Despite Turbulence, One Constant in Mexico is Hotel Demand

Hospitality businesses throughout Mexico are not operating without their challenges. As the country rises among the world's most-visited destinations, some Mexican cities continue to fight rampant drug trafficking and gang violence issues.

As hospitality operators enhance their security measures, the Mexico Tourism Board and the U.S. State Department are downplaying the threat of violence to tourists.

"In the very rare recent cases where foreigners have been impacted, the majority of the cases found that those individuals were involved in suspicious or criminal activity, not associated with tourism,” the country’s tourism board said in a statement.

So far in 2018, the U.S. State Department has not issued an alert recommending against travel to Mexico. And the visitors keep coming. So, for hotels in the region, the show must go on.

The effect of these negative headlines depends on a number of factors, says Paula Smith, Customer Success Manager at Duetto. Smith says in resort areas like Riviera Maya that cater to leisure travelers, hotels are ramping up security, and guests usually prefer to stay on resort grounds, anyway, so effects are minimal to date. It’s hotels in the urban areas that are seeing major demand slumps – groups, meetings and business travel are struggling, she said.

Below, Smith highlights ways hoteliers in Mexico can derive better demand insights and use that data to ensure hotel revenue and profitability remain strong amid a shaky outlook.

1. Start With a Vision for Better Demand Insights

While Mexico’s hotel business has been flourishing for decades, unfortunately many owner-operators have not stayed current with yielding, digital marketing and distribution practices.

Some larger-sized chains in the region have begun to adopt modern revenue strategies, and many local companies employ hotel ecommerce teams. But many operators are still forecasting by hand with little to no data, then changing rates for week vs. weekend or seasonality only. They rely heavily on OTA demand – Expedia and Booking.com, and domestic distribution partner Best Day – and update extranets manually.

Today there is much more actionable data to help hotel revenue managers and marketers make smarter decisions, and that data should be available immediately and sharable with all interested departments.

2. Improve Your Revenue Management Resources

In many cases, adding one team member with a hotel operations background who understands numbers and is curious about how pricing affects hotel demand can be enough.

A revenue management system will equip this person with the right tools to automate most of the keystroking processes and free him or her up for more strategic thinking.

Modernize your hotel technology stack at least to the point where all the pieces and parts are integrated so the team is not manually entering rates on all the disparate systems.

3. Start with Segmentation

Once the data is available, hotels can start to do more granular dives into things like segmentation.

For example, your hotel might have done more OTA business this year than last year. With advanced segmentation, you can break the data down into each of the partners and see which site drove what kind of business.

For hotels that do a lot of corporate business, more forecast and pricing data allows managers to quote the right rates to ensure they’re not displacing transient revenue. You can break this corporate business down into smaller segments so you can view pacing on a more granular level, and you should review these numbers often, because this year’s rate and strategy should not be the same as last year.

4. Take steps toward Open Pricing

Most hotels in Mexico are still managing BAR-level pricing, meaning one Best Available Rate is set and different offers and room types fluctuate as a percentage off the BAR rate. Hotels might have multiple BAR rates for higher-demand days or in peak season, but typically discounts, packages and offers are a percentage above or below BAR.

With an Open Pricing strategy, each of these different price points — whether they’re for a room type, a specific distribution channel or a customer segment — can be yielded independently based on the supply and demand for that particular category.

While this is definitely your most profitable strategy, you don’t have to jump in head first. Start slow, make small changes and monitor the results.

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Jason Q. Freed, Dir. of Marketing Communications

Jason, Dir. of Marketing Communications, joined Duetto in June 2015 after reporting, writing and editing hotel industry news for a decade at both print and online publications. He’s passionate about content marketing and hotel technology, which leads to unique perspectives on hotel distribution and revenue management best practices.

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