With the pandemic in the rearview mirror, hotel companies are bracing for a travel boom that started a year ago and shows no signs of slowing down. According to data from KAYAK’s Travel Trends Forecast for 2023, searches for flights are increasing and there is a strong appetite for international travel.
It’s no surprise, then, that hoteliers here and around the world are eager and excited to return to the period of growth they enjoyed before Covid-19 shook the world. Thom Geshay, CEO and President of Davidson Hospitality Group, a third-party hotel management company recently ranked number one for guest satisfaction by JD Power, is one of them.
Although the Davidson name does not appear on hotel signage, it manages hotels from almost every major brand as well as many independent hotels. This is the traditional business model for most hotels today. Properties in Davidson’s portfolio include popular hotels and resorts like Snowpine Lodge in Alta, Utah; Margaritaville resorts in Nashville, Hollywood Beach and Palm Springs; Eden Roc Miami Beach; The Don CeSar in St. Pete Beach, Florida; Sheraton Kauai Coconut Beach Resort and Grand Hotel on Mackinac Island Michigan.
Geshay is realigning the hotel management company to meet the needs of today’s travelers as well as those of property investors, both of which have seen small changes since 2020. From his perspective, the future is bright for hospitality, and travelers will be the ones to get the most out of greater choice, price and product offerings. He explains how his company is planning for growth in a still unstable economy.
How has the pandemic affected hotel management companies?
In my 34 years at Davidson, this was the most difficult situation the company had to face. The Disruption Contingency Plan did not include revenue dropping to $0 and the world shutting down without personal interaction. As the employer of tens of thousands of people across the country, the first priority was to protect the health and well-being of team members and guests. The next objective was to protect the interests and assets of landowners. Many management companies, including Davidson, ended up closing many hotels to preserve cash and the property itself. This is simply unheard of as hotels are not designed to close for periods of time.
What types of hotels are opening in the current market?
While there is certainly greater interest in resort assets today, it takes years of planning and execution to open a new hotel. During the pandemic, resorts and leisure-oriented hotels have performed much better than city hotels, and they continue to thrive. Corporate and group hospitality is rebounding more slowly and has yet to recover to 2019 levels. However, the hotels opening this year are developments that began their planning process long before the pandemic hit, so the transient leisure effect was probably not part of the underwriting to build these hotels.
Going forward, the focus will likely be on resort assets, but these are more difficult to build and take longer as locations and land requirements generally increase the cost and delivery time to market. At Davidson, there is greater interest in resort hotel acquisitions, as they have proven to be a resilient asset class during the toughest economic times. So look for more leisure-oriented properties down the line.
How have staff shortages affected your business?
In response to the demanding labor market, in order to attract and retain talent, Davidson encourages staff from resort markets through subsidized public housing, childcare and other benefits.
How have customer needs evolved over the past two years?
The main needs of customers are similar today to those before the pandemic, but some of their priorities have changed. They are more focused on cleanliness today than they were before and are willing to spend more for an elevated experience. For many, there is a new expectation that more services can be delivered digitally. The pandemic has forced the hospitality industry to accelerate this transformation, from booking to buying to marketing. Another major shift is an appreciation for living life to the fullest, with consumers traveling to improve the quality of their lives. It’s a mindset that we don’t see changing anytime soon.
Will Davidson open more international properties in the future?
Davidson has always taken a very thoughtful approach to growth. After nearly 50 years of operating national hotels, we are confident to begin entertaining international destinations. Davidson is very selective with which owners, markets and hotels we bring into the portfolio, which means there are no plans for rapid international growth. There is still a lot of real estate to conquer here in the United States
How is Davidson’s restaurant business doing post-pandemic?
The restaurant and bar sector has done very well following the pandemic. In fact, our same-store restaurant and bar revenues ended 2022 up more than 10% over 2019. Consumers showed a willingness to dine out and also embraced ordering takeout. A challenge has been reduced banquet and catering revenue as group and convention business remained well below 2019 levels. A positive note is that group activity is beginning to pick up for 2023 and 2024 Supply chain issues for menus and food prices also presented challenges.