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Article Excerpt
Ritz-Carlton president and COO Simon Cooper last month spoke with Business Travel News editors David Meyer and David Eisen about the deluxe hotel operator's negotiations with corporate buyers and its expansion plans.
BTN: How have your negotiations with corporate travel buyers changed due to the current strong seller's market?
Simon Cooper: You try and walk a fine line, because these pendulums swing all the time. To be frank, if I was a buyer I wouldn't expect the pendulum to come back for maybe three to four years. I'm not just talking luxury. The upscale segment is where most of the corporate buying occurs--it doesn't really occur at our level--it occurs at the upper-upscale level: the Hiltons, the Hyatts and the Marriotts. If you look at supply and demand, provided nothing happens to demand and it stays at 3 to 4 percent, which is ticking along, you have to believe as a buyer you're going to have three to four tough years. There's almost no supply and a lot of it deals with the cost to build a full-service hotel in a North American city, which is extremely high, so I think you'll have three to four years of the pendulum favoring the seller, but one has to remember that the pendulum will go back the other way. Having said that, not unlike the airlines, energy costs in hotels--although not the same percentage as airlines--are going through the roof. Insurance has gone up, as have benefits. Relative to an airline, our benefits would be a lot more influential because our labor costs are much higher than an airline's labor cost. At most hotels, you are looking at 33 percent to 40 percent of costs going toward labor and with benefits growing in double-digits year after year, that's going to be a challenge.
BTN: At deluxe properties, are those labor costs higher?
Cooper: It could be higher. The only thing keeping it a little lower is if they've got less food and...
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