Why Now is the Time for Hotel Owners to Leverage Revenue Management
By Trevor Stuart-Hill President & Founder, Revenue Matters | November 09, 2014
The hotel industry, in virtually every global market, has recovered from the sharp downturn of 2008 and 2009. In the US market, during the first half of 2014, room demand was up 4.2% and room revenue was up 8.6%. Randy Smith of Smith Travel Research (STR) states, "The surge in demand we witnessed during the summer of 2014 even caught us by surprise…and it certainly is nice to be pleasantly surprised." So why is now a good time to harvest the value that revenue management can bring to the table? The answer relates to the cyclical nature of our business, combined with mounting pressure on profitability.
A Global View
According to Aron Gampel, vice president and deputy chief economist at Scotiabank, gross domestic product (GDP) globally is growing at approximately 3.4% on average. While this isn't dramatic by any stretch, it, along with very modest supply growth in most markets, has been enough to positively impact hospitality industry key performance indicators.
Of course, as would be expected, some regions are performing better than others. Brazil and the Eurozone, for example, are teetering on the brink of a recession, but according to Gample "still have some momentum potential through structural adjustments and economic stimulus initiatives." Manufacturing output in Germany (Europe's strongest economy) has slipped, France, UK and Netherlands economies are relatively stagnant and concern is mounting relative to a recessionary trend in Portugal, Italy, Greece and Spain.
Industry pundits, while hesitant to precisely predict the peak of the current cycle in the US, generally anticipate that we will experience a few more years of positive demand fundamentals before experiencing the inevitable downturn. US consumers and companies have become somewhat inoculated to threats of terrorism and news of pandemic outbreaks, so it is not anticipated that these will have a deep or sustainable effect on travel in the short term.
So, What's the Problem?