It seems that the hospitality industry has bought a ticket to the same ride, one that shows no sign of stopping or even slowing down any time soon. Who can keep track of rates, occupancy, and attrition with market drivers shifting each week, first up, then down? Summer 2021 delivered a resurgence in leisure travel but slowed down during the winter months, and the absence of new business travel left operators wanting more. Leisure demand continues to push the needle across the industry, with several markets reporting gains in rate but not occupancy. Many operators are concerned that the end of the year could be a lot like last year, and they are looking for ways to adapt.
Before we can talk about what hoteliers can do to regain control of their destinies, we must discuss the industry's new challenges. Global economic uncertainty has pushed the value of the U.S. dollar higher than in recent memory, which bodes well for outbound travel but negatively impacts travel to the U.S. Meanwhile, Europe has grappled with ongoing fluctuations in travel demand varying by region because of political instability and the war in Ukraine. Other countries, such as Japan, have installed new, wide-reaching visa restrictions, complicating the process of entering the country and further demand.
This is a small snapshot of the uncertainty continuing to impact global travel trends, and significant events in each location will send shockwaves across the international community. With this in mind, hoteliers have turned to advanced data analytics technology and revenue management systems to react when the wind changes direction. Still, to indeed be successful in these conditions, hoteliers will need to adopt a new mentality.
Here are a few ways hoteliers can adjust their strategy to maximize revenue and regain control of their property’s success:
First, hoteliers must adjust their expectations for what is possible using data analytics today. Today’s travel landscape is prone to abrupt shifts that cannot be accurately and consistently predicted. It remains to be seen how long this will remain the prevailing trend in travel. Still, revenue managers need to adopt a dynamic strategy that is continuously revised based on external changes in the market.
Revenue leaders must use their data analysis tools in unique ways to get there while researching their competitors to better understand the optimal business mix for the coming quarter. Over the past few years, this process has felt like trying to hit a moving target. In these situations, hoteliers must aim for their optimal business mix the best they can and rely on revenue management technology to assist wherever possible.
That said, some shifts and trends make a more significant impression on the travel landscape than others, so hoteliers must sharpen their focus to know where to look ahead of time. The entire industry is watching for the return of MICE (Meetings, Incentives, Conferencing, and Exhibitions) travel, with operators looking to cement their place at the forefront of recovery. Additionally, it is advisable to closely watch the fluctuating value of the dollar and the availability of construction materials and labor to chart the development of prospective properties, which could impact a hotel’s competitive set over the long term.
Most importantly, hoteliers must discard the notion that they will be able to set a plan for the hotel’s business mix today without making frequent adjustments. Today’s market demands attention to derive success. As trends reliably change every few months, committing to short-term strategies will be valuable and can help operators more clearly focus on what is impacting their hotels and the demand coming to their property.
Back to the Basics
Pent up travel has led consumers to embrace revenge travel, spending more to recoup lost downtime from the pandemic. Despite this, hoteliers are frustrated that they have not realized the recovery many in the industry have anticipated – but to fully recover, much of the industry must focus on delivering the basics of the hotel experience at the highest possible level. Many operators are fixated on increasing profits to recover lost revenue from the pandemic, but this attitude is premature. The business will return, but without taking a critical look at the hotel’s revenue strategy from the ground up, a hotel may not be prepared to operate in today’s market.
Operators should start with their profit margins – do they really know them? If these numbers have been unchanged since before the pandemic, they may not. Revenue managers must adjust to new key performance indicators to achieve their goals today and, in turn, own them.
This is the time to learn the profit margin on the hotel’s data and strategically approach revenue management with fresh eyes. This may involve discussing a little “Revenue Management 101” with pertinent employees to find the right concept, effective strategy, and target business mix. Doing so will help get to the bottom of how much travelers are willing to pay.
This is not the time to complicate things. Hotels across the industry are just now beginning to return to the baseline of service offered before the pandemic, but this is not business as usual. Instead, it’s an opportunity to refresh the hotel’s operational, purchasing, and revenue strategy to position it for success in the marketplace. Creating a checklist that comprises what makes a hotel successful and modifying the strategy to fit today’s traveler will be vital to earning back or discovering new business.
ABOUT THE AUTHOR
Working intimately with hotel organizations all over the world, Digna boasts a strong global background in hotel operations, revenue management, consulting, and strategic pricing. As Director Industry Consulting at IDeaS, Digna leads a global team of professionals assisting hospitality companies of all sizes to build and enhance their total performance and price optimization capabilities. Prior to joining IDeaS, Digna spent 11 years at InterContinental Hotels Group (IHG) with roles that included regional head of revenue management for Japan and Korea, the Middle East and Africa, and global pricing implementation and business integration manager.