The industry is just starting to wake up after a long, cold winter! And the good news is that industry experts are predicting better results for the remainder of 2010 and for 2011 than previously forecasted. “STR predicts 2010 occupancy to increase 1.9 percent to 55.8 percent, average daily rate to decrease 2.3 percent to US$95.45, and revenue per available room to end the year virtually flat with a 0.5-percent decrease to US$53.22. Supply in 2010 is projected to grow 2.2 percent and demand is expected to rise 4.1 percent” as published in eHotelier, April 12, 2010.
In all likelihood during these unprecedented economic times through out the world, it was very difficult for the owner/manager to know what steps to take to reverse the downward trend and to simultaneously positively impact the bottom line. Most hoteliers cut expenses as a first step followed by cutting room rates to generate demand. The expenses cut were most likely in the areas of staff reduction and property maintenance. But did they strike the right balance of those two measures to ensure the desired results for the short term without compromising the long term? Now that business is slowly coming back, why wait to ensure that your property is ready to compete for market share. The adage, “You play the way you practice” is never more true than now. To ensure that your property is poised for success when business demand returns, now is the time to address some key areas that will distinguish your product and services from the competitors. Waiting for the business to return before implementing changes may be too late. This article will provide a few reminders to make sure that your property is poised for success when business is back.
This may seemingly be an obvious or unimportant issue, but without a firm understanding of your position in the market place, decisions made to cut costs can have a powerful impact on your business. A five star hotel that has not offered five star services, will be hard pressed to justify rate increases when business returns and will be hard pressed to expect customers to return after receiving a guest experience that was less than industry standards. Guests remember if service was spotty or inconsistent and if rooms were dirty and in need of repair regardless of what they were paying. And meeting planners may have enjoyed the low rated conference packages they received during the poor economic times, but will think twice about returning to a property that did not meet their expectations. A low price will not compensate for faulty AV equipment, late coffee breaks, or absent service staff when needs arose. Consistency develops trust and trust develops into guest loyalty. Even in difficult times, decisions can be made to reduce costs without jeopardizing the position in the marketplace.
Staffing and Training:
During the downturn, many positions were eliminated and some job functions either disappeared or were combined with other positions. Unless there was a plan in place to address the areas that were impacted, more often than not, a service or a function just was not provided. And again, the end result was a disappointed guest who will find another place to stay upon his/her return trip. So rather than wait for business to increase before this is addressed, why not be proactive and create and implement a plan to identify all areas impacting the guest experience from answering the phone, making reservations, check in and check out, and room service, to name a few. Set standards based on reasonable expectations relative to guest expectations and operational issues, communicate that to the staff, and train on an ongoing basis. Waiting until business is there to justify the expense or effort will be too late.
Big ticket items such as FF & E expenditures were either delayed or scaled back in an effort to reduce expenses. Even with limited staff or limited resources, now is the time, when business is down, to bring your property to exceptional levels of cleanliness and maintenance. Continuous periods of high occupancy create lots of wear and tear on a property and taking rooms out of inventory for maintenance and deep cleaning is most likely not an option to most owners or managers when demand is high. During the feast periods, guests will pay the going rates just to have a room and will accept it in almost any condition rather than forgo the business trip or family holiday. But, as we know, once occupancies start to fall the tide will turn and hotels will experience a “Buyer’s Market”. Those properties that had noisy air conditioners, stained carpets, or slow shower drains, will find themselves eventually making the investment to be competitive. Therefore, set up a program to clean up and fix up all of those items that not only will keep guests away, but when ignored become much more expensive to clean or repair than maintaining high standards. Keeping your property in exceptional working order it is not only more cost effective in the short term, but also ensures guest loyalty in the long term which translates into revenues.
As we know, direct sales can account for 50% of the marketing budget. How often do we hear that the sales person doesn’t have time to make sales calls? When pressed to explain why they don’t have time, they many times attribute it to dealing with operations/accounting/guest service issues. But, consistent management and consistent expectations will help develop a sales culture, where sales calls is the priority and the achievement of goals is mandatory.
With staff cutbacks, it is very tempting, due to a limited staff, to have sales people handle such issues. More often than not, they are very happy to so do, but again the outcome is that sales calls are not made, and eventually the property finds itself lagging behind its competitors. Without the proactive solicitation of new business, a property will find itself coming up short as supply/demand dynamics shift. And that can only be accomplished with consistency. Now more than ever, it is important to maximize every dollar spent to generate business and the sales department is one of the most expensive investments. Therefore, ensure that all systems are in place for maximum productivity and the maximum ROI.
It is also critical to establish a pricing or yield philosophy. In the down economy, rates have spanned a broad spectrum, with seemingly little basis and little parity. With such wide discrepancies, consumer confidence is in question. How can hotels justify rates to customers that vary significantly from day to day or from season to season? Secondly, the cycle will not end unless group or any long term contracted rates are established at “tomorrow’s” prices, not today’s. In BTN News, January 25, 2010, Monica Eiden, Carlson Wagonlit, stated “2010 hotel rates globally are about 6.6 percent lower than 2009 rates, and North American hotel rates are down by more than 8 percent”. Therefore, despite an uptick in business for 2010, group hotels are locked into rates that were established a year ago.
Therefore, as an owner and/or manager interested in protecting your investment and ensuring optimum performance, it is important to proactively address providing a good guest experience. By setting up your business initiatives now with the end result being a good and consistent guest experience, you are well positioned when overall demand increases.