Protecting Revenue in a Competitive Landscape: Strategies for Independent Hoteliers.
By Rachel Grier - Exclusive for 4Hoteliers.com
Thursday, 28th May 2015

Exclusive Feature: It’s no secret that the competitive landscape in today’s hospitality industry is more intense than ever, in the Asia Pacific region alone, there are 2,400 hotels under contract to be opening in the coming years, according to the January 2015 STR Global Construction Pipeline Report.

With hotels being developed at this rate, existing hoteliers can expect new rooms totalling more than 540,000 to hit the market soon and with it, new challenges for capturing market share and producing profits.

The growth in hotel competition across the Asia Pacific region is putting pressure on all hoteliers, including independent properties operating in emerging Asian markets that may have previously existed in a city, or destination, without a concentrated presence of international hotel chains.

The prospect of new internationally branded hotel chains - with their best-of-breed operating systems, deep pockets and trusted brand names, opening in an independent hotelier’s neighbourhood is enough to keep even the most confident hotel owner awake at night.

So what should independent hoteliers in Asia do when larger international hotel chains start establishing businesses in their cities? How can they best protect their revenues in a competitive environment?

Discount at Your Own Peril

The worst thing an independent hotel in Asia can do in times of new competitive pressures brought by bigger hotel chains is to offer a short-term discount to gain an edge over a rival hotel brand and then have to reduce services to help accommodate for the price reduction.

Large scale hotel chains won’t open their doors in a new city or location without planning for the long term. Any short-term discounting to attract guests in the face of greater competition will only hurt the independent hoteliers, who do not have the financial backing of the international chains.

In order to fight commoditisation brought about by an excessive focus on price, independent hotels must maintain service levels and a strong brand focus.

Every customer that comes through a hotel’s door needs to understand what makes the property different and special, and what makes its brand unique, whether they are a loyal customer or came in because of a promotion. 

If a hotelier is unable to convince customers that their product is worth more than their competitors’ through “soft” factors beyond price (assuming that hard factors such as location are equivalent), then they’ve become a commodity.

Price then replaces the brand, service standards and physical property as the key driver of purchase decisions which could have a profoundly negative impact on a hotels ability to generate revenue in the future.

Forecast for Success

Just ask a meteorologist " forecasting isn’t as easy as it looks at times. However, in times of both economic growth and hardship, forecasting pricing decisions will have one of the biggest impacts on hotel profitability. It is more vital than ever that revenue managers in Asia understand industry best practices and the latest supporting technologies to ensure their hotel rooms and services are priced at the right rate regardless of periods of high or low demand.

In order to be able to accurately forecast demand for their business and plan accordingly, independent Asian hoteliers need to ensure they have detailed data that is both historical and forward looking.

Historical data should include the number of occupied rooms and revenue broken down into market segments by day, for a sufficient period of time to make fact-based decisions. If data is then collected every day following, it will allow hoteliers to establish simple booking pace forecasts by segment and day of week, from which they will be able to compare to historical data. If this is done consistently, it will allow hoteliers to quickly adapt to any changes when demand picks up and enable them to tweak their strategies accordingly.

Sometimes something as simple as comparing occupancy and average daily rates (ADRs) can provide deep insights into pricing and revenue management opportunities, for example by assessing when ADR and occupancy do not move in tandem.

A Repeat Customer is Cheaper to Attract than a New One

The importance of loyalty in the hotel sector can’t be underestimated in the current competitive environment across the Asia Pacific region. Independent hoteliers in Asia need to understand that it is cheaper to attract repeat business " than it is to bring in new business. And it stands to reason that a satisfied guest is much more likely to come back if they leave a happy customer.

Clearly, fostering satisfaction and loyalty within current guests is crucial to making them repeat customers and supporting a hotel’s future revenue growth. It not only brings in repeat business, but improves future spending " and helps bring in repeat business from those customers " as well as those reading their reviews. But how do hoteliers use revenue management to increase loyalty and decide who to target to bring in the biggest value over a guest’s lifetime?

Not all business is good business. Hotels can easily fall into the habit of selling out rooms to lower rated business and then losing higher business " and customers who may be more likely to stay again in the future.

Sophisticated analytics technology is now capable of aggregating and transforming large, disparate data sets into actionable intelligence for making accurate demand forecasts and strategic pricing decisions. With this technology, hoteliers have the ability to instantly and systematically decide what business to accept across multiple revenue streams, based on which decisions deliver the greatest overall value to the hotel.

To really inspire long term loyalty amongst guests, hoteliers must not only identify who their most valuable guests are, but also put strategies in place to make these guests feel not just welcome, but wanted by the hotel.

Having Executive or VIP check in counters for hotel guest club members, coupled with free Wi-Fi for return guests or other offerings " such as items such as champagne, chocolates or flowers, complimentary spa treatments, golf rounds, water in the room, mini-bar in the room " all combine to show a guest that their patronage is recognised and appreciated by the hotel.

Don’t Leave Money at the Front Desk

Independent Asian hoteliers should be aware of key revenue making opportunities their properties present and look to capitalise on this. Hoteliers should encourage staff, through regular briefings and incentive programs, to focus on up-selling arriving guests at check-in, which can contribute significantly to a hotels top line (up to 3 percent and more).

Additionally, when higher demand situations occur " hoteliers should also identify their VIPs and preferred guests early and make sure they don’t get “bumped” in a situation where overbooking occurs.

At the same time, they should ensure that staffing levels are adequate for those “spikes” in guest numbers that occur during an upswing. It is important that the hotel doesn’t have too few people to handle all check-in / check-out and room turn around activities that help make the hotel experience as smooth and pleasant as possible.

It’s Not All Bad News

The rapid expansion of international hoteliers across Asia is undoubtedly increasing the level of competition in the industry.

As a result, many locally owned independent hoteliers across the region are facing fresh business challenges of having to attract and retain guests in markets with newly developed upmarket properties and against competitors using advanced global operational systems and strategies.

While this new operating reality can seem incredibly daunting for many independent hoteliers, it’s not all doom and gloom. International hotel chains will help market the city or destination that they open a property in to a wider network of business and leisure travelers.

Also while many hotel chains look to cater for the widest range of guests possible, independent properties have the opportunity to tailor their offerings to guests to customise their experience and ensure that they not only leave their property happy, but plan to come back again.

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.

Rachel Grier is Managing Director Asia Pacific for IDeaS " A SAS Company


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