How to Create Demand
By Juston Parker President & CEO, Parker Hospitality Group, Inc. | June 15, 2010
Is it possible for a hotel to "create" demand? Is this just a myth used by Directors of Sales to try and stimulate the troops? When it appears that there is just no one wanting to visit your property, can you really "flip a switch" to drive people to your product? It is possible to create demand where there is none. First we need to uncover what is demand and how can it be managed and even stimulated.
Hotels have always wrestled with the idea of reducing rate to drive demand. Then the field of Revenue Management came along and initially said, "Don't just drop the rate!" Now, with things like GOPPAR (Gross Operating Profit Per Available Room) being a major benchmark, profitability plays into the decision process and reduction of rate is not the best option. In order to stimulate demand, we must first understand how to manage demand.
What is demand? Most hotels refer to demand as the volume of rooms they sell in any given period. "Our demand for this past year was 20,383." Some hotels refer to demand as the movement over any given period. "We went from 378 room nights on the books for next week, to 478, therefore our demand is 100 room night this week." Demand is actually defined as, "The demand schedule, depicted graphically as the demand curve, represents the amount of a good that buyers are willing and able to purchase at various prices, assuming all other non-price factors remain the same."
So, how does this help us out? Well as you see, demand includes the amount of product (in this case room nights) that people are willing and able to purchase. This means that demand goes beyond what they bought, but also includes what they are able to buy or in this case, available inventory.
What we need to achieve is the balance of what they customer is willing and what they are able to buy to get the maximum yield from the existing demand for our property.
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