Staying Competitive in Changing Markets

New Product in Attractive, Established Territories Pose Both Challenges and Opportunities

By Richard Takach, Jr. President & CEO, Vesta Hospitality | March 15, 2015

Any given hotel property is subject to a broad range of challenges due to changing market conditions. These competitive factors can impact occupancy rates, the room rates a property can command in the market place, the property's overall revenue stream, and, ultimately, profitability.

Often times, challenges that can make a property vulnerable are independent of the overall supply of rooms in a given market. Examples include changing demographics and public safety issues, which may make a property less appealing to a portion of its traditional guest base; the move of a major employer or other entity that was a key demand generator; nearby commercial real estate transactions; swings in consumer tastes; sometimes, just a change in area roadways can make it more difficult for potential guests to reach your property.

At other times, the "enemy" can be strategic moves by competing hotels, or growth in the overall supply of rooms within a given market.

Regardless, we must respond, in effect, "changing our hotel," in order to preserve our cash flow, profitability, and reputation. This response can involve a wide range of approaches that impact such areas as staff recruiting, training and compensation; standards of customer service; physical plant and technology upgrades; or sales and marketing initiatives.

In this article, we consider some issues related to changing markets in general, before discussing what is on the near-term radar screens of many operators these days; the result of a peaking hospitality sector with outstanding occupancy and rates-that inevitable onslaught of new builds we see in every industry cycle.

Two sides of the challenge coin. Let's consider, for example, the situation where a major employer that was a significant demand generator for a property moves its headquarters to another city. As a result, business declines significantly. While every hotel ownership group will have a long-term asset strategy that includes prospective "sell" markers, many of the situations we are considering occur "in the interim"; often, either with little notice or due to slowly developing trends that lull us into complacency.

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