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What Can You Be Certain of in An Uncertain Market?
By Tracy Dong - Exclusive for 4Hoteliers.com
Tuesday, 13th July 2021
 

Tracy Dong, IDeaS - Revenue ManagementThe hospitality industry has faced unprecedented levels of market disruption over the past 18 months: From government mandated travel restrictions to new cleaning and hygiene protocols, and whole business segments disappearing.

One could be forgiven for thinking there is only one thing certain about the industry today: uncertainty.

While no one can accurately predict what the next year will look like for the APAC hotel sector, there are a number of trends emerging which hotels can rely on to help plan for the future.

Here are five things hoteliers can be certain of in today’s uncertain market that will help support their business recovery through 2021 and into the unknown future.

Domestic demand will be strong in 2021

According to a Tourism Economics forecast, domestic hotel bookings will have recovered to 65% of pre-pandemic levels by the end of 2021 and 91% in 2022. This rapid recovery of domestic tourism presents opportunities for hoteliers and is largely due to international border closures along with the perception that travelling locally is a safer choice.

As a result of demand coming from local, domestic sources, hoteliers will likely have to adjust to a significant reduction in booking lead time as well the influx of shorter trips. Also, domestic guests will be more familiar with the destination and range of properties in the market, have more knowledge and be more open to booking directly with a hotel. This differs compared with a new international customer who is not as familiar with the destination and will often research, compare and book with an OTA.

To attract demand from domestic markets, hoteliers need to rethink their market segments and guest personas. By understanding the motivations of hotel bookings under each guest persona, along with the expectations of their guests, hoteliers have a better chance of attracting demand from domestic sources and converting this into repeat business.

Business travel will return

While the levels of business guests remain low across the APAC region today, positive signs are emerging from North America, where the successful rollout of a mass vaccination program is empowering the economy and facilitating the resumption of corporate travel. According to GBTA, one third of the businesses in North America have resumed corporate travel, while nearly 80% of companies surveyed indicated they would restart their own business travel programs in the near future.

Although business travel remains constrained across the APAC region today, it is expected that it will follow a similar recovery path to North America, where once vaccination programs progress, businesses feel more confident about allowing their executives to travel.

As corporate demand returns across the APAC region, hoteliers can make their properties appealing to potential guests by creating experiences that appeal to business guests. Given corporate guests are active on email, this communication channel becomes key in setting expectations and promoting services.

Tailored pre-arrival, in-house and post-departure emails sent on a regular basis will help you engage with guests and make them aware of promotions and extra facilities you might be offering, along with local experiences that could make their stay unique. Hotels should also make the check-in/check-out process as seamless as possible, through paperless services like self-check-in via hotel kiosks, to ensure a positive first and last impression is created.

There are no winners in a race to the bottom with pricing

History tells us there are no winners in a race to the bottom when it comes to pricing. Even in a soft market, where any business can look like good businesses, hotels must avoid continually matching competitor prices and starting a price war. This can damage a hotel’s long-term positioning and erode profit margins long into the future. The longer a hotel discounts its rate, the more likely this lowered rate will become the reference price in the minds of consumers, making it harder for a hotel to lift its rates back to the original price when the market eventually recovers.

To make matters worse, even if a hotel drop its rates to try and stimulate demand, it may not get the volume it wishes for and suffer from a RevPAR loss. Hotels need to understand the price sensitivity of its market segments and forecast groups, as well the expected demand at certain price points to have control of their own pricing destiny.

The pandemic reboots ‘direct’ bookings

The market disruption wrought by COVID-19 has led to many hotels revaluating their business, including the channels through which they secure guest bookings. While OTAs remain a key driver of occupancy, they are expensive and take revenue away from a hotel’s own recovery. Interestingly, there has been a move towards direct bookings in the region during the pandemic, according to Edwin Saldanha, Regional Manager of Oceania and Head of Marketing for STAAH.

"There has been strong growth in direct bookings within the market recently. Our data showed us that in Oceania, direct bookings were the number two channel in that region. Following booking.com, direct bookings are now the second largest channel in the region, highlighting that people are not only committed to supporting local businesses, but they are also becoming savvier around trying to strike a deal directly with a property," Saldanha said.

Given the cost associated with doing business with OTAs today, hoteliers should explore all opportunities to grow bookings from alternative channels, like their own website. In an effort to attract more website visitors and increase direct booking conversion rates from this channel, hoteliers need to understand those people who land on their website. What dates are they searching for? What is the purpose of their trip? Where do they search?

Collecting this information provides data that can be used to develop targeted marketing campaigns that attract the right type of website visitor—those with a higher chance of becoming a guest.

Guest needs and behaviours have evolved

The booking behaviour of guests have significantly shifted over the last 18 months. For instance, short booking windows (0-7 days) have now become the norm with many travellers reluctant to book far in advance in case their plans get interrupted by future travel restrictions.

As a result, hotels must have the ability to switch their strategy and pricing swiftly to adapt to the changing market conditions An advanced revenue management system (RMS) can help to analyse a rapidly evolving, competitive market through rate shopping and booking patterns.

Guest preferences have also changed through the pandemic. As travel is occurring less frequently, it becomes perceived as more of a luxury experience rather than common occurrence, meaning guests will seek stays which offer the chance to be pampered or experience something memorable over price alone. Hotels need to personalise their offerings and pricing to match guest needs today.

This is strictly an exclusive feature, reprints of this article in any shape or form without prior written approval from 4Hoteliers.com is not permitted.

Tracy Dong, is a Principal Industry Consultant at IDeaS. For more information on how your hotel can better adapt its revenue management capabilities and commercial strategy to today's uncertain operating environment, please visit: www.ideas.com

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