Ted Teng, president and CEO of The Leading Hotels of the World, recently told HotelWorldNetwork that the development of new hotels should be based on consumer demand, not on a company's need to grow (which has been the case the past several decades). Part of what he had to say:
"Sixty new chain brands have been added in the past sixty months, and they all want to have a hotel in key markets to support brand growth. These are the wrong types of ‘demand’ to build new hotels. Hotels developed for the wrong reasons will not only hurt the financial viability of that hotel, it will hurt the entire market due to desperate rate-led competition. Due to the high fixed cost and low incremental cost, perishable inventory, overlapping distribution channels, volume mentality (heads in beds), incidental revenue hope (mostly not profitable) and lack of business acumen, many will resort to discounting in order to attempt to fill the empty hotel rooms. Revenue management is used as a remedy for flawed development. The best remedy for flawed development is to just say no."
Teng also weighed in on synchronized facility and business cycles, as well as controlling distribution.