New Openings Bring New Challenges.
By Klaus Kohlmayr, Director of IDeaS Advantage
Sunday, 24th February 2008
The Asia Pacific region is experiencing a hotel construction boom.

Based on years of strong economic growth and investor confidence, more hotels are constructed in our region on an annual basis than in any other place in the world.

Importantly, the frantic pace in which these hotels are being constructed and opened is leading many in the industry to question whether these hotels are adequately prepared for the challenges they face in optimizing their revenue potential. 

According to the Global Authority for Hotel Real Estate, Lodging Econometrics, as of October 2007 there were a total of 1,555 hotels with a combined 366,679 rooms under construction in the 24 countries making up the Asia Pacific region.    

While increased construction is occurring throughout the entire region, development underway in China in preparation for the upcoming Beijing Olympics is underpinning the regional boom. In total, China has 7882 different projects underway with a combined 222,591 rooms. China currently accounts for 50% of all planned projects in the region and a staggering 60% of all guestrooms.

Hong Kong, as a financial and transportation hub in the Asia Pacific region is also experiencing record levels of construction. This, in part, can be attributed to the expected freeing-up of the Hong Kong economy which will allow for Chinese investors, both individuals and institutions to openly invest in the market. In preparation for this economic resurgence Hong Kong is anticipated to open 50 new hotels in coming years, split evenly between Hong Kong Island and Kowloon Island.

However, in spite of the number of hotels and resorts opening annually throughout the Asia Pacific region continuing to rise, many hotel's are struggling to reach their optimal revenue potential due to inadequate pre-opening preparation and a lack of in-depth pricing and channel strategies.

With a Hotel typically requiring 9 – 12 months post opening to achieve its full potential, every effort must be undertaken to ensure a Hotel is "Revenue Optimized" from well before its doors open, therefore ensuring a higher revenue flow and in turn better return of investment for both Hotel Owners and Hotel Managers alike.

There are many areas that need to be covered throughout the pre-opening phase of a Hotel, ranging from establishing market segment strategies, undertaking comprehensive competitor evaluation, pricing research and processing and forward planning. It is also important that all hotels follow a structured, standardized approach to pre-opening to ensure consistent and effective results from day one. 

Being adequately prepared prior to a hotels opening is of particular relevance in India, where current economic growth has driven record levels of hotel and lodging construction take place in recent times. With 261 projects currently underway and a total of 47,647 rooms India is second behind only China in terms of hotel construction.

Hotels, such as those new facilities being built in India and throughout the region, should consider addressing their pre-opening processes in three stages, which allow for a mixture of on-site training and strategy preparation.

A strategy setting process, in which pre-opening revenue, marketing processes and actions are developed, should be undertaken six to nine months before a hotel is to open and ideally consist of:

  • Hotel strategic analysis including a study of micro market/overall economic factors that could affect the hotel's performance.
  • A thorough analysis of the market and competitive set, including competitor value/benefits positioning across a range of price points.
  • Sophisticated pricing structures, based on market conditions, segmentation and hotel positioning.
  • Relevant channel strategies according to product positioning and market environment and cement "product positioning" (i.e. Hotel Descriptions, Room type descriptions etc) through all channels.
  • Together with the Sales & Marketing Department develop market segmentation strategies and action plans, with a particular focus on business with long lead times (Wholesale/Groups etc.)
A pre-launch process, which ensures that all stakeholders are fully trained and able to implement appropriate revenue management strategies is also vital. This process should be undertaken around three months prior to a hotel's opening and focus on checking that all systems and channels are revenue optimised, all revenue influencers are appropriately equipped with knowledge and tools are in place to maximize a Hotels' performance from day one.

Lastly, all staff working alongside or within the hotel revenue management team need to be provided with guidance and support during the hotels crucial initial operating period, between 60-90 days after opening. Continued staff support once a new hotel has opened, together with post opening strategy evaluation, will ensure staff are able to meet their set strategies and handle market expectations as they develop.

The success of a particular hotel or resort can be decided in the initial few months, both in terms of industry reputation and financial success, making the implementation of an appropriate and flexible revenue management program essential.

Through the ongoing support and assistance of IDeaS, hotels and resorts opening throughout the Asia Pacific region are now able to maximize their revenue potential from day one, ensuring positive growth and longevity.

About IDeaS:
Integrated Decisions and Systems, Inc. (IDeaS) invented critical decision solutions that enable global organizations such as leading hotels, airlines, car rentals, car parking, manufacturing, and transportation management companies to understand, anticipate and react to consumer behavior in order to optimize company-wide revenue and profits.For more information please visit
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