What to Expect in 2008

By Bradley Schmidt | February 19, 2008

The ancient art of tasseography - better known as reading tea leaves - has been associated with cultures ranging from the Scottish and Irish to the Greeks and Chinese. Now, after thousands of years, it has finally made its way to HT's headquarters for its inaugural issue of 2008. So, join with us as we peer into the industry's tea cup, in order to divine and understand the issues and trends that will affect you in the year to come.

Hospitality Going Green
Many hospitality operators are seeking to do their part to protect the environment through building and operating green facilities. A major barrier to building green, however, is the fact that development cycles prevent the most efficient technologies from being built into hotels. "With a build cycle of one to four years depending on property type, most building designs for newly opened hotels are already well behind the curve of available technology," says Douglas Rice, executive VP & CEO, Hotel Technology Next Generation.

What's more, developers aren't yet getting more greenbacks for their green buildings. Until they do, motivation to build them is low. "I think developers will only get green religion when we see that LEED ratings having a significant impact on sale prices. We still seem to be pretty early in that trend," says Rice.

And unless developers are on board from the beginning, the true environmental benefits of a green property may be negligible. "Retrofits are possible but they can be expensive and benefits can be limited. Green technologies reduce the carbon footprint, but they can't correct inefficient design."

Ben Prentice, co-founder of Boston-based Grille Zone, the first restaurant in the nation to be certified green by the Green Restaurant Association, seconds the notion of building green from the ground up. "It is more cost effective in the long term to make one large initial investment," says Prentice. "I wouldn't want to discourage anyone from doing it piecemeal, but it's not very feasible to install equipment that will be in daily use, that you are then going to change out, unless you are going through a major renovation."

Millenials Rising
The Millennial Generation (individuals born between 1976 and 2000) are considered children of the Internet. Having matured alongside it, Millennials have made the Internet an integral part of their existence, utilizing it for tasks ranging from basic communication and entertainment to education and financial management. This last point is the most crucial.

Millennials use the Internet to spend money, and a major goal of the hospitality industry in the Internet age has been to discern the best way to leverage the Internet to take advantage of that reality. And so as the Internet has become an extension of the lives of Millennials, the Internet has become an extension of the hotel and restaurant brand in response.

Millennials are even affecting the architectural concepts of hotels themselves. In a presentation at the 2007 Hotel Electronic Distribution Network Association Conference, Lalia Rach, associate dean, director and HVS International Chair for the Tisch Center for Hospitality, Tourism and Sports Management at NYU, indicated that Millennials view life as something "to be shared, displayed and lived on the world stage." This idea of the Internet and technology as experiential, as a lifestyle, manifests itself in the creation of a new brand segment of the same name - the Lifestyle hotel.

Hotel brands such as NYLO and Starwood's aloft were designed with these specific elements in mind. They feature 24 hour dining and fitness center amenities, and open floor plans designed to draw guests to social common areas where they can eat, drink, check email and above all, relax, together. Would Millennials expect any less?

Healthier Travelers
Large portions of the American public, witnessing a rising incidence of obesity, have become increasingly health conscious. For the hospitality industry, this has mostly manifested itself in the very public battle over trans fats.

Although trans fats have been in use for nearly a century, recent research has linked their consumption to an elevated risk of coronary artery disease and increases in levels of bad cholesterol, or LDL. In response to the growing concern over trans fats' adverse health effects, the FDA mandated in 2003 that all food companies must declare the amount of trans fats on nutrition labels by January 2006.
Shortly thereafter, state and local governing bodies introduced legislation banning the use of trans fats in restaurants. The most notable of these were the New York City and Philadelphia bans, signed into law in December 2006 and February 2007, respectively.

With several trans fat bans already on the books and legislation pending for 2008 in 18 states, as of press time, numerous restaurants and hotels - including KFC, Starbucks, Papa Murphy's, Marriott and Loews - saw the writing on the wall and announced their own plans to ban trans fats.

Karl Guggenmos, university dean of culinary education at Johnson & Wales University, believes that trans fats will be removed from the consumer food chain entirely within a few years. The culinary school is helping to pave the way by eliminating trans fats in all capacities, and actively training students to recognize the difference in food preparation and results between trans fats and substitute products.

It's the Economy
Rising prices have a ripple effect, and gas isn't the only commodity making waves. Corn prices are increasing due to the crop's role in creating ethanol, a decidedly more green energy source, and one that can reduce carbon emissions and dependence on foreign oil. As American farmers divert corn crops towards the production of ethanol, the corn supply is stretched and it becomes more expensive to feed livestock, in turn making it more expensive to purchase products derived from that livestock. This directly affects both restaurant and hotel operations and though costs are not always passed to consumers, it can happen. Starbucks did just that twice in a nine month period - October 2006 and July 2007 - citing rising energy and dairy costs as the reason for raising the cost of its beverages.

In times of economic prosperity, the average consumer would be able to absorb such a price increase. However, consumers themselves are experiencing the increased commodity costs at the grocery store and at the pump. Combined with sub-prime mortgage woes and recession fears consumers may think twice about where they're going to spend and discretionay dollars.

David Lehn, VP of IT, Noodles & Company believes that customers who eat out frequently will continue to do so, but will be looking for better price value options. "I would expect to see economic pressures pushing some folks down and out of - by frequency, if not entirely - the spectrum of fine and casual dining towards the fast-casual and QSR concepts."
Lehn believes fast casuals are positioned uniquely because of price point and similar food quality when compared to casual dining. He expects QSRs to thrive particularly from customers who want the convenience of casual and fast-casual but are minding their budgets more closely.

"People have long ago decided that eating out is what they prefer to do for many of their meal options," Lehn comments. "But with the pressures of the economy I think those concepts towards the less expensive end of that spectrum could actually thrive as diners start to place more value on price than other dining out attributes.


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