As Demand Slows Hotels Should Get Priorities in Place Now

In the midst of good times, it’s hard to ignore the fact that bad times are coming. But when?

2016 wasn’t a dismal year for hotels. It wasn’t a banner year either. According to data from STR, occupancy was nearly flat, ADR rose 3.1% and RevPAR grew 3.2% compared with 2015. But as we move further into 2017, supply is beginning to outpace demand. (CBRE Hotels’ Research’s baseline forecast for 2017 predicts a 1.8-percent growth in supply against a 1.5-percent growth in demand.)

With the supply/demand scales tipping, experts predict the small growth hotels experienced in 2016 will decelerate further in 2017. All the while, occupancy is at historic peaks with growing competition from OTAs and sharing-economy platforms further stalling demand.

So is a demand recession upon us? Maybe. If not, it’s not far away. This means hoteliers must focus on preparing their properties and people to weather the storm with profitability intact.

The first step in doing so is being proactive now about investments and being cautious about where to spend money. While bathroom and lobby renovations or guest-facing technology like remote check-in are well and good, these types of high-dollar investments may not directly steal market share, which is exactly what hotels must do in order to beat the competition now and in the future.

Instead of spending cash on multimillion-dollar renovations, hotels must set up the infrastructure to gather the best data to make the right distribution and pricing decision. This will drive revenue far better than new chairs in the bar.

Then when the recession hits, instead of slashing rates like many have done in the past (which does little to improve demand) revenue managers will be savvier about managing distribution channels, optimizing business mix and yielding room rates higher as often as possible.

To get this process started, hotels need better information and an all-encompassing Revenue Strategy that brings sales, marketing, distribution, revenue management, loyalty and everything else that’s part of generating revenue to the table. They need an integrated approach where everyone shares the same mind-set and works toward the same goals.

One of the most important elements of this strategy will be Open Pricing. Open Pricing allows hotels to move past the antiquated practice of setting tiered BAR prices and instead yield each segment, channel and room type independently in real time. (Learn more about how to implement an Open Pricing strategy to increase profitability here.)

From there, forward-looking data sets will provide critical insight into market demand and integrating customer data will allow hotels to be better able to anticipate their guests’ needs and personalize every aspect of the guest stay—including a tailored rate.

Before the bad times come, hoteliers need get their house in order and prepare for the road ahead. Smart pricing and distribution methods will cost less than those aforementioned upgrades—they also drive way more revenue over the long term.



Joanna DeChellis, Digital Marketing Manager

Joanna joined Duetto in May 2015 as a Digital Marketing Manager with more than a decade of writing, editing and graphic design experience for both print and online trade publications. She is passionate about digital media and driving engagement.

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