IN 2018, THE U.S. hotel industry faced natural challenges, including two major hurricanes, as well as manmade disasters in the form of massive data leaks. But it also saw continued growth, the birth of new brands and new acquisitions.
This is a review of some of the major headlines in our publication for this past year.
Half a billion guests exposed in data breach
In November, Marriott international reported a data breach in its Starwood reservation system that exposed private information for up to 500 million people. The company launched its investigation in September after one of its internal security tools detected an attempt to access the database in the U.S. It determined that since 2014 an unauthorized party had been copying and encrypting information from the database, two years before Marriott had acquired Starwood.
Investigators found evidence indicating Chinese government operatives may have been responsible for the leak. The company told federal authorities the breach did not threaten the company’s long-term financial health.
A month before the Marriott announcement, Radisson Hotels had warned its Radisson Rewards members to look out for suspicious behavior on their accounts following a data breach that compromised some member information. No other guest other credit card or password information was put in jeopardy.
Mother Nature has her say again
The year also brought two major hurricanes to coastal areas that had suffered similar blows in 2017. In September came Hurricane Florence, which rolled over North and South Carolina. It killed 53 people and caused around $50 billion in damage, and it made a hero out of Fayetteville, North Carolina, Knights Inn owner Mital Talati. Talati was recognized at the Red Lion Hotels Corp. annual conference in Las Vegas in December for her efforts to keep her hotel open through the storm and its aftermath so she could give shelter to the storm’s victims.
The news was not all bad. While many hotels closed, North Carolina also saw occupancy rise 16.5 percent over the same time last year for the week of Sept. 16 to 22, according to STR. During that same week, occupancy levels in South Carolina and Virginia dropped 6.1 percent and 5.0 percent respectively. Rural areas around Raleigh, North Carolina, saw the highest occupancy, 90.2 percent, which was the highest increase as well, up 71.5 percent. ADR for the area was $87.77, a 17.4 percent increase.
Then Hurricane Michael smashed into the Florida panhandle in October. In that storm 36 people died and many more were left homeless.
Again, a hotelier stepped up to help out. Mahesh “Mike” Shah kept his Comfort Inn & Suites in Panama City, Florida, open despite suffering damage and a loss of power.
“We were going to close it,” Shah said. “But there were a lot of requests from local people, and we decided to stay open to house them for safety.”
On the other end of the continent, California saw deadly wildfires. Much as with the hurricanes, however, that disaster boosted local occupancy rates as evacuees and emergency workers filled hotels.
Major mergers and acquisitions
On a more positive note, 2018 saw a series of important mergers as brands like La Quinta and Knights Inn found new owners. Wyndham Hotels & Resorts acquired La Quinta in May, and the acquisition contributed to the company’s strong third quarter performance.
La Quinta added seven new hotels and boosted Wyndham’s revenue by 74 percent, including $238 million in incremental revenue, said Geoff Ballotti, Wyndham’s president and CEO, during the company’s third quarter earnings call. Wyndham also saw royalty and franchise fee revenue increase by $31 million or 29 percent, most of that because of La Quinta’s contribution.
Meanwhile, Wyndham sold its Knights Inn brand to Red Lion Hotels Corp. in the same month, a move that seems to have energized some Knights Inn owners. RLH Corp. revealed a new logo for the brand at its annual conference in Las Vegas in December.
It was one of several needed upgrades for the brand that owners like Nancy Patel in Corpus Christi, Texas, said was badly needed. Under Wyndham Knights Inn had been neglected, said Patel, who also is a member of the brand’s owner advisory board. So far, though, she thinks the brand will turn around under RLH Corp.
“It’s not going to happen overnight,” she said. “I feel like they can really do something with this brand.”
Also, after numerous tries, Pebblebrook Hotel Trust managed to wrestle LaSalle Hotel Properties away from after Blackstone Real Estate Partners VIII in September. In the $5.2 billion deal, Pebblebrook agreed to pay $37.80 cash for up to 30 percent of outstanding LaSalle shares with the rest exchanged for Pebblebrook shares at a ratio of 0.92, meaning each LaSalle share can be exchanged for 92 percent of a Pebblebrook share.
Together Pebblebrook and LaSalle will hold a portfolio of 662 primarily upper-upscale and luxury independent and collection branded hotels and resorts around the country, according to Pebblebrook. It will be the largest owner of independent, small brand and collection hotels, as well as the third-largest lodging REIT in terms of enterprise value and the second-largest in terms of equity market capitalization.
Boutique and extended-stay brands launched
Several new brands launched in 2018, with a focus on boutique or lifestyle hotels and extended-stay options.
In October, Hilton launched its Motto “affordable lifestyle brand.” The first Motto by Hilton is under development in London, and others are planned for Savannah, San Diego, Boston and Washington, D.C.
Hilton describes Motto as a “micro-hotel.” It will provide cost-conscious travelers a place to stay in the cities they most want to visit.
Vision Hospitality Group under CEO Mitch Patel launched its Kinley boutique brand in November. The new brand will see openings in Cincinnati, Ohio; Chattanooga, Tennessee; and Louisville, Kentucky over the next few years and is part of VHG’s Humanist portfolio of lifestyle properties.
August brought Red Roof Inn’s launch of its HomeTowne Studios extended stay brand. The phased launch of the brand will include $50 million in renovations of more than 30 properties with 4,000 rooms in around 20 markets. Red Roof Inn plans to open another dozen HomeTowne Studios properties over the next 12 months.
And Intercontinental Hotels Group launched its upscale Voco brand in June. It is expected to add 200 hotels to IHG’s portfolio over the next decade and increase the company’s footprint in the $40 billion upscale segment, which is expected to grow by $20 billion by 2025.
New faces and lost colleagues
The industry lost some important names in 2018, one to an unfortunate accident and another to age.
In July, HNA Group Co-chairman Wang Jian fell to his death accidentally during a trip to France. His co-founder and Chairman Chen Feng later took over the China-based company, which is heavily invested in the U.S. hotel industry and had owned Radisson Hotel Group. In August it announced that it would sell Radisson.
Philadelphia-based hotel industry consultant and founder of Hotel Partners Lee Dushoff died in July at the age of 80. Dushoff worked with Henry Silverman in 1990 to help found franchising company HFS, which later became Wyndham Worldwide, now called Wyndham Worldwide. He graduated Philadelphia’s Central High School and Brandeis University in Waltham, Massachusetts, and was a lifetime member of Germantown Jewish Centre, according to his obituary.
Steve Belmonte, CEO of Vimana Franchise Systems, described Dushoff as “the single most unique individual I have ever met in this industry.”
“He was a brother, a father, a mentor and most importantly, my very best friend for decades,” he said. “He was committed to fair business dealing and lead many of today’s executives down a better path to success. I don’t know what else to say except he was beautiful individual and he will be missed in so very many ways.”
Some changes were announced in 2018 that will take place this year. In September, American Hotel & Lodging Association President and CEO Katherine Lugar announced her departure to become president and CEO of the American Beverage Association, a Washington, D.C.-based trade organization which represents businesses that support the $183 billion non-alcoholic beverage industry in the U.S.
Last month, AAHOA President and CEO Chip Rogers said he would be taking Lugar’s place after New Year’s Day. Rogers had been in his position at AAHOA since 2014, according to AHLA. He oversaw a staff of 30 and an annual budget of $15 million. While he said he is grateful for his time at AAHOA, he said he is looking forward to continuing Lugar’s work at AHLA. AAHOA is now searching for his replacement.