Resetting the Baseline for Hotel Performance
By Teri Utley Senior Account Manager, Range Online Media | May 07, 2010
The hotel industry has experienced growth in demand and revenue through the years, as leisure and business travel brought high levels of occupancy to U.S. hotels with strong revenue-per-available-room (RevPAR) figures. With current occupancy numbers hovering around 51 percent, U.S. hotels are concentrating on forgetting the performance of 2009 and eagerly looking to 2010 for renewed performance. During 2009, the hotel industry experienced its worst year in history. The average daily room rates declined by nearly nine percent and RevPAR fell into the double digits. A new year normally brings renewed optimism, fresh ideas and plans for growth. But 2010 is forcing hoteliers to redefine what is now normal" in the industry and how they should best assess their current and future performance. Decreased occupancies and lower average-daily-rates (ADR) bring challenges that before 2009 had never been seen industry wide.
While some experts predict modest travel growth in 2010, the scale is tipped more heavily to those that believe that occupancies are continuing a downward trend, which leaves the industry working to find an answer to weak demand and an increase supply of available rooms. The ADR will continue to be the number most focused on within the industry. Daily rates in 2009 were discounted by as much as 60 to 80 percent off 2008 rates.
These steep rate reductions that were made in 2009 will be slow to rebound, with experts projecting a three-year-cycle before rates are back at 2008 levels. The core market has been revised – business travel and group travel are still being excluded to reduce expenses. Air travel continues to slump as a result of decreased business bookings. Travelers are undeniably more budget and value oriented, with the car continuing to be the preferred mode of travel for vacations and leisure trips. While vacations are eliminated or shortened, travelers are negotiating for multiple night discounts, and lessened amenities result in lower rates.
Looking to the future, hotels will be forced to adapt to what some are referring to as the "new normal" in the industry. So the big question-what should the strategy be for 2010 and the years to come? What strategies should be in place for coping with the new baseline for performance in the hotel industry?
Many in the hospitality industry have already begun to rethink and revise their focus. Whatever the strategy may be for their company, they must be ready to maintain this focus and restrain from changing plans mid-course. There will always be opportunities to entertain promotional ideas or illogically change the core direction, but there must be a clear vision and action plan that will address all aspects of hotel management from efficient operations to customer relations. Revenue managers have the opportunity to affect the outcome of the business over the next few years if the new vision and action plans are clearly explained to all that are involved with the industry.
Revenue managers will be polishing a new skill set this year with a greater focus on the stakeholders within their organization. By becoming proactive and communicating with stakeholders within their company, a shift in the trend of the stakeholders will begin to occur. Rather than reacting to current conditions, a greater need will surface that will require communicating confidence in the new long range plans for the organization and sharing this renewed confidence across the organization. The ability to articulate and communicate the new long range plans will produce greater loyalties from all subsets of the organization. Efforts must include involving your staff and the addition of employee incentives to encourage forward thinking and new ideas. By assembling all parties to collaborate on generating increased revenue, successes will be found in closing new business, up-selling and customer service. Employee confidence will increase which should transmit into greater guest satisfaction.
Another tactic worth implementing is focusing on your sales and marketing activities. Are you contacting existing customers, providing loyalty programs or offering special rates to contracted clients? How about your website? Make sure this business tool is being used as a contact tool for all segments of travelers. It should be your most cost effective channel and allow your customers to navigate for booking, checking prices or signing up for emails and promotions. Assess the functionality of the site – is it user friendly and easy to navigate? Are you invested in online search, display media and search engine optimization? These direct response channels are open for business 24/7 and offer the largest return on investment. Make yourself well informed of technology. If your guest is savvy online, you should be as well.
Research and rethink your target markets. Invest where the demand is present. Revenue strategy is dependent on knowing and understanding customer segments and gaining insight into which ones are realistic for you to seek. What data is available that will offer insight into the customer traits that you service? Are revenue managers and marketing teams forming alliances that can produce forward thinking results to target these segments? The knowledge that is gained via segment research will provide invaluable information as hotels work to rebound.