Chain-affiliated Occupancy Rising in 2003 -  Rates to Follow in 2004 and 2005

Quarterly lodging industry performance forecasts prepared by Boston-based Torto Wheaton Research and Hospitality Research Group were recently released to clients and subscribers.  The forecasts are for chain-affiliated properties in the 54 largest metropolitan markets and are based on actual performance levels through the third quarter of 2002 as compiled by Smith Travel Research and are developed using HRG/TWR proprietary forecasting models.

“The recovery cycle of the branded hotel market appears to be following a logical and formerly-observed pattern.  History has shown that once long-run occupancy is reached, which is expected in 2004, room rates rise, and development follows,” noted Jack Corgel, Ph.D., Managing Director for HRG.

The forecasts reveal that chain-affiliated occupancy is expected to rise towards long-run average levels in 2003, while ADR is predicted to remain flat.  Occupancy is forecast to increase by a moderate 2.8 percentage points and a very slight 0.9% increase is forecast for average daily rate (ADR) during 2003.  As a result, Revenue-Per-Available-Room (RevPAR) growth, a key industry performance measure, is forecast to turn positive in 2003 and increase 5.5% by year-end, which is only slightly lower than the previous increase forecast by the HRG/TWR model.  The bulk of this RevPAR growth should happen in the second half of 2003, as the first two quarters of the year are expected to register an average RevPAR increase of only 2.8%.

Figure 1 summarizes the outlook for lodging performance for the next three years.  Occupancy is expected to register strong increases in 2003 and 2004 and then experience a slowing growth rate as long-run stability is reached in 2005.  As occupancy moves towards equilibrium, increases in ADR are forecast to rise in 2004 and 2005.  Historically, development of new hotels resumes after this occupancy-followed-by-rate pattern of increase materializes.
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Hotel Room Prices Will Remain Attractive Through Most of 2003

Hotel room rate declines are expected to finally stop by the end of 2002 and remain stable through 2003.  Slight growth is expected in ADR in the second half of 2003.  This will be followed by reasonable room rate growth in 2004 and 2005.

Forecasts Differ by Segment

The 2003 outlooks for full and limited-service segments of the hotel market differ.  “The full-service segment is expected to grow strongly from 2003 through 2005 with RevPAR increases ranging between 6% and 10%.  The recovery of the limited-service segment will be similarly strong, but won’t start until 2004,” states Petros Sivitanides, Ph.D., Vice President for Research at TWR.  During 2003, occupancy for the chain-affiliated full-service market is forecast to increase by 3.5 percentage points, while ADR is forecast to remain relatively flat.  The resulting near-term outlook for the chain-affiliated, full-service segment is RevPAR growth of 6.2% in 2003.

The outlook for the branded limited-service market is slightly less optimistic, as RevPAR is projected to increase by only 2.3% during 2003.  Limited-service occupancy is forecast to increase by a slight 1.6 percentage points, and ADR is forecast to remain more or less flat.

Quick Adjustment to Changes in the Economy

The HRG/TWR forecasting models also reveal that most movements in the general economy are reflected in the demand for chain-affiliated hotel rooms during the same quarter as they occur.  As a result, hotels with brands should benefit by the end of 2003 from momentum building in the economy.

“According to Smith Travel Research monthly reports, chain-affiliated hotels have been impacted the most during this economic downturn. These properties will likely experience the earliest and strongest rebound in percentage terms,” Corgel adds.

The updated forecasts take into account not only the effects from the economy, but also the negative impact of the remaining portion of the stigma effect imposed upon the air travel industry as a result of the September 11 terrorist attacks.  Air travel stigma refers to the fear of injury and death from becoming involved in terrorist attacks and war, emotional disturbances associated with following new procedures for air travel, and reemerging fears of airplane safety stemming from the weakened financial position of the airlines.  While this stigma effect has decreased, it seems to still hamper lodging demand to some extent.

War with Iraq Would Likely Cancel RevPAR Growth

The prospect of a war with Iraq also creates great uncertainty in the lodging market.  Using the Gulf War experience that occurred in the first quarter of 1991 and assuming a short war would take place in the second quarter of 2003, the HRG/TWR analysis shows that a war with Iraq will have varying consequences within the branded lodging market.  The chain-affiliated, full-service segment would be negatively affected by a war, while a war would have a negligible impact on the branded limited-service segment.  In particular, forecasts suggest that at the national level, a war lasting approximately one quarter during the first half of 2003 would reduce expected RevPAR growth during the second quarter of 2003 to practically zero.

The Hospitality Research Group (HRG), headquartered in Atlanta, is the research affiliate of PKF Consulting, the international consulting and real estate firm specializing in the hospitality industry.  HRG, along with PKF Consulting and the PKF Consulting Capital Markets Group, are wholly owned subsidiaries of Hospitality Asset Advisors International, a U.S.  Corporation.  HAA International has offices in New York, Boston, Philadelphia, Washington DC, Atlanta, Houston, Dallas, Los Angeles, San Francisco, and Singapore.

Boston-based Torto Wheaton Research is the premier provider of commercial real estate forecasting, analysis and consulting services for office, industrial, retail, multi-housing and hotel property types. The firm provides unrivaled market knowledge through a full suite of research products and specializes in commercial real estate risk management through strategic debt and equity consulting. Highly sophisticated and reliable forecasting models, along with proven analytical expertise, have earned the company international recognition.  Torto Wheaton Research is on the web at www.tortowheatonresearch.com.

HSMAI 2003 Calendar  for Industry Events

The Hospitality Sales & Marketing Association International (HSMAI) has announced several industry events and programs to take place in 2003.  HSMAI events highlight educational sessions as well as business-to-business forums for buyers and suppliers of hospitality, travel and tourism. 
        
“From cutting-edge educational sessions and executive think tanks featuring expert speakers and on-line learning to a full program of regional meetings, trade shows and networking opportunities, HSMAI events are invaluable for sales and marketing professionals looking to hone their skills and stay abreast of industry changes and trends,” states Robert A. Gilbert, CHME, CHA, president and CEO of HSMAI. 
        
Executive T.H.I.N.K sessions and an eConference series are among the key events that will take place during 2003. 
        

HSMAI events for 2003 include: 

HSMAI Travel Industry Awards Dinner 
Jan. 28, 2003 
Marriott Marquis 
New York, NY 

Excellence in travel and hospitality advertising, public relations and Internet marketing is honored at HSMAI’s annual Awards Dinner. Attended by a “who’s who” of the industry, the dinner’s highlights are the Best in Show, Platinum Awards and Lifetime Achievement honors.  Bunny Grossinger and Peter Warren are this year’s recipients of the Lifetime Achievement honors. 

HSMAI’s Affordable Meetings® 
This show provides meeting planners with free educational workshops on topics related to affordable meeting planning as well as the chance to liaise with a variety of suppliers from hotels and resorts to CVBs, destination management companies, airlines, etc.

April 2-3, 2003 
HSMAI’s Affordable Meetings® Mid-America 
Chicago’s Navy Pier, Chicago, IL 

June 11-12, 2003 
HSMAI’s Affordable Meetings® West 
San Jose McEnery Convention Center, San Jose, CA 

Sept. 3-4, 2003 
HSMAI’s Affordable Meetings® National 
Washington, DC Convention Center 
  
HSMAI 75th Anniversary Gala Event 
April 3, 2003 
Chicago 
HSMAI is celebrating its 75th Anniversary with a gala dinner honoring industry celebrities of the past and present in the city of the organization’s first conference held in 1927. The gala dinner and a commemorative book are sponsored by the HSMAI Foundation, which makes contributions to the book and dinner sponsorships a tax-deductible expense (including a portion of the dinner price). 

Meetings Quest 
Meetings Quest is a one-day show featuring educational sessions, a reception and luncheon with speaker(s), and an afternoon trade show providing meeting planners with one-on-one visits with suppliers. 

St. Louis - Sept. 9, 2003 - Millennium Hotel 
Atlanta - projected date - Sept. 25, 2003 - Hyatt Regency Atlanta 
Boston - projected date - Oct. 2, 2003 - Sheraton Boston Hotel 
Chicago - projected date - Oct. 16, 2003 - Holiday Inn O'Hare 
Minneapolis - Oct. 23, 2003 - Millennium Hotel 
Dallas - projected date - Nov. 6, 2003 - Hotel Inter-Continental Dallas 
Washington, DC - Nov. 25, 2003 - Hilton Washington & Towers 
Anaheim - projected date - Dec. 11, 2003 - Disneyland Hotel 

HSMAI European Congress 
Stockholm, Norway 
Fall 2003 

This European Congress features leading speakers who address cutting-edge issues facing the hospitality industry in the sales and marketing disciplines.  The conference is designed to foster lasting relationships and build bridges of communication between countries, cultures and among industry professionals. 

HSMAI is an organization of sales and marketing professionals representing all segments of the hospitality industry.

Contact Details:

Hospitality Sales & Marketing Association International
8201 Greensboro Drive, Suite 300
McLean, VA 22102
phone (703) 610-9024
www.hsmai.org

HFTP Hosts Two New Conferences in 2003 that Focus on Human Resources and Restaurant Finance and Technology

\Hospitality Financial and Technology Professionals (HFTP®) has added two new, one-day conferences to its 2003 education schedule — the Hospitality Restaurant Professionals Forum and the Human Resources Seminar. The two were adopted into HFTP's education program because of widespread interest in these topics from the association's members, and are geared for hospitality professionals. The two conferences will be held on Friday, February 21 at the Crowne Plaza Los Angeles Airport in Los Angeles, Calif.

The Hospitality Restaurant Professionals Forum will cover three topics in an open-discussion format, with each topic moderated by an industry expert. Topics currently include: Cost Controls, Food Safety and Supply Chain Management.

The Human Resources Seminar is geared toward hospitality professionals whose jobs require them to perform in a human resources capacity. The seminar will be lead by Cecile J. Bereal, president and founder of RMA Management Alliance, Inc. Topics currently include: Wage and Hour; Termination Practices; Workplace Diversity; Employee Relations; and Recruitment, Hiring and Retention.

Ms. Bereal's firm, RMA Management Alliance, Inc., is a human resources consulting, training, coaching and organizational management firm. Ms. Bereal has worked in the human resources field for over 20 years and her skill sets include what she refers to as the "ATIONS" — employee relations, investigations, mediations, facilitations and collaborations.

HFTP is welcoming feedback on the conference topics prior to the events. Suggestions for any particular area(s) of the topics listed above will be considered and can be e-mailed to education@hftp.org. This information will be compiled and provided to the session facilitator; however, the attendee's information will remain anonymous.

Online registration is available from the Education page at www.hftp.org. The early registration deadline is Friday, February 7, 2003. For more information, contact Angie Greer, HFTP education director, at (800) 646-4387 ext. 27 or (512) 249-5333 ext. 27 or by e-mail at education@hftp.org.

Based in Austin, Texas, HFTP® is the professional association for financial and technology personnel working in hotels, resorts, clubs, casinos, restaurants, and other hospitality-related businesses and has produced HITEC for thirty years. The association provides continuing education and networking opportunities to more than 4,000 members around the world. HFTP also administers the examination and awards the certification for the Certified Hospitality Accountant Executive (CHAE) and the Certified Hospitality Technology Professional (CHTP) designations. HFTP has been serving the hospitality industry since 1952.

Riedel Named Chairman Of The 2003 IH/M&RS Board Of Directors

Paul F. Riedel has been named Chairman of the Board of Directors for the 2003 International Hotel/Motel & Restaurant Show® (IH/M&RS). Riedel succeeds Xavier S. Lividini, who will continue to serve on the Board.

Riedel, whose career in the hospitality industry extends more than 30 years, is owner of the Holiday Motel in Willamsville, NY. His lengthy industry service most recently includes a successful two-year term as Chairman of the Board of Directors for the New York State Hospitality & Tourism Association (NYSH&TA), the organization he represents on the IH/M&RS Board since 2001. Since joining NYSH&TA in 1975, he has also held the positions of secretary, treasurer and vice-chairman.

In addition to his involvement with NYSH&TA, Riedel is the founder of the Western New York Hotel Motel Association (WNYHMA), of which he served as board member for 14 years, and treasurer for 11 years. Riedel also worked with the U.S. Corps of Army Engineers, in civilian and military capacities, for more than 10 years. He is a graduate of Erie Community College with a degree in Construction Engineering.

Current Board members for the 2003 IH/M&RS include: Treasurer Joseph E. Spinnato, Esq., of the Hotel Association of New York City, Inc. (HANYC); Secretary Daniel C. Murphy of the New York State Hospitality & Tourism Association (NYSH&TA); Joseph McInerney of the American Hotel & Lodging Association (AH&LA); Robert A. Holt of Best Western Inns & Suites (Cooperstown, NY); Xavier S. Lividini, CHA, of The Mayflower Hotel (New York, NY); Gene Rupnik of Rupnik Hospitality Management (Springfield, IL); John Russell of Yesawich, Pepperdine, Brown & Russell (Orlando, FL); and Gary Schweikert, Fairmont Hotel & Resorts, The Plaza (New York, NY).

The 88th annual International Hotel/Motel & Restaurant Show will run Saturday, November 8, through Tuesday, November 11, 2003, at New York City’s Jacob K. Javits Convention Center. The IH/M&RS will feature some 1,750 hospitality industry suppliers and attract approximately 45,000 in total trade attendance.

The IH/M&RS is sponsored by the American Hotel & Lodging Association; the Hotel Association of New York City, Inc.; the New York State Hospitality & Tourism Association, and is managed by George Little Management, LLC (GLM®).

Employee vs. Independent Contractor: A Game of 20 Questions

By Christina Morfeld

In today's economic climate, downsizing is an unfortunate reality for many businesses. Despite staff reductions, a company must continue to produce if it is to survive long term. While contingent staffing may seem like a logical way to get the work done (and keep headcount – and associated employment costs such as taxes and benefits – down), think twice before engaging the services of a so-called "independent contractor."

Simply because (a) you refer to a worker as an IC, (b) he or she has agreed to the arrangement in a written contract, and (c) payments are issued by accounts payable rather than the payroll department does not mean that the individual is, in fact, an IC. The nature of the relationship between the individual and the company is the true determinant and misclassification can result in serious consequences for an organization. These consequences include backpaying taxes, providing benefits – including vacation pay, stock options, and 401(K) contributions – retroactively, and stiff financial penalties.

There are a number of events that may trigger an investigation into your worker classification practices. For example, a contingent worker may apply for unemployment benefits at the conclusion of his or her contract, make a complaint of discrimination or harassment, or file a Worker Compensation claim. Additionally, the IRS may target your organization for an audit, either randomly or in reaction to a sudden and significant change in the number of reported W-2 employees.

The specific criteria used to discern whether an individual is an employee or an IC depends upon which government agency is researching the situation. But beware: It is not uncommon for one office to get others involved, and their conclusions are not always consistent!

The focus of any such inquiry is the level of control that the employer holds over the individual. It is important to note that whether this control is actually exerted is irrelevant; what really matters is whether the employer could, if it so desired, dictate the details of the individual's work.

The Internal Revenue Service's 20-Factor Control Test is the most explicit in its requirements. The good news is that no single factor is decisive. Rather, the facts and circumstances surrounding all of them must be carefully considered when assessing the degree of control that exists in a given work arrangement.

When determining whether an individual is more appropriately classified as an employee or IC, ask yourself the following questions:

To streamline this analysis, the Internal Revenue Service recently used these factors to develop what is known as the three "categories of evidence" – behavioral, financial, and type of relationship. While intended to assist workers in determining their own appropriate classification, employers may find IRS Publication 1779 (http://www.irs.gov/pub/irs-pdf/p1779.pdf) to be a useful reference in understanding these criteria. Publication 15-A (http://www.irs.gov/pub/irs-pdf/p15a.pdf) is also quite valuable, especially in that it provides scenarios from a variety of industries.

But what if you're only reading this article because of an impending IRS audit? Based on the information presented above, you now believe that your workers are misclassified, but it's too late to change their status now. Is there any chance of avoiding the harsh consequences?

Believe it or not, the answer is yes. Your business may qualify for an IRS Section 530 "safe harbor" exception if you can substantiate all three of the following relief requirements:

1. You had a reasonable basis for classifying the individuals as ICs. For example:
• You relied on a relevant court case, IRS ruling, or the advice of a qualified accountant or attorney;
• The IRS did not reclassify these or similar workers during an earlier audit; or
• It is a standard industry practice to treat certain types of workers as ICs.
2. You have consistently treated these and all similar workers as ICs in the past.
3. You have consistently filed federal tax returns (Form 1099-Misc.) for these and all similar workers.

Going forward, there are several measures you can take to safeguard against allegations of misclassification:

• Consider engaging only those ICs that are incorporated and, as a result, have been assigned a federal tax ID number. By establishing a "corp-to-corp" relationship, the burden is shifted away from your organization because the individual is considered an employee of his or her own corporate entity.
• Keep IC files separate from employee files. Manage IC files as you would those of any other outside vendor.
• Require that ICs submit invoices for services rendered prior to processing payment.
• Collect documentation that supports the individual's IC status, such as business cards, yellow page listings, marketing collateral, etc.
• Refrain from asking ICs to complete standard "new hire paperwork" such as an employment application and I-9 (immigration) form. Additionally, do not provide them with an employee handbook.
• Avoid having ICs and W-2 employees work "side-by-side" (i.e., performing the same tasks and reporting to the same managers).
• Develop a contract that explicitly reflects the 20 factors described above, with an emphasis on the following points:
• The agreement is limited to a specific term or project and will not automatically "roll over."
• The IC will determine how the work will be accomplished.
• The IC is not prohibited from providing the same or similar services to other companies during the course of the relationship.
• The IC is not covered by the organization's liability, health and worker compensation insurance.

While adhering to IRS guidelines may reduce some of your staffing flexibility, the short-term inconvenience is far less unpleasant than the long-term repercussions of being found non-compliant. That said, the IRS will gladly help you determine the appropriate classification for a worker or group of workers in your organization. Simply complete and submit Form SS-8 (http://www.irs.gov/pub/irs-pdf/fss8.pdf).