Ian Schrager on hotel industry amid inflation: Be careful and do not act precipitously
Ian Schrager, Founder of Ian Schrager Company, joins Yahoo Finance to discuss recovery in the hotel industry, weathering challenges brought on by the pandemic, shadow inflation, and Covid-19 vaccine mandates.
Video Transcript
KARINA MITCHELL: Well, the hotel industry has been one of the hardest hit by the pandemic on ongoing labor and supply challenges. But there are signs of a revival. Here to discuss what's ahead for the industry is hotel visionary and legendary entrepreneur Ian Schrager. Thank you so much, sir, for joining us today. We really appreciate your time.
Analysts are expecting a significant bump up in the holiday travel season for travel and hotel bookings. But it has been a bumpy road getting here in part due to COVID and various state mandates that are in place for the virus. Tell me what are you seeing as far as demand at Public Hotel, where you are the owner, and more broadly, demand into the holidays and going forward into next year.
IAN SCHRAGER: Well, I think demand has been quite high. And I think that may be due to the pent-up demand and frustration people are suffering. But it has been quite high and the hotel is doing off the charts in terms of rooms and all the F and B, the food and beverage. I hope that continues. The business is changing a bit in the sense that the leisure travelers have become a focus rather than the business and group sections of the business, which I assume will have a little bit longer ramp-up. But the leisure travel, the transient business, is back in full force.
KARINA MITCHELL: And tell me how much of an impact do you think that opening up international travel now in the US in the coming weeks will impact demand.
IAN SCHRAGER: I think it will have a major impact. The only thing I'm a little bit concerned about is that while it is opening up, a lot of the airline tickets are quite expensive, being priced in opportunistic levels, I suppose. So people are going to be waiting a couple of weeks before they actually do start traveling. But I think that's a great help. Every bit helps. And it's very important.
KARINA MITCHELL: So we all know the challenges that the industry is facing, right? Because every sector has been hit by higher prices, wage increases, labor shortages. Wages are up in the hospitality industry 12% since Q4 2019. That far outpaces inflation, and commodity prices also higher. What are you doing at the hotel to sort of weather these challenges?
IAN SCHRAGER: Well, of course, we're trying to run as efficient as an operation as we possibly can. But I think you have to be very careful and not act precipitously and wait to see what happens. I think the most important thing is to get the customers back, and not cut back on the services or the amenities or the things you're offering them. And then once that stabilizes, then you can go to the next level and think how you might want to maximize your profits. But I think now, we're in a kind of very difficult stage, where we have to hold the line, hold the costs, and see where everything settles.
KARINA MITCHELL: So we've seen a lot of shadow inflation in this industry, where people are having to-- operations are having to cut back on pricing and on sort of menu selections and cutting staff. Are you saying you haven't had to raise prices in any regard? Have you cut back on prices when it comes to menu items? What are you doing?
IAN SCHRAGER: Well, you never have to raise prices. You only raise prices when you have a successful product or what the demand is there. But I think the worst thing that a business can do is to start cutting services and raising prices because of economic conditions. You know, you have to price your product appropriately.
And we have to wait and see where this whole thing falls out because it's unprecedented. And you can't make a permanent decision, a strategic decision, without knowing in what direction you're heading in. So, no, we can't be raising prices, and we can't be cutting back services. We have to see where this inflation ends and where it settles down before we do anything.
KARINA MITCHELL: You know, the president of the Hotel Association of New York says he's optimistic that by 2026, the hotel industry here in New York City will revive. What do you think needs to be done to bring guests back into the hotel? And are you seeing a fundamental shift in what they're looking for when they come to the hotel? I know we've talked in the past before about contactless check-in and, you know, more automation in the industry.
IAN SCHRAGER: Well, you know, I hope it will before 2026, quite frankly. I mean, I'm not a big believer in paradigm shifts. I think, you know, nobody really knows because it's completely unprecedented. All I know is that business has been very good, and it's picking up. And the demand is there. And I'm hopeful and more optimistic that business will recover well in advance of 2026.
And, you know, I'm a believer in New York. New York is forever. As long as we're breathing and living, New York will always be here in the center of the world, as far as I'm concerned. And I think we just have to stay strong and be steady and wait to see what happens, rather than jumping on the latest forecast of prognostication by all the experts that don't really know anything more than we do.
KARINA MITCHELL: And I want to ask you about vaccine mandates. You were the first hotel in the city to actually implement them, both for staff and guests. And since then, we've seen the mayor here in New York City implement more mandates, and we're seeing them across the country. Is that something that you favor? And do you think that that has helped as far as guests being more comfortable in the hotel?
IAN SCHRAGER: Absolutely, it's helped. It's helped business. It's made people come to the hotel because they feel safer, because we've taken into consideration their health. I can't understand what the issue is. I know everyone's entitled to do whatever they think is appropriate for themselves. Everyone should be able to control their own body. But our position is, when you're getting a vaccine, it's not only to protect yourself, but it's for the benefit of everybody else around you because you can get them sick.
And I don't understand what the issue is about taking vaccines. I think it's essential. And I think we should be doing it. And I think everyone should be doing it. And the sooner we all do it, the quicker we'll get out of this pandemic and this free-for-all. But I think it's for me, and of course, it is up for everybody to make their own decision. We don't force anybody to do anything. But to me, there's only one decision, and that's to get vaccinated.
KARINA MITCHELL: And so you say guests are starting to feel more comfortable. How comfortable are they with sort of joining in, in experiences again? And how important is it for you to sort of offer those things? I know you're doing something this weekend for Halloween. Are guests ready to sort of congregate and come together and sort of feel the vibe and feel part of a bigger group again?
IAN SCHRAGER: Oh, boy, are they ready. They are so ready. They're, like, in their 11th or 12th month of pregnancy. They are ready to give birth. People are tired. They want their lives back. I think all of the confusing and contradictory information we've been getting from all the governmental people has even frustrated people even more. People want to go on with their lives. And they want to be healthy. They want to be safe. And they want to be assured of that.
But I think people are really ready. They've had enough and they want to get back to their lives, no matter what limitations that includes, whether it's continuing to wear masks and whatever other sanitary things we have to do. But people are there, and they're ready. You can't squash that human spirit to live your life and enjoy yourself. So I think everyone's at the starting gate, ready to go.
