Hotel Heads Face Tough AAHOA Crowd
CHICAGO – The Asian American Hotel Owners Association ended its 21st annual convention this weekend broadcasting a clear message to the hotel industry: AAHOA’s number one goal is to make sure its members’ best interests are brought to the table.
During Friday morning’s general session, that’s exactly what the 10,000-member independent franchisee organization did, placing a panel of top hotel executives on center stage to take questions from the audience of hotel owners. Setting the theme, moderator Cheryl Casone, Fox Business News “Cashin’ In” host asked the audience several pertinent questions, one being, if you could leave your system today without having to pay for liquidated damages, would you terminate your agreement? A surprising 47% instantly replying on their handheld remotes voted “Yes,” while 28% registered “Maybe” and a mere 25% voted “No.”
In other words, 75 percent of the franchisees in the audience expressed that they were not happy staying with their current franchise system.
Liquidated damages has been a main point of contention for hotel franchise owners since AAHOA was organized in 1989. If a hotel owner’s agreement is terminated, most systems assess a penalty for future royalty payments for the remainder of the contract period at unfair and unreasonable rates, often assessing $1,000 or $2,000 for each guest room of a hotel franchise.
The panel of experts in the hot seat included Jim Abrahamson, president of InterContinental Hotels Group; Liam Brown, chief operations officer of Extended Stay Hotels and Marriott International; Hubert Joly, president and CEO of Carson; Steve Joyce, president and CEO of Choice Hotels International; Keith Pierce, president of brand operations of the Americas for Wyndham Hotel Group; and Olivier Poirot, president of Accor North America.
With the travel industry dramatically down, hotel owners have been hit hard with the depressed economy, desperate for financial relief. Casone asked the panel if they felt the economy had hit bottom yet. Abrahamson stated that things were coming back and by the end of this year there would be significant changes for the better. Other executives chimed in with somewhat optimistic remarks, but also reminding the audience that franchisors have suffered as well. One stated, “We are seeing improvements. We’ve turned the corner.” But that did not appease everyone. One hotelier asked, “What if we are down again? What then?”
Moderator Casone also asked the panel if the hotel chains were willing to reduce royalties during these tough times, but none of the executives stepped up to the plate. Instead, they dodged the question by explaining how they are helping franchisees behind the scenes in other ways, such as through proactive matching, vendor programs and financing avenues.
On the topic of whether franchisees should be required to attend company conventions, Wyndham’s Keith Pierce asked franchisees, “Why wouldn’t you want to attend the convention?” He suggested it was a good opportunity to share information and pick company vendors. Choice Hotels Steve Joyce agreed, stating that they get support from vendors.
A voice in the crowd yelled “kickbacks,” suggesting that franchisors were getting the benefit from high volume purchasing through their own suppliers instead of passing it on to franchise owners. “We want quality. We want to make money from suppliers,” one franchisee expressed, saying that there needed to be more transparency with programs involving hotel vendors.
Another audience participant rose up to the microphone to say that big hotel chains were more concerned about making money for their shareholders than they were for franchise owners.
Striving for Fairness
Incoming chairman C.K. Patel has expressed that despite the fact that the credit market and economy have put a sometimes overbearing strain on many of AAHOA member businesses, hotel owners and franchisees still must find ways to keep their doors open and meet their financial obligations. For that reason, he feels AAHOA’s fair-franchising efforts over the past year seem to have more importance than they already did before the current economic downturn. He stated that during these times, members depend even more upon their outreach efforts with franchisors in order to facilitate the process of finding solutions. He stated, “We recognize this and have dug our heels in, so to speak, to work with franchisors.”
Other Highlights of the Convention
The general session on Thursday morning started with opening remarks and several award presentations. Numerous checks were presented to AAHOA from franchisors and suppliers, including one from Chase Paymentech, JP Morgan Chase'’s credit card processing division, for $807,000.
Another was presented by Wyndham Hotel Group for $115,501.
AAHOA’s treasurer gave his report, simply stating that the organization’s revenues last year were $6 million plus, and expenses were under $5.9 million. AAHOA also announced that their political action committee fund was $300,000.
Another big announcement was that the House passed a bill authorizing a $30 billion fund for community banks to increase lending to small businesses, which would leverage up to $300 billion in loans to small businesses. But the speaker added, “It’s too little, too late.”
Illinois Governor Pat Quinn addressed the crowd, praising AAHOA for its accomplishments and stating, “Small business means big business.” He expressed that the hotel association was banded together in a positive way to make sure their voice was heard. He advised, “Speak in a clear voice for your industry. Pass on your ethics of work and of integrity.” He said the hotel industry created 303,000 jobs in the Chicago area.
The session also featured a spirited debate between Karl Rove, senior advisor to President George W. Bush, and Terry McAuliffe, former chairman of the Democratic National Committee. Rove kicked off the point-counterpoint debate, setting the mood in addressing his opponent, “Terry, you ignorant twit,” referring to McAuliffe’s view of the problems with the economy. But the Democrat responded by asking, “Why isn’t it better?” He, of course, pointed to the Bush administration.
McAuliffe said being at the AAHOA convention was like being at a Patel family reunion. He added that the Asian American hotel owners were “job creating engines” and their energy drives the spirit of entrepreneurs.
Ambitious Goals
As C.K. Patel assumes his position as chairman of AAHOA, he realizes the tremendous responsibilities it carries. AAHOA members today own approximately 22,000 hotels and control property with a total value estimated at being in excess of $60 billion. But Patel is up to the challenge. He is currently the longest serving member of the board and the only member to have been elected a director-at-large for three different terms.
Patel and the board have an ambitious agenda ahead of them. They are proposing two new initiatives, one taking on the contentious issue of online travel agencies (OTAs) such as Expedia, Hotels.com, Priceline, Orbitz and Travelocity, which has had a tremendous impact on the lodging business during the past two years. AAHOA members have seen significant drops in revenue as the OTAs, with their pricing policies, have grown in power and influence. The board feels if companies like Expedia and Priceline can control so much inventory, AAHOA members can do the same.
The second initiative Patel and board members want to implement this year is a purchasing cooperative. “Numerous vendors support our association and we make sure our members support these vendors in return,” Patel explained in a Hotel Business interview. He said members will be able to get better pricing than what they are now getting simply as AAHOA members, and it will help them manage costs and enhance their bottom line.
Also high on AAHOA’s list is its aggressive legislative agenda. Patel said political advocacy at the local, state and federal levels has always been a tenet at AAHOA, and their association will continue to be highly visible in the coming year on Capitol Hill in Washington.
Patel’s message at AAHOA’s convention was clear: “We are a group of 10,000 strong that has clout. In order to exercise that clout, our members have to be ready to make their voices heard.”
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