OTAs, legislation, development in Phoenix spotlight
“Hotel News Now”

September 24, 2010

The second day of the 2010 Lodging Conference kicked off with a familiar subject: online travel agencies.

Viewed by many within the hotel industry as necessary evils—or just plain, old evils by some—third-party reservation sites were top of mind for executives who took the stage for the day’s opening general session.

“You use them. … It’s the reality of the marketplace today,” said Jim Anhut, chief development officer of the Americas for InterContinental Hotels Group.

Most of the industry leaders mirrored Anhut’s ho-hum acceptance of distribution channels such as Expedia, Priceline and Orbitz. Thomas Magnuson, however, took a far more favorable spin.

“Our independents are really channel agnostic,” said the CEO and principal of Magnuson Hotels, a membership group for independent hotels. “All they care about is revenue. … as much distribution as possible. We don’t care where it comes from. OTAs are our best friend. We just signed a deal with Expedia and Hotwire to take our group of independents and put them on the same level of visibility with the major brands.”

As to whether OTAs were responsible for the rampant discounting suffered during the recession, Magnuson was dismissive. “As far as pricing, nobody holds a gun to (a hotel owner’s) head and tells them how to price their product,” he said.

Underscoring this all-too-familiar discussion was the burden of occupancy tax. While many jurisdictions debate who should pay what portion of occupancy taxes, OTAs have spent millions of dollars lobbying Congress for exempt status.

“The OTAs are not your friend,” said Joe McInerney, president and CEO of the American Hotel & Lodging Association. “They’re trying to pass a piece of legislation … which would say they would not have to pay any type of occupancy tax for any reservations they make.”

“Clearly that’s an issue that we should all be concerned about and focused on,” said Joel Eisemann, executive VP, owner and franchise services and select service and extended stay lodging development, Marriott International. “When they are not paying taxes on the revenue that they get, that revenue is not going back to the local jurisdictions. What are those jurisdictions going to do going forward? Are they going to look to hotels and travelers?”

A fiery response

When asked to comment on criticism of the AH&LA’s progress and accomplishments in Washington, McInerney presented a fiery and impassioned defense.

“If we weren’t doing anything, you would have union hotels all throughout the country,” he said with a finger pointed to the audience. “… We’ve been able to defeat the Employee Free Choice Act in the last three Congresses.

“You would also not have the Travel Promotion Act for the first time in the United States’ history to spend money overseas to send people the message to come to the United States … of which the United States (government) does not pay 1 cent for.

“You would also have (Americans with Disabilities Act) rules you would not be able to live with or open most of your hotels. … We’ve been working on that since 1993. You would also have problems with pier diem rates. … We’re out there fighting for that to increase it in different jurisdictions.”

In short: The AH&LA is working hard and producing results, McInerney said to a round of applause from the 900 or so attendees in the audience.

“We’re the only national trade association that represents all the stakeholders of this industry,” he added. “… We’re there to be your voice on Capitol Hill. If you’re not a member, we know where you live, and we’re going to send you some information.”

Getting deals done

You have to know exactly what you want in order to get deals done in this economy, said Thorsten Kirschke, executive VP and COO of the Americas for Carlson Hotels. A general approach to development will lead you nowhere.

Paul Sacco, senior VP of development—North America for Starwood Hotels & Resorts Worldwide, shared a similar sentiment.

“Our development model is about focusing on the right property, right partner, right place, and it’s about understanding the owners’ objectives,” he said.

Marriott is working with owners to provide credit enhancements and other financing assistance in some markets, Eisemann said.

IHG has taken a similar approach, turning inward to help existing owners work through its pipeline, Anhut said.

“It’s not just about signing and winning deals in this market place … but not letting that pipeline get away from us,” he said.

Both Marriott and IHG are investing heavily in China, the panelists said.

“We have more hotels in development than we have open in China,” Anhut said.

“If there’s one place that capital is not an issue today, it’s China,” Eisemann added. “… There is still significant capital available to develop hotels. There’s still a significant desire to have branded hotels.”

About Magnuson Hotels, the fastest growing hotel chain in history.
In only seven years, Magnuson Hotels headquartered in Spokane, WA has become the world’s largest independent hotel group, representing nearly 1500 hotels and a combined affiliate base with assets in excess of $5.5 Billion. One of the top 10 global hotel chains, Magnuson Hotels was the #1 Hotel Company of Inc. Magazine’s 2009 annual ranking of the 5,000 fastest growing privately owned U.S. companies. With a four year reservation sales growth of 595%, Magnuson Hotels is listed in the top 100 U.S. business services companies.

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