In the past quarter, I have read at least 20 columns on strategies to encouraging revenue growth, with many of them offering contrasting opinions and options.  

This is the fourth economic crisis I have had to address with in my career. These crises have run the gamut from gas shortages to high inflation and unemployment, to the savings and loan equity/credit debacle to 911 to the current global economic meltdown. Each was painful at the time and both failure and success were part of the solutions for us all.

With that recognition, I am revisiting the discussion on discounting and rate strategies by sharing some industry recognized leaders' comments and opinions.

In late April, I offered some ideas in a column published in this service titled " Four steps to setting accountability: building revenues". Those steps echoed author Harvey MacKay's perspective on recognizing that each of us must address our challenges with focus and energy.

Building revenues these days is a moving target facing all hospitality businesses.  We receive some short-term good news on lower gas prices that is offset by higher unemployment. Opposing opinions on government actions flood the media and we all find ourselves pondering the next course of action.

Cornell University's Center for Hospitality Research using data provided by Smith Travel Research offers some very specific data in  published reports that concluded cutting rates is ultimately harmful for the hotel industry¹  – regardless if the economy is strong or weakened. This was a detailed study and examined several hundred hotels in various market conditions.

In early July, I offered another column titled Lessons on Brands and Discounting  (with a touch of humor).    I shared that I have worked in both independent and branded hospitality businesses and found advantages and limitations in both at times.  I found the reality of brands is that they can offer tremendous resources to participants if everyone acts as partners and not antagonists. The challenge is when the partnerships waver.

I offered my belief that the owners and managers of each individual hotel and hospitality business need to be aware and involved in the pricing levels offered by their business.  I commented that I sincerely believe adding VALUE and creating synergy with other businesses is a much better way of reaching both ongoing and long-term success and asked readers to share examples.   I received several on how people effectively extended their local networks and were able to involve other area businesses.

In that April column mentioned above, I saluted the determination of Starwood to rally its organization at all levels when they launched a program that was not technology based, but one that focused on proven tactics of the past.  Their announcement labeled "hitting the road—hard" would lead to what they called its "most aggressive sales blitz in history."  Starwood associates planned to call on 20,000 key accounts and new customers throughout the United States and Canada with a stated target of generating $135 million in new potential revenue.

The announced strategy was an "everyone sells approach," with company sales and catering teams working with corporate executives.  Hotel teams including general managers, chefs, executive housekeepers, concierges and others are planning to call on all segments of business from retail travel agents to corporate travel planners.  The purpose was to generate leads, prospects and eventually to build revenues. A sales blitz places a concentrated effort by a large number of people in one or more targeted areas for a specific time.

I do not recall reading about the outcome of this effort, but Starwood again made the headlines this past week with their latest effort to build revenues:  a global 50% off sale.

The blogs and the editorials immediately ran on over-drive, beginning with Joie de Vivre CEO, Chip Conley's comments in a guest post on USA Today's Hotel Check-in² blog that critiqued Starwood's actions of  "Cutting prices across the board—as opposed to strategically to those market segments who will most increase demand by seeing selective cuts in prices—doesn't just damage Starwood's reputation and their hotel profitability, but it does a disservice to our industry since it creates a rush to bottom feeding in an industry that has high fixed costs."

Starwood defended its global discounting (on Hotel Check-in³) stating the promotion is an annual event.    Vice President of Revenue Management, Leslie Anderson agreed in general that  price integrity is a positive aspect of brand-building but said that does not entirely preclude hoteliers from putting inventory on sale from time to time. 

She wrote: "With our sophisticated revenue management systems, we're able to strategically target this segment [short-term leisure] to create and execute short-term promotions that are incredibly popular with our guests and profitable to our hotels, with no negative impact on our long-term pricing power."

Finally, in his HOTELS' Magazine July 24, 2009  online blog⁴ , Adam Kirby commented that he felt "Revenue management typically means tweaking particular rates at particular hotels across particular channels for particular periods of time; a global half-off sale seems to me to be closer to mass discounting than precision revenue management.   In an ideal world, Conley's thesis—that wide-scale discounting ought to be minimized—holds true. Unfortunately, this isn't an ideal world, and short-term financial reality oftentimes outweighs the desire for long-term rate integrity."
  
Great question from Adam Kirby in his close "Hoteliers, whose side are you on here—Conley's or Starwood's?"

I find it both aggravating and rewarding that there apparently is not only one approach to long-term revenue success.   Whatever strategy is used today probably needs to be revisited next month, as we must all adapt regularly to be fresh!

Notes:

1 www.hotelschool.cornell.edu/research/chr/pubs/reports/2009.html
2 http://content.usatoday.com/communities/hotelcheckin/post/2009/07/68495239/1
3 http://content.usatoday.com/communities/hotelcheckin/post/2009/07/68495331/1
4 www.hospitalitynet.org/external/750104970.html

Feel free to share an idea for a column at johnjhogan@yahoo.com anytime or contact me regarding consulting, customized workshops, speaking engagements …………. And remember – we all need a regular dose of common sense. Autographed copies of LESSONS FROM THE FIELD – a COMMON SENSE APPROACH TO EFFECTIVE HOTEL SALES can be obtained from THE ROOMS CHRONICLE www.roomschronicle.com and other industry sources.

John Hogan, a career hotelier and educator, is frequently invited to participate at franchise meetings, management company and hospitality association industry events.  He is a successful senior executive with a record of accomplishment in leading hospitality industry organizations at multiple levels, with demonstrated competencies as a strong leader, relationship builder, problem solver and mentor. He conducts mystery-shopping reviews of quality in operations and marketing, including repositioning of hotels.

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