Ms. White

Sales & Marketing

Down Market: Growth is Still Possible

By Kristi White, Director of Revenue Optimization, TravelCLICK, Inc.

Recent statistics from the hospitality industry are grim. Occupancy declines range from a low of 9.8% in Europe to a high of 14.4% in Asia Pacific, average daily rate (ADR) declines range from 3.0% in the Middle East to 17.9% in Asia Pacific, and revenue per available room (RevPAR) declines range from 14.9% in the Middle East to 29.7% in Asia Pacific. What can your hotel do to buck this trend and recover-sooner rather than later?

Two opportunities are apparent for recovery:

• look for business outside of your normal comfort zone, and

• protect one of your most precious assets, ADR, to position your hotel to recover more rapidly when demand levels begin to rebound.

Your Comfort Zone

As hoteliers, we understand segmenting our business. We place customers in buckets based on what rate codes they book in, what channel they book through, etc. Historically, this has been an accurate way to understand who our customers are and how and why they are booking our hotels.

However, as with all metrics, segmentation can become a self-fulfilling prophecy. For example, a hotel gets 20% of its business from ABC Company. Counting on this business, the hotel may become complacent and stop looking for other avenues. But with the current economic climate, ABC Company has likely scaled back on travel. The hotel, then, will most likely suffer because it did not have a back-up plan for replacing this business.

By committing to specific segmentations, hotels often overlook other segments that could drive more business for them in the short term and help weather a stormy economy:

Groups - Early in 2008, when the economy was still booming, hotels could afford to be selective in the groups they chose to do business with. With the economic downturn, it has become a buyers' market. Some of those groups, unattractive just last year, now look good. Have your sales team reconsider business that was previously turned down. Mining this valuable list might provide leads that will fill painful gaps in forecast. Also, groups that you might have on the books might want to renegotiate rates. Tread this path carefully, however. While for some groups you may be open to rate negotiation because of the long-term value of their business, for others, you might consider holding firm on the rate but offering a complimentary amenity that will increase the value of the rate originally negotiated.

Charter Bus Tours - The charter bus tour segment, part of the smaller group category, is not aggressively pursued by most hotels. It tends to be a segment that is booked if the business "falls into your lap." Tour sizes can range from smaller groups with 18-20 rooms to larger 50- to 60-room groups. The business can also help to drive business on shoulder dates and often requires food and beverage that helps to drive ancillary revenues. Two aggregators offer excellent opportunities to garner leads for your sales team to pursue:

• American Bus Association - A quick tour of this group's site reveals 947 tour operators specializing in tours across more than six types of travelers. In exchange for a few phone calls and a time investment, hotels can open up a new line of business that can help sustain them during this time and possibly broaden their horizons for the future.
• United Motorcoach Association - This site provides a membership directory of more than 800 tour companies. Again, pursuing this group will take a time investment from your staff, but is well worth the effort.

Traditional Wholesale (off-line) Business - This is a natural part of many hotels' annual business plan. For others, it is a segment of business that they have never explored. Although this business generally comes at a steep discount, it is year round in most markets and can provide a much-needed base that helps to fill otherwise empty business. Some of the major companies in the marketplace include Tourico, Gulliver's Travel, and Apple Vacations. These companies, however, are not the only operators in the traditional wholesale space. Careful research will identify even more that might be specific to your area. While this might not be a viable market for all hotels, it may be a surprising source of business for some.

Travel Agents are Your Friends - For 2009, an estimated 45 million reservations will be booked through the Global Distribution System (GDS), generating $16 billion in revenue. Of this volume, about 50% is managed business through companies that use travel agencies to manage their travel. For these travel needs, a hotel must be contracted to receive the business.The other half, however, is business that can be influenced by advertising and direct solicitation. Your Central Reservation System (CRS) provider can help you to make the most of this channel. When was the last time you saw your hotel in the GDS? When was the last time you updated your listing? Your listing has specific requirements and limitations that you should recognize and embrace. When optimally displayed, your GDS information can turn thousands of travel agents into your best salespeople. And, best of all, they get paid only when you get bookings. Make you sure you pay them promptly. If you aren't using a vendor to process commissions, find one and begin.

Protecting Your Asset: ADR

With the bottoming out of demand across the globe, ADR’s are also bottoming out. After 9/11, demand and rates bottomed out as well. Recovery to pre-9/11 rates took more than six years. The forecast for recovery this time around is estimated to be even longer, as the dip in rates and demand has been more aggressive. While moving rates upwards might seem impossible for hotels caught in the spiral of diminishing demand, pockets of opportunity can be found.

In the chart below, demand and ADR percentages of change are shown by day of week. The drop in demand Sunday through Thursday, for example, is hovering around 10%. This stands to reason, as corporate negotiated travel has been one of the segments most heavily hit by the economy. For weekends, demand decline is less severe at only 4%. What is most disturbing about this chart is the decline in ADR. While the decline is more severe mid-week, ADR declines are relatively flat at about 8.5% average across all days. So, even though demand is higher on the weekends, hotels are applying equal discounting on all days. Each hotel needs to look at its changes by day of week and make pricing decisions based upon each individual day. By segmenting the business at this micro-level, most hotels should find an individual day or days where they have an opportunity to begin to recover rate. This will help them to rebound sooner and position themselves to leapfrog the competition once demand returns.

Kristi White is Director of Revenue Optimization for TravelCLICK. Her team provides focus on TravelCLICK’s iHotelier Central Reservations customers, working to maximize transactions through best practices in marketing and distribution. Ms. White advises on business strategy, improving performance and profitability. She has experience in Operations and Regional Sales at both independent and flagged hotels. She is a frequent guest speaker and is on the Board for the HSMAI Revenue Management Special Interest Group. She holds a B.A. in Political Science from LSU and multiple certifications from AH&LA. Ms. White can be contacted at 817-719-2956 or kwhite@travelclick.net Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.