Potential downturn could test younger revenue strategists

by Ed Watkins, Contributing Editor | June 10, 2016

For old timers in the hotel business, the last downturn in industry performance was a doozy, but not completely different from others in the past. However, today there are a lot of young professionals in the industry—and many of them in revenue strategy positions—who have never worked through a downward part of an industry cycle.

The so-called Great Recession ended in 2009, and the hotel business in the United States and most of the world has been on a long, steady climb ever since. Quarter-over-quarter increases in occupancy, average rate and RevPAR were the norm for more than six years. And while revenue strategy is a hard-fought, in-the-trenches daily business that’s never easy, the economic climate has helped ease the job for many property-level and chain-based revenue strategists.

If you listen to the experts, that’s all about to change. RevPAR growth is decelerating across the industry and has gone into full downshift mode in some markets, such as New York, Houston and most all U.S. oil markets.

The projected downturn seems ready to start this summer. New projections from STR shows the number of rooms sold this summer will increase about 2.1%. The bad news is new room supply will rise 1.7%, resulting in a modest 0.4% increase in occupancy. That foreshadows a tough summer for revenue strategists looking to significantly increase rates and revenues.

[bctt tweet="Today’s DORMs are young and enthusiastic, but many have never worked in a downturn."]

And while the hotel industry might not be alone in this trend, it is a business traditionally populated by a young and mobile workforce. That’s especially true in the field of revenue strategy. Even 10 years ago, before the Great Recession, revenue management wasn’t really a unique hotel job type. It was often an added responsibility given to a front desk assistant manager or a reservations manager. The technology was still young and mostly unsophisticated, and so were those tasked with revenue management.

Since then, however, the technology has caught up and surpassed the needs of the industry; more university-level programs feature curricula in revenue management; and a lot of young graduates are entering the front door of the revenue profession, not slipping in through the side door of the front desk or reservations.

While young, enthusiastic and smart talent is great for the profession, it also means the field is dominated by many people who never worked in a hotel environment like we’re facing in the next few years. If they think the past four or five years have been challenging for them, wait until occupancies drop, rate hikes are harder to achieve and GMs, asset managers and owners are panicking about lower profits and deflated property valuations.

Of course, because many DORMs received great university training and learned the practical side of their craft from seasoned property-level and chain professionals, most of them should be in solid shape to cope with the new realities ahead.

As this recent article in Hotel Management details, the way to prosper in a soft economic environment is to steal market share in order to maintain, or even boost, your RevPAR Indexes. It can be done through a combination of sound technology, effective use of data, nimble reactions to changing conditions and the courage to face these challenges head on. 

And while many revenue strategists are facing systemic adversity for the first time, they should learn valuable lessons that will enable them to achieve success throughout their careers. And some day, following an inevitable upward curve for the industry followed by the next downturn, they will be able to impart their knowledge to the next group of young revenue professionals facing their first rounds of tough times.


Ed Watkins, Contributing Editor

Ed has been covering the hotel industry for more than 40 years. He was editor-in-chief of Lodging Hospitality from 1980 to 2012. He then joined Hotel News Now as an Editor at Large, until his retirement at the end of 2014. Ed still contributes to several publications and is a member of the advisory boards for the hotels schools at Michigan State and Penn State.

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