Strategies include implementing fees, mitigating liability risks
PHOENIX — Hotel owners have had a lot to contend with during the pandemic and recovery years. Hoteliers now face macroeconomic challenges that are shrinking margins and the rise of a new technology that’s changing the way they do business.
One of the biggest issues owners face is fostering their relationships with guests while also prioritizing profitability. It’s about striking the right value proposition, said Chris O’Donnell, president of select service at Aimbridge Hospitality, on a panel at the 2026 Lodging Conference.
“Anytime money is exchanged, there’s an expectation of value, … when you think about the expectation of value for guests, they don’t necessarily care [about] profitability — they want a great experience. But for owners, obviously they need a return on their investment,” he said. “So I think the inflection point between the two is when you end up with a successful business.”
The best owners understand this concept, he added, and while a guest might not think about their hotel’s profitability, they can tell if it’s a property that’s being invested in.
For the most part, guests are being brought in by the brand associated with the hotel — through its website or loyalty program — but that is just the beginning of their relationship with the hotel, said Leslie McClure, president at TGC Hospitality Management.
“At the end of the day, it’s the service that’s provided when we get there that makes the difference,” she said. “Yes, the brand is important. Yes, it brings guests into your door, but the success of your hotel is based on the service they get when they get there.”
Owners also have to best differentiate their properties from the others in their area, said Norman Leslie, CEO and co-founder of National Hospitality Services. He added that hotel teams must deliver on service “so that guest comes back to our hotel versus the Marriott on the street.”
Handling a ‘fraught’ brand relationship
The other challenging relationship owners are navigating is with the brands themselves. Dina Winder, executive vice president of asset management at Highgate, said these relationships are “a little bit more fraught” these days. Even so, brands and owners are ultimately playing on the same team, and that becomes more apparent when there are unifying challenges such as shrinking margins amid current economic conditions.
“The business models are different, but the goals are the same,” Winder said, explaining that both want guest satisfaction and business growth. “Owners are looking at the bottom line. The brands are fee-based business, it’s just a fact, and it’s about how we find that inflection point where they’re both together. That’s the hardest part.”
One way to foster a good relationship between brands and owners is increasing touchpoints and communication, said Vinay Patel, president and CEO of Fairbrook Hotels.
“The more you engage with the brands, the more the brand engages with the ownership group, then that’s the recipe for success,” he said. “I think that transparency and the alignment is absolutely critical for the success of both sides.”
Not all brands are created equal as some brands “deliver more” than others, Patel said.
“The value [for brands] is there, but I think the single most [important] thing is about communicating, making sure we work together, making sure they … understand your needs,” Patel said. “As long as they’re communicating and engaging is where the difference lies.”
As past chair of the IHG Hotel Owners Association, Leslie said he’s seen some momentum in these relationships.
“In the last couple of years, I think we’ve really seen this crescendo where everybody is very focused on the deliverable of ownership returns and returning to the lost margin that owners have lost since 2019,” he said. “It’s happening every day, every week, every month at multiple levels between IHG and the owners association, and I think that gives me great confidence that, while not perfect, that there is alignment in the deployment of the system.”
Pushing margin growth
Growing margins is at the forefront of hoteliers’ minds, and there are certain ways to do it successfully, but it’s not by only cutting hotel expenses.
Hoteliers can’t cut their way to profitability, Patel said.
“You’ve got to look at the top line — how do you increase revenue?,” he said.
The panelists discussed several ancillary revenue opportunities, such as parking rates, early check-in fees, retail opportunities, day passes for fitness centers and pools and room rates that include pets.
“Everybody wants to travel with their pets, and actually, we can charge as much as we want — it’s still cheaper than boarding them wherever they’re going to board them,” Winder said.
Charging for parking can be the easiest avenue to growing ancillary revenue, but adding fees has to be done in a way that doesn’t upset guests, Leslie said.
When done right, it can be impactful. Leslie said that parking fees have “added over $20 million in market cap to our portfolio because it’s virtually all profitability.”
Hotel owners are combating rising labor and procurement costs but are also facing insurance increases.
There are “all these new coverages that we never had before, or they weren’t as costly to buy, so those are going to continue to increase, unfortunately,” Winder said, referencing court verdicts that have driven the need for more liability insurance, such as for cybersecurity or sexual assault.
“There’s nothing to do but pass those costs to owners,” she said. “So I think that’s something that, from an on-property perspective, we can start to mitigate by having systems in place that assure the insurers and the carriers that we’re doing everything we can on property to mitigate those losses.”
The technology opportunity
New technology, especially artificial intelligence, has an opportunity to improve conditions for hotel owners. One way tech can help is with forecasting.
“As an industry we’re terrible at forecasting,” O’Donnell said. “I think that’s a struggle for us as an industry, and I think that’s where technology can help us. And when we do a better job of forecasting, it’s going to help us drive more profitable revenue.”
There are other operational opportunities for tech and AI, and the panelists agreed that new tech will be the biggest thing to watch in 2027. However, even with AI on the rise, hospitality is a people business and the need for on-site staff isn’t going anywhere.
“You still need somebody to look that person in the eye when they check in, and we see it with the brand mobile key adoption, which is at like 25%. There’s a reason it’s not higher,” Winder said. “The brands have been touting this for years, but people want to see somebody [at] check-in.”
By: Natalie Harms / CoStar News
News | Hotel owners open up playbook amid strained relationships with brands