Strong Hospitality Marketplace Prompts Its Own Set of Challenges for Operators

By Richard Takach, Jr. President & CEO, Vesta Hospitality | January 11, 2015

A continued positive economy, with the 2008-2009 recession firmly in the rear view mirror; excellent levels of business travel; and consumer confidence have all contributed to a sustained strong hospitality marketplace. At the same time, a number of factors, including the ability to acquire existing hotels for below replacement cost, the preference of private and public entities to purchase existing properties with in-place cash flow and the difficulty to finance new hotel construction have, so far, constrained overall growth in supply. With that said, it is important to note that strong recent sales prices have helped encourage some additional supply, especially in strong markets. This is a trend that bears watching.

As a result of the improving economy and still relatively constrained supply, we are experiencing consecutive period increases in RevPAR. Occupancies are strong and, increasingly, rates are also being driven higher.

A November 2014 "Hospitality Directions US: Our Updated Lodging Outlook " paper by PricewaterhouseCoopers (PwC) reported RevPAR growth of 8.2 percent for 2014, with accelerating group demand contributing to stronger occupancy gains. This RevPAR gain was strong across all property categories. Also, PwC projects that in 2015 hotels will reach their highest occupancy levels since 1984, with RevPAR increasing 7.4 percent, more than 80 percent of which will be derived from increases in room rates.

However, as Bill Marriott, Sr. liked to note, "success is never final." Sustaining and improving upon success has its own set of challenges. In particular, it is only natural that when guests pay premium rates for a room, their expectations soar correspondingly. This is especially so for leisure travelers, whose accommodations aren't being funded by a company or, otherwise, accounted for as a business expense. Being busy and meeting the needs and expectations of demanding consumers also impacts our executive teams and staffing at properties; perhaps, raising their own expectations for compensation and organizational support.

Surely however, it's a "problem" we like to have.

In this article, we will consider some of the issues our hospitality industry faces, even as we are doing so well. Subsequently, we will review some key areas or topics that impact our efforts to extend these good times.

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Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.