Maximising Revenue in the Extended Stay Sector.
By Joerg Happel - Exclusive for 4Hoteliers.com
Monday, 22nd February 2016

Exclusive Feature: The hospitality industry faces significant challenges and opportunities in 2016, the year ahead will see the hotel landscape become even more competitive as guest behaviours, booking patterns and accommodation preferences alter.

For hotel groups in the Asia Pacific Region looking to maximise their revenues across their entire portfolios, the extended length accommodation market presents sizable opportunities.

The extended stay market is growing strongly according to ‘The Global Serviced Apartments Industry Report 2015/16’ by The Apartment Service Worldwide, which stated that 82.6% of serviced apartment operators reported growth in supply, with 77.9% also reporting increased demand. As the extended stay market grows in the Asia Pacific region, it is critical for property owners to apply the right pricing solutions to maximise their revenues.

Extended length hotels and serviced apartments differ from many traditional hotel rooms in terms of physical layout of the space, with the majority of rooms equipped with full kitchenettes and often providing amenities such as complimentary wireless internet access. While the extended stay accommodation sector grew out of a niche set of hotels in the 1970s that sought to provide long stay guests with home-like amenities, most of today’s major hotel groups have at least one extended length accommodation offering under their portfolio of brands.

Pricing of extended length hotels and serviced apartments has traditionally been a challenge for revenue managers, given that rates greatly vary depending on the length of stay a guest is seeking. However, it is vital that hotel groups enhance their approach to pricing for this sector given the revenue opportunities that it presents.

Guests look to longer-term accommodations for a variety of reasons, from a construction crew working on a multi-week project to a family traveling for extended medical treatment. Market segmentation, therefore, is critical in analysing which business to take in an extended stay environment. Identifying the type of guests staying at a particular property requires a reliable separation of data and grouping for accurate forecasting. How valuable are different guest groups? When do they arrive? How far in advance do they book?

Understanding and accounting for key demand factors for each key business segment enables the revenue manager and executive team to set dependable business controls, such as the right price, the right mix of guests and the right time to overbook in order to avoid lost revenues and achieve profitable growth. Analytically-advanced revenue management systems can facilitate exactly this kind of forecasting and understand the complexities of extended stay demand and produce controls that manage these finer details. These controls include the ability to price based on arrival dates, length of stay and room type, and accept the most valuable demand across all arrival dates by length of stay.

Competition for extended stay properties is intense: Not only do they compete with other hotels for shorter length of stay business, but they are also trying to attract the same guests who are looking at time shares, corporate housing, private rooms and properties through sharing economy platforms like Airbnb. They even face off within the general apartment rental (serviced apartments) space. Specifically in the case of Airbnb, upmarket hotels focused on short stay guests might not feel like private property rentals pose a large threat to their business since their guests typically desire a more ‘pampered’ experience; however, an extended stay property often features kitchenettes and is priced similarly to a full house, making them more risk of losing out on potential guests. 

To address competitive booking issues, extended stay property owners need to employ advanced revenue management solutions that feature tools that incorporate competitor impacts on long-stay and short-stay demand separately, and assess the impacts of price changes or demand adjustments to support informed decision making across many organisational teams.

To maintain long-term profitability, it is also important that properties that can accommodate both short and long stay guests are able to forecast and identify potential periods of low demand, as this will allow them to take on more long stay guests and price that demand appropriately.

In periods where higher demand is anticipated, accommodation providers may not want to take on too many long stay bookings since this may displace higher paying segments which are potentially more profitable. The reverse may also be true, depending on particular market dynamics, costs and business models.

As the extended length accommodation sector continues its growth in Asia and provides solid value for owners and guests alike, property owners need to understand that accurately forecasting demand will not just affect revenue; it can see wider impacts across entire operations by optimising wage costs and increasing guest satisfaction.

Revenue management systems help extended stay properties take into account demand by arrival date and length of stay, cancellations and no-shows, extensions, early departures and more. This data ultimately supports intelligent business decisions, such as ensuring that one sold-out night is not blocking a guest willing to make a 30-night booking.

Booking extensions are also common in the extended stay accommodation sector. For example, a construction crew that reserved four weeks may end up facing supply delays, equipment problems or bad weather.

Accommodating their needs is in the property’s best interest, not just for repeat business but also because cost of service typically drops for longer length of stay business, thus increasing profitability. Being able to understand demand and bookings extension and cancellation windows with revenue management technologies, and properly select the most valuable business while maximising occupancy is vital.

The extended length accommodation sector is evolving and differentiating itself from traditional hotel offerings. To succeed in such an environment, it is vital that property owners are employing the most advanced operational systems, marketing approaches and application of revenue management to ensure that guest experiences and revenues are maximised.

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.

Joerg Happel is the Senior Product Manager, IDeaS Revenue Solutions


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