Independents Day: How Independent Hotels Can Win
By Mike Kistner President, Chief Executive Officer & Chairman of the Board, Pegasus Solutions | March 18, 2012
Recessionary economies historically lead to the demise of small businesses faced with the challenge of competing against industry giants. Hospitality isn't immune. The recent downturn has affected everyone, including the major brands. But, the independent hotels are faced with potentially making already lean budgets or staff even leaner. As major brands trim a portion of a large budget to adapt to diminished demand, the independent is often faced with eliminating key business building operations altogether. In the down market, when demand reaches historically low levels, how does the independent hotel cope as supply outstrips thinning demand? The answer is to refocus and invest - in revenue management, distribution, rate structures and strategies, travel agent programs, marketing programs, online strategies, corporate travel programs...securing and building their core business to ensure they obtain at least their fair share of the market. How does the independent hotel invest when their budget is under so much pressure?
Some seek the security of a major brand, where fees can amount to 11 percent of revenue, which does not include the cost of meeting brand standards on property upgrades. Others opt for global hotel representation with a company like Utell Hotels & Resorts or Preferred Hotels & Resorts? And the rest maintain their solidarity, relying on their own brand, financial resources and team to manage what business building operations they deem necessary and possible. Each option has its benefits, which are both dependent on and determined by hotel culture, audience and, as always, budget.
In today's travel marketplace, a large part of the discussion centers on online booking, which accounts for a third of total travel bookings according to PhoCusWright's 2009 forecast. Conventional wisdom says online travel booking has leveled the playing field for the global hotel company and the independent or small group hotel. But, ask independent hoteliers, and they'll tell you it has become yet another area where size - of budgets and dedicated staff resources - matters. Take the Centennial Inn Hotel in Farmington, Connecticut for example. The hotel, an independent 96-room property that caters to business and leisure travelers visiting Hartford, recently ramped up its Web site to allow customers to make bookings directly on it. In asking the director of sales, Victoria Freeman, about how the Internet has affected the hotel's business, she said its opened a Pandora's Box of new marketing, revenue management and sales opportunities for the property and its Web site. "Take the meta-search sites alone," Freeman added. "For a hotel like ours, it is important to appear prominently on the search engine results pages, so we may have to invest as much as our major brand competitors in the Hartford area do. Most online bookers don't understand the model - as far as they're concerned, the properties returned first are their best options, which, as we all know, may not be the case at all."
Revenue Management and Competitive Intelligence
For the Centennial Inn Hotel, and countless other independents like it, sophisticated technology and distribution can pose a challenge to competing on a global level. In a competitive marketplace, technology considerations for the independent hotel also extend to revenue management. Industry sources recently reported that the online hotel sector is proving more resilient than expected in terms of volume, but that rates have dropped 12 percent. With effective competitive intelligence, independent hotels can recognize changes to market conditions and react with appropriate market rates to ensure they capture their share of business that still exists. Various products allow independent hotels to measure performance against their competition. Comprehensive market intelligence tools are available that offer integrated insight into market performance with available measures based on revenue, net reservations, room nights, average daily rate (ADR), market share, average lead time and average length of stay. Additionally, booking patterns can be analyzed and reported, both historically and as far out as 120 days, to help guide sales, marketing and revenue management decisions, thus allowing independent hotels to dynamically see and act against competitor performance. We are currently seeing a high level of interest in competitive intelligence from our independent hotel customers and we are now working with growing numbers of them to assist in this important arena of business planning.