Consumers Shouldering Price Increases

The hospitality industry is looking for solutions to deal with changes in its supply chain that have increased input costs. Over the past year inflation, higher foreign demand and less supply ability have all contributed to the higher costs of staples such as beef, milk, and sugar. Groceries and restaurants have taken in these costs over the past couple of years in fear that passing them along to consumers will push them towards their competitors who have kept their price costs internally. Now, however, executives are looking towards alternatives to deal with this situation. Pete Bensen, chief financial officer of McDonald's, has claimed that "The question will be exactly at what point will we be able to take some of that pricing," and chief executive of Starter Bros. Jack Brown has quickly backed him up by stating that "The big challenge will be, how much can we swallow and how much can we pass along?" While many see that this could hurt their business, those with a high brand equity such as Starbucks, Domino's Pizza and Morton's Restaurant group, believe they have enough wiggle room and pricing power not to hurt the business too much. With costs expected to rise 2% in the US and 3% percent in Europe, international and local organizations will find a difficulty in transitioning.

Here is where I believe brand loyalty plays a significant part in business decisions. If a company knows that it has built a strong loyalty within its consumers it knows that they have some breathing space to deal with higher costs. Another important factor in this new approach is timing. Companies who change their prices earlier than their direct competitors could easily loose customers even though the competitor will eventually have to raise prices. BJ's Restaurants has played a slight-of-hand trick as they raised prices but also changed the decor and table settings of the restaurants. BJ's chief financial officer Greg Levin as said that they followed this trategy because "in this business, you can't just raise prices without improving the overall dining experience." Others will have to find their own ways of loading off some of their costs unless they see a true potential for long-term growth if they swallow the short term costs.

http://online.wsj.com/article/SB10001424052748704506404575592313664715360.html

Hotel Plan-Kyle Davis

Residents and officials of a neighborhood in Williamsburg are questioning the governments decision to finance the construction of a hotel. The hotel developer is applying for 15 million in federal tax exempt financing and next tuesday The New York City Capital Resource Corp will vote on whether or not to aprove the loan. The location the hotel would be built is in an area that is designated for industrial and manufacturing jobs. Management at the company trying to purchase the land claims that no one else was trying to acquire the space and that a hotel would make a great addition to the area. Earlier in the year, the new york capitol resource gave 20 million to finance a hotel in harlem. They claim that it will help the economy by stimulating construction and hotel jobs.


This article brings up an interesting government and economic issue. Theoretically the hotel would stimulate the economy to some extent but it is a risk to invest in a hotel that could possibly not be profitable. Also the money that is being used for these hotels could probably be used for other ventures that are more secure and that create more jobs. A hotel does present a variety of jobs such as management, custodial work, receptionist jobs and chefs for potential restaurants or room service. Also construction of the hotel, interior design, electrician and what ever else is necessary to create the hotel. In my opinion, i do not think the hotel should be approved for loan unless more research is done on the amount of jobs they hotel will stimulate. Also i think research should be done on the need of a hotel in the area. How man people visit Williamsburg? What is the competition in terms of other hotels and the demographic of tourist and visitors of Williamsburg?


http://online.wsj.com/article/SB10001424052748704462704575590270402178614.html?KEYWORDS=hotels#articleTabs%3Darticle

Hotels Increases (Irma Mendez)

The recent recession had an impact in the hotel industry. Personal travel didn't change by a lot. The Business travel, however, drastically decreased, which was where the hotels saw a decrease in revenue. This trend had occurred in the last two years. This year it seems that hotels are beginning to recover from the recession as business travel slowly increases. According to Smith Travel Research Inc. hotel occupancy rose from 62 percent to 67 percent last year in hotels with the most expensive rooms. Also occupancy rose from 62 to 65 percent in hotels across the country. This increase demonstrates that the recession is slowly going away, which is making businessman travel more often. If this increase continues, then hotels can recover from the loss of revenue they had because of the recession, which caused businessman to travel less.
I believe that the revenues of hotels will continue to increase as more and more businessman continue traveling and staying at hotels. Also as the recession continues to disappear, it will benefit hotels. Once people feel confident that the recession is over or that economy is in good shape, they will be more willing to spend money. This has the possibility of increasing personal travel, which will boost the hotel revenues. With both an increase in business travel and personal travel, hotels will be able to recuperate their losses from the last couple of years.
http://www.bloomberg.com/news/2010-11-03/hyatt-third-quarter-profit-rises-as-demand-for-high-end-hotels-increases.html

Socializing at the Holiday Inn

Executives at the InterContinental Hotels Group PLC (IHG) have announced their intent to incorporate a "social-hub" into their Holiday Inn chains. Holiday Inn studies have shown that most of their guests—"who are most often middle managers, route salespeople, entrepreneurs and government supervisors—want to be around other people rather than holed up in their rooms." The company plans to overcome the everlasting problem it faces with generating enough traffic to support full-service food services.

The social-hub would join all the aspects of a restaurant, game room and business center into one. There the guests of the hotel can meet and interact even if just briefly. Kevin Kowalski, senior vice president of global brand management for IHG, has said that "these are more extroverted, charismatic people who like people," therefore, they will enjoy this new inclusion. Although the start up cost of such a project will be significant, the project promises to decrease labor costs by limiting the wait staffs. This will result as the planned social hub will have a more "do it yourself" theme where many stations will be set and you, as a guest, pick and choose.

I think that this plan could pay off for IHG as it has been an underperforming sector of the middle market hotels. A restructure could be exactly what this area of the business is looking for to creative a more lucrative field. Social travelers will likely look forward to these hubs as they can turn their stiff business trips into more relaxing and enjoyable ones.

http://online.wsj.com/article/SB10001424052702303443904575578613162270270.html

"Greenwashing" -Irma Mendez

It seems that the recent goal of hotels is to become more environmentally friendly. Hotels in the Northwestern part of the country are no exception. The only difference is that they are trying to do it even greater than what other hotels are doing. One hotel that is becoming eco-friendly is the Oxford Hotel in Oregon. One way that the hotel is doing that is by having natural mattresses. The mattresses have “no polyester or off-gassing.” The rooms in the hotel are also cleaned with nontoxic solution made from water and electrolyzed salt. Other ways that the hotel saves energy is that: “The hotel is entirely powered by Columbia River Gorge wind farms and hydro dams through renewable energy credits provided by Pacific Power’s Blue Sky program.” These are not the only ways to be “green.” The hotel is also starting its own roof garden, which will provide some of the foods for the hotel's kitchen.
One reason that the hotel is trying to be more “green” is that it wants to show that it does care about the environment. Also as Ben Perle, the hotel's manager put it that the hotel is not doing it because of all the “greenwashing.” The trend of hotels moving towards becoming more “green” is quickly growing giving the hotel chains the pressure to change their facilities to accomplish this. This pressure has made some hotels lie or exaggerate to some extend about the “green” changes that they are making. This is what the term “greenwashing” refers to. Ben Perle doesn't want the Oxford Hotel to be seen as those “greenwashing” hotels. He says that the changes the hotel is going through are real and no exaggeration or lying is taking place.
It is very important that if a hotel says that they are going to become “green” that they actually go through with the plan. If they fail to do so or of it know that they are lying, then the hotel could loose credibility and clients. In order for the hotel to keep its reputation it needs to keep its word and perform all its planned activities. A hotel doesn't have to become “green” if it doesn't want to but the growing trend shows that if hotels want to stay in competition then they have to find some way to more towards being “green.”
http://www.nytimes.com/2010/10/17/travel/17headsup.html?scp=7&sq=hotels&st=Search

Bedbugs Take A Bit Out of the Waldorf - Jesse Binder

The massive infestation of the bedbugs in the New York City area has already created havoc for apartment dwellers, retail stores, and even the Lincoln Center for the Performing Arts.  In recent years, it has become a growing concern for New York City’s hotel industry.   Over the past five to seven years, hotels began to “change some of their housekeeping protocols” to identify a problem early said Joseph McInerney, President and Chief Executive Officer of the American Hotel and Lodging Association(a trade group).    He also noted that the number of lawsuits against hotels over a bedbug complaint has been “miniscule.”   But a recent lawsuit by a Nassau County mother may increased this risk for hotel industry.

In a Nassau County Supreme County, Ms. Susanne Igneri filed a complaint in mid October against the renown Waldorf Astoria hotel(owned by Hilton Worldwide) in New York City.   She argued that she has spent more than $13,000 in expenses to treat her six year old daughter Sophia.     Their complaint suggests that the child is experiencing repeated nightmares and lasting medical issues.    If the family prevails, it may spark a rash of lawsuits against the NYC hotel industry.   Already, travelers have second guessed staying in New York hotels.   If the Igneri family succeeds, hotel operators may also second guess opening new hotels in New York City. 

Although the mounting concerns about the bed bug infestation has reduced demand for NYC hotel rooms, an increase in lawsuits could reduce the longer term supply of hotel rooms.  This could have a favorable impact on longer term hotel rates.   However, this presumes that New York City prevails in cleaning up its bedbug epidemic.   It remains to be seen who will win this fight, New York City or the Bedbugs?

http://online.wsj.com/article/SB10001424052702303339504575566413252299180.html?KEYWORDS=bedbugs

Starbucks Slow down-Kyle Davis

Next month, Starbucks is implementing a storewide change into their approach in preparing beverages. People had been complaining that the care and attention in the preparation of their drinks had been lost due to the assembly line method used in making drinks. Starbucks is responding to this by making employees slow down the amount of time use in making the drinks. No more than two drinks can be worked on at a time and milks is steamed for each drink. This change brings the small coffee feel back to this coffee shop chain. They also claims it will increase the efficiency. I can agree that the quality of the beverages will increase but more time is being taken so i would argue that there is no efficiency change.

Slowing down the production time is going to increase the wait time for customers. This could lead to less people from visiting Starbucks who are in a rush or impatient. People who may need to get their morning coffee before work may go to other alternatives. McDonalds is Starbucks biggest competition already and not only is their coffee cheaper, but it’s also faster now. In this situation I do not think that making this switch is going to reap enough benefits to make it worth it. “Earnings at Starbucks rose 37% while revenue for the quarter ended June 27 increased to $2.61 billion from $2.4 billion in the year-earlier period” Sales are fine for Starbucks so I do not see what exactly starbucks is responding to because whatever system is currently going on is working.

http://online.wsj.com/article/SB10001424052748704164004575548403514060736.html?mod=WSJ_Hospitality_leftHeadlines