One Size Doesn't Fit All: Optimise Your Negotiating Strategies
By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | July 10, 2011
For many hoteliers, 2010 will forever go down in history as the one that got away. As the economic downturn bottomed out, hoteliers around the globe received an unexpected boost from international tourism demand which offset some of the implications of financial recession. The United States alone welcomed 1.2 million travellers that year, with long-haul arrivals contributing a 9.5 per cent increase on tourism compared to numbers achieved in 2009(1).
It goes without saying that hoteliers in many locations were ideally placed to make the most of this unexpected return of demand but for a lot of hotel operators it turned out to be a case of right place and right product but wrong time.
For those operating in the leisure and tourism industry, the recession was a frightening experience. Hoteliers sought to safeguard their future with long-term contracts designed to lock in guaranteed income and help weather the storm. However, in a bid to make the contract as attractive as possible to similarly beleaguered businesses, hoteliers found themselves drastically under-pricing their offering before quickly realising that a poorly negotiated deal will take the shine off the contract the moment the going gets good.
The lesson learned is that whilst the recession was felt by industry and individuals alike, it is essential that during periods of economic crisis hoteliers delve deeper to discover the reality of their situation before doing anything reckless. The factors affecting each element of a hotel operator's offering are so dynamic and diverse that a 'one size fits all' approach simply will not cut it, and whilst a high volume of long-term contracts may prove the right way to go at one location, it may be more financially sound to reduce them at others. Equally, it is critical that when entering into a contract, the terms are set at a rate and conditions which are beneficial to all parties. Ultimately, hotels are preparing for a period of anywhere between 12 and 18 months of trading, so if a hotel doesn't get it right now, it may never have the chance to buy back time and make amends.
Future forecasts are frustratingly mixed. Whilst some financiers are flying the flag for recovery, naysayers continue to cast doubt with cries of a double dip recession. As long as savvy hoteliers are amply prepared with the right intelligence, they will make educated and informed decisions when developing their negotiating strategies for 2012 and enter into the year in a strong position.
Thinking outside the box