years. Offering training and certification like Guest Service Gold® encourages all of us to keep on learning.  It helps us to be refreshed and encouraged as we do our jobs," she explained.  

The paper-based training was offered in three sessions. Roberts led the first session for employees connected with front office jobs, and included two housekeeping supervisors in that class. Those two supervisors then presented the training to employees in the housekeeping department. A final session was offered for anyone who missed the first sessions, as well as all managers, including the general manager and assistant general manager. In total, 35 employees earned the Certified Guest Service Professional (CGSP®) designation.  

"Everyone took away so many positive ideas from the training; everyone's confidence level is up," said Roberts. "Employees also like the 'bling' of the certification pin. It makes them feel good, and it's a frequent topic of conversation between guests and staff about what the pin means."

CTE Spotlight

DECA, AHLEI Partner to Offer Hospitality Certifications for Students

DECA The American Hotel & Lodging Educational Institute (AHLEI) is pleased to once again partner with DECA on a unique opportunity for student members to meet the increasing requirement to earn industry certification in order to graduate. 

As the certifying body for the lodging industry, AHLEI is proud to offer the Certified Guest Service Professional (CGSP®) designation to high school and college students who successfully pass the DECA Hospitality & Tourism Cluster Exam with a score of 70% or higher. Recognized worldwide, the CGSP® designation is the highest acknowledgement of guest service for employees in the lodging industry. It has been the #1 AHLEI industry certification for three years straight.  

This past September, AHLEI welcomed 20 of the top human resource executives in the United States for a two-day roundtable to discuss hiring for competency in the lodging industry. The executives came from the country's top hotel brands and management companies, representing more than 16,000 properties nationwide. Across the board, all of the executives stated that the competencies showcased in the CGSP® designation were the most important to them from a hiring perspective. 

The certification epitomizes the guest service characteristics necessary for successful entry into the hospitality industry.  It can serve as a direct pathway to employment for students entering the lodging workforce, while offering the additional benefit of earning industry certification while in the classroom.  

DECA students have a unique opportunity to earn the certification without having to sit for an additional exam, a member benefit available only to DECA members. Additionally, DECA members are able to access the CGSP® at a deeply discounted price of $20/student. DECA advisors should go here to purchase the CGSP® for students.  

For more information, please visit www.ahlei.org or contact Shelly Weir at sweir@ahla.com or 407-999-8166.

Financial Issues Impacting the Lodging Industry

The Urban Hotel Market Challenge: Brand Redemption Programs and a Lack of Cancellation Fees

Dr Raymond Martz By Raymond D. Martz  

The Financial Management Committee (FMC) of the American Hotel & Lodging Association was established to provide superior financial management expertise on issues of common interest to owners and operators of hotels and motels. In an effort to assist hotel owners and operators, the FMC is presenting a series of monthly articles that address current and emerging financial issues impacting the lodging industry. Some of the potential topics to be discussed include the standardization of industry definitions for distribution channels and associated costs, benchmarking green and sustainable practices, cyber security, loyalty program accounting, and the impact of labor-related legislation.  

This month, Raymond D. Martz discusses the impact of Brand Redemption Programs and Lack on Cancellation Fees on urban markets.   

The U.S. hotel industry finished 2015 at its highest occupancy ever. Hotel demand continues to outpace supply, and although the industry is experiencing firmer headwinds from the weakening global economy, the hotel industry's macro fundamentals remain sound.  

Despite these positive factors, urban markets are continuing to underperform against the U.S. industry due to a combination of the decline in inbound international travel, largely resulting from the strong U.S. dollar, and the increase of Airbnb supply and presence in urban markets. In addition, booking windows continue to shrink and short-term cancellations have been rising significantly in urban markets, putting downward pressure on average daily rates. 

There are several variables causing this increase in short-term cancellations, which are impacting urban market performance. The structure of the brand redemption programs combined with a lack of cancellation fees is creating a negative dynamic in many urban markets. 

A Primer on Brand Redemption Programs  

Branded hotels allow customers who have accumulated enough "points" to redeem these for free stays at a hotel in the respective brand family. Originally developed by American Airlines, this has been an effective strategy by branded operators to create additional brand loyalty. 

When a customer redeems their points for a stay at a branded hotel, the respective brand pays the hotel owner a set redemption rate which is designed to cover the cost of the guest's free stay since the hotel owner is accepting points as compensation. During high demand periods, the brand will compensate the hotel owner with a higher redemption rate so that the hotel owner isn't harmed by accommodating a guest who is redeeming points vs. a guest who is paying the market rate for a given night. When the hotel reaches the high occupancy redemption threshold that is set by the hotel brand, usually around 95% occupancy, the hotel brand will pay the hotel owner a higher redemption rate.  Most brands today have a binary approach: 95% occupancy and above, the hotel owner receives the high occupancy redemption rate from the brand; below 95% occupancy, the hotel owner receives the low occupancy redemption rate to cover the cost of the stay.     

Given the record high occupancy levels across the U.S., and even higher occupancy levels in the major urban markets, there is a greater frequency when branded hotel owners are at or near the brands' high occupancy redemption threshold. When a hotel is near (but still below 95% occupancy) this high occupancy redemption threshold, hotels are effectively incentivized to aggressively sell the remaining rooms, many times at deep discounts, in order to surpass the high occupancy redemption threshold of 95% occupancy. Often, this deep discounting takes place during short lead times, which is one of the factors that is causing booking windows to shorten.  When there are multiple branded hotels in a market, a race is created to reduce room rates, sometimes in the day for the day, to capture the remaining demand to reach the high occupancy redemption threshold. This was not the original intended design of the brand loyalty programs, but given the high occupancy levels across the country, this phenomenon is happening with greater frequency than ever before as many hotel owners and revenue management teams can attest. 

Lack of Cancellation Fees Encourage Travelers to Cancel and Rebook  

This is where the lack of cancellation fees in our industry makes matters worse. Unlike the airline industry, the hotel industry has provided free options to its customers that allow them to make a reservation (or multiple reservations), then cancel and rebook them as much as they desire.  In fact, Booking.com now has a television commercial that promotes cancelling and rebooking, as often as the traveler likes. 

If a hotel discounts their rate, through metasearch websites like Kayak or Trivago, customers have the ability to seamlessly cancel and rebook their reservation at the same hotel or to the hotel across the street. In turn, hotels are forced to further discount rates to gain any last minute pickup that will help them hit the brand's high occupancy redemption threshold. 

In addition, hotel reservations made via the OTA channels have become more relaxed, giving the customer greater flexibility to cancel a reservation short-term without penalty.  In the past, OTAs channels "locked" the guest into their reservation with nonrefundable rates. Rate parity now requires that the hotels provide OTAs with access to all publically offered rates which include rates with flexible pricing that do not require a guest to prepay and allows for short-term cancellations.    

In recent past, last minute demand for hotels was strong enough that hotels would strategically manage inventory to capture the highest rates for the remaining rooms left to sell. The majority of these bookings would typically come from premium rate segments such as BAR, negotiated, or consortia. However, with the growth in hotel room supply (including Airbnb), the increased access to all remaining inventory in the market through last minute booking technology and mobile tools, the ability to sell rooms short-term has become exceptionally competitive. This causes a "race to the bottom" in room pricing.    

Example: The Booking Window and Discounting in Times Square  

To illustrate the impact to pricing and cancellations, the following table provides the lead booking windows during 2015 in Times Square (Manhattan). 

Times Square (Manhattan)
  All Channels Brand.com OTA
Lead Time % Room NightsADR % Room NightsADR % Room NightsADR
31+ Days 47%$295 45%$315 59%$284
8-14 Days 10%$286 11%$284 7%$273
4-7 Days 9%$287 11%$275 7%$266
1-3 Days 10%$268 12%$258 9%$249
Same Day 7%$239 5%$220 5%$216
31+ Days to Same Day
ADR % Change
  (19%)  (30%)  (24%)
          
1-3 Days to Same Day
ADR % Change
  (11%)  (5%)  (13%)
          

 

Source: Travelclick 

In the Times Square hotel submarket, average daily rates 31 or more days out from arrival remain largely flat until three days before arrival, when the average daily rates start to decline significantly. Hotels experienced a drop in ADR of 19% ($56) from reservations booked more than 31 days before arrival to the rate booked the same day, with most of this decline occurring starting three days before the arrival.  Bookings on branded websites dropped the most in this period, on average 30% ($95) during this same period, while rates on OTA sites declined almost 24% ($68) with just over 13% of the 24% decline in rates taking place within three days of arrival. In addition, almost 17% of total reservations occurred within three days of arrival, which illustrates the high amount of cancellations that also occurred during this period. We have seen this type of pricing behavior in most of the urban markets throughout the country.  

This data demonstrates that travelers have been trained to wait for better pricing by booking closer to the day of their arrival as hotels are caught in this discounting trap.  In addition, anecdotal evidence supports that travelers are making multiple reservations within a market and using metasearch sites (Kayak, Trivago, etc.) to track pricing. Rates are declining over time rather than increasing as the booking window shortens closer to the arrival date.    

Potential Solutions: The Brands Change the Redemption Reward Structure & the Hotel Industry follows the Airline Industry's lead with Cancellation Fees.  

The major brand redemption programs should be modified with a more gradual or sloped redemption rate to hotel owners, rather than an "all or nothing" approach. This would help reduce the behavior that many revenue management teams deploy of discounting short-term rates, which negatively affects all of the brands, as well as hotel owners. The hotel industry is training the customer to wait until the last minute to book their reservation. Current cancellation policies are porous, or effectively non-existent, and give customers the flexibility to control their reservation up to the day before arrival.  What would happen if the hotel industry adopted cancelation and change fees that would protect hotel owners from last minute cancellations? Our customers would be retrained to book in advance, helping preserve ADR integrity. 

The hotel industry could adopt a change and cancellation policy that would charge customers change fees for any reservation adjustment or cancellation that occurs before arrival. The airline industry has been doing this for years and it is now the standard practice. Moreover, we should recall that the airline industry, as recent as fifteen years ago, did not charge for a cancellation or reservation change. When the airline industry first introduced cancellation policies, the initial cancellation fees were minimal, but the fees helped modify customer behavior and "train" the customer to book in advance before rates went up.  In the hotel industry today, we have trained the customer to wait until their date of travel to book since there is a current trend that last minute rates will likely be lower, especially in urban markets. 

These are the good years for the industry. If we don't change our behavior through implementation of cancellation fees and/or push for alternatives to the brands' high occupancy redemption threshold practice, the next downturn may be worse than the last cycle; something that no hotel owner, revenue manager or brand wants. 

Raymond D. Martz is the Chief Financial Officer for Pebblebrook Hotel Trust (NYSE:PEB) and is on AH&LA's Financial Management Committee (FMC). He is a graduate of the School of Hotel Administration at Cornell University and a Master of Business Administration from Columbia University.

International Spotlight

Tokyo American Club Chooses CARE for Alcohol Server Training

Tokyo American Club

A prestigious multinational, multicultural private club in Japan has turned to the American Hotel & Lodging Educational Institute (AHLEI) to help train its employees who serve alcohol in the club's dining venues. 

Founded in 1928, the Tokyo American Club has 3,900 members representing more than 50 countries.  The club is a place where members and their guests can relax, learn, exercise, socialize, do business, and spend time with family.  There are seven restaurants on the property, which also houses a spa, pool, fitness center, library, child care facility, and meeting rooms. 

While Japan does not mandate alcohol server training, the club introduced AHLEI's Controlling Alcohol Risks Effectively® (CARE) for Servers seminar to provide employees with a solid foundation in responsible service. 

"We opted to use CARE to increase knowledge and service levels and reduce alcohol-related incidents at the Club, as well as completely redo our alcohol service practices based on the American standards and following the spirit of Dram Shop laws, although they are not used as extensively here in Japan as they are in the States," explained Brian Marcus, assistant general manager-business operations for the Tokyo American Club. 

CARE for Servers is a one-day seminar that provides employees with the proper knowledge of how to handle the challenges of responsible alcohol service. During the program servers learn to: 

  • Effectively monitor and control guests' alcohol consumption
  • Tactfully intervene before problems arise
  • Carry out their establishment's ID-checking policies and spot false identification
  • Handle minors according to their operation's specific policies
  • Understand the laws in their region and how they affect their procedures

The program's components include a Manager/Trainer Guide, Server Training Video, Sample Server's Manual, and Sample Pocket Guide.  Properties purchase server manuals and pocket guides for each trainee, who must pass an AHLEI-graded final exam with a score of 84% or higher in order to receive the CARE certificate and training verification card. 

Marcus noted that Japan has significantly reduced alcohol-related auto incidents by lowering the legal point of intoxication to 0.03% with extremely stiff financial fines. 

"It was important to the club that we are providing a fun, enjoyable, and safe experience for our membership and their guests. The CARE training has assisted in that," said Marcus. "We have seen a heightened awareness within our staff and a reduction of alcohol-related incidents in the operations."

Workforce Spotlight

National Network Programs Shine Light on Workforce Challenges and Solutions

National Network The National Network of Business and Industry Associations (National Network) represents major business sectors and is funded through a collaborative partnership of Business Roundtable, ACT Foundation, the Joyce Foundation, and Lumina Foundation. Members include leaders in the manufacturing, retail, healthcare, energy, construction, hospitality, transportation, professional and business, and information technology sectors. They represent the source of nearly 75 percent of projected U.S. job growth through 2020 (an estimated 30 million new jobs). 

The mission of the National Network is to improve economic opportunity and quality of life for Americans by better connecting the working world and the learning world. To realize this vision, the National Network links and leverages the work of national industry associations whose members face the common challenge of finding skilled talent to fill their high-quality jobs.

National Network works to bridge the "skills gap" by better connecting the worlds of learning and work. It recently released a guidebook, "Work and Learn in Action: Successful Strategies for Employers," which showcases 15 real-life models of successful work & learn programs. Best Western International's I Care® program is a featured hospitality example, while the National Restaurant Association's ProStart curriculum (similar to AHLEI's Hospitality and Tourism Management Program curriculum) is held up as a model for career and technical education. 

Last fall, thanks in part to a grant from the National Network, AHLEI conducted a business roundtable of hospitality executives, who explored the role of competency-based hiring and certifications in the lodging industry.  The findings from that roundtable will assist AHLEI in developing and promoting programs that will help to close the skills gap in hospitality, as well as helping hospitality organizations to make better use of existing training and certification resources as part of their hiring and employee development efforts.

Hospitality Boot Camp Sets Students on PATHS to Employment

UDC Start A job-readiness program at the University of the District of Columbia prepares its clients for careers in hospitality by partnering with a hospitality training expert who uses American Hotel & Lodging Educational Institute resources and certification in her curriculum. 

Vivica L. Brooks, CHT, is a former Marriott professional who left hospitality to follow her passion for education and training. Through her company, The Brooks Group LLC (TBGLLC), she leads a six-week Hospitality Boot Camp that includes AHLEI's 180-hour Skills, Tasks, and Results Training (START) curriculum and certification, as well as Guest Service Gold® training and certification. The boot camp is offered as part of UDC PATHS (Paving Access to Trails for Higher Security), which helps Temporary Assistance for Needy Families (TANF) recipients to get off government assistance and into the job market. 

"With hospitality and tourism being such a major market in D.C., this was an industry that the university wanted to include in the PATHS program," explained Alexis Henry, TBGLLC spokesperson.  "START and Guest Service Gold® provide a solid foundation for people to learn about the industry." 

Brooks brings close to 15 years in hospitality experience to the classroom.  Her Marriott career included roles ranging from night auditor to sales and marketing executive, but she found her true passion in training. She holds the Certified Hospitality Trainer (CHT®) designation, and uses the same skills used to train those already working in hospitality to prepare future employees for industry positions. 

The Hospitality Boot Camp incorporates classroom instruction, visits from industry experts, and trips into the field to provide an overview of the industry and the skills needed in a hospitality career. One of the most popular field trips is the Hospitality Scavenger Hunt, where students (like those pictured) have to find places that hotel guests in Washington, D.C., might ask about. 

"As hospitality employees, they need to know and understand where things are in the city to be better equipped to offer information on monuments, museums, restaurants, and other attractions for visitors to the nation's capital," said Henry. 

Brooks also reviews students' résumés, conducts mock job interviews, and provides help with job applications. Throughout the program, the importance and value of guest service is stressed. 

"No matter what field these students end up pursuing-hospitality, construction, health, retail-they will use guest service skills," said Henry.  "Guests, clients, patients, coworkers-all deserve great service. Service is a skill you can take with you, wherever you go in your career. Of course, we love to see students go into hospitality. It's an industry where you can move up quickly, and there are so many directions you can go.  It's a stepping stone to a wide open future." 

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