The Annual Hotel Conference kicks off tomorrow in Manchester, bringing together more than 800 owners, operators and managers from individual, boutique and consortium hotels.
Duetto’s EMEA managing director, Michael McCartan, will be talking at the event, which is targeted at the independent hotel sector. Arguably, Michael’s participation comes at a key turning point in the future of the independent hotels sector.
The big chains have been circling overhead for some time — in fact, according to the PwC UK Hotels Forecast 2016, more than 50,000 independent-hotel rooms closed between 2000 and 2014, as the market shifts more toward branded hotels, leaving the mid-market and independent sector adrift.
So how can these small hotel chains, bespoke properties and independent bastions of hospitality continue? Revenue management has to be at the heart of their survival tactics.
The Benefits of Being Small
Marriott may have just completed its acquisition of Starwood to create the world’s largest hotel group, but big doesn’t always mean better. Smaller hotel groups and independent properties need to play to their advantages in order to compete.
Imagine turning a huge ocean-going cruise ship, one with more than 3,000 berths — it takes time, a lot of time. Now imagine turning a speedboat. If you are smaller you can move faster.
For the independent hotel that means pushing prices higher or lower as market demand dictates. You don’t need to adhere to the established operating procedures or pricing rules that come with having a brand. You can price according to the market, and not according to your brand metrics.
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“As an independent, you don’t have to accept the inconvenience of taking in discounted guests because it will help someone else in your hotel group,” explains Augustin Cacot, director of customer success, EMEA at Duetto. “You don’t have to accept corporate rates, guaranteed discounts or loyalty programmes in which you have had no say on the price or the structure.”
According to Cacot, the same goes for distribution channels such as OTAs. As an independent or small group, you don’t have to opt in to as many channels as the big brands. You have a say.
“If you are right about the assessment of your demand then you only need to have a footprint in countries where you don’t have much presence,” Cacot says. “For example, you have a small independent hotel in the centre of Paris. If you have the right revenue management people and the right technology, then you could be full every day and distribute most of your rates directly, with only a little help here and there. The challenge for these independent hotels is to identify where best to invest their money, in terms of people and technology.”
Why Revenue Management is Vital Right Now
The idyll of the full Paris hotel is something all hoteliers aspire to. However, the reality is often less idyllic. The rise of the OTA (and its cannibalisation of rates), as well as the increasing consolidation and acquisition of independent hotels in recent years, has left an independent hotels sector in need of new impetus.
Small hotel groups and independents will never have the money to hire a team of dedicated revenue management experts, which is why they need to turn to technology to get ahead.
Predictive analytics in revenue management gives you the power to assess your entire market several times a day. With three-quarters of mobile searches for hotels carried out on the day of check-in, being informed and able to benchmark on rates throughout the day has never been more important.
An automated revenue management system provides the revenue manager with real-time alerts that might otherwise get missed — such as people shopping on your website, a missed event in town or a market segment operating out of the norm. It gives independents the ability to look at the market exceptions and then take their rightful place in the niche.
What’s more, constant data helps build up a picture of guest behaviour. How far in advance do people book? What room types go first?
However, even with all this data you still need someone who understands the commercial nature of the business.
What the Hoteliers Have to Say
Many in the market believe that now is the time for independent hotels to stand up and be counted, both against the OTAs and the big brands. Chris Lynch, general manager of the 28-room Nira Caledonia hotel in Edinburgh, says it’s good to hear that there are hoteliers out there still championing the independent.
“The big corporates have the luxury of having regional offices or headquarters that take care of sales and marketing strategies, shared out to the properties,” he says. “Independent hotels don’t have that luxury. Independents need to get on top of the under-cutters — there’s many websites that will buy non-public, negotiated rates. But independent hotels have to stand firm.”
Lynch manages a 28-room five-star property in one of the UK’s most ‘in demand’ cities – Edinburgh. Yet he says revenue management on a 28-room property is all the same as revenue management on a 280-room property.
“It’s an economy of scales,” he says. “You still have the same market influences. You need to match your competitive set appropriately. In a big hotel you have a bigger team, in a small hotel you have a small team. But there’s still the same process to reviewing your competitors’ pricing, current occupancy, demand, and taking decisions based on that.
“The key to that is managing it well; making it alive and active every day,” he admits. “It’s not a part-time project.”
Jon Murphy, director of revenue for three independent properties in Bath — Abbey Hotel Bath, Villa Magdala and No 15 Great Pulteney, which opens in November — spent a large part of his career working with big chain hotels. He now understands the challenges faced by the independent sector, and is embracing his newfound freedom.
“Moving into the independent world, I soon realised how much support we were given and the level of access we had to the latest technology to drive our businesses forward,” he says. “Being outside of this loop means it’s very easy to lose touch with the industry and the latest techniques available; the toughest challenge for me was not having peers I could readily bounce ideas off.”
He admits that, whether a large or a small hotel, the fundamentals of revenue management remain the same, but with a careful eye on the balancing act of not filling too early but also not missing out.
“We are more reliant on the transient market,” Murphy says. “The key in a smaller property is not filling too quickly. Spotting the movement and reacting to it is vital, especially over your higher-demand periods. Understanding your pick-up trend is also key, as this should give you the confidence to hold out for rate. It can be a risky strategy, especially if you are budgeting high occupancies, and any system support to help with this is vital.”
It comes down to how the modern traveller buys. Ten years ago we flicked through a brochure to select a hotel; now the customer has vast choice and is influenced via the Internet. Things have changed.
So hotels such as the Abbey Hotel in Bath and the Nira Caledonia in Edinburgh have to change too.
“A smaller hotel means a smaller team and the chances are you have a multi-tasking revenue manager,” Lynch says. “So in terms of organising and collecting information, and reviewing results, Duetto streamlines the whole process and brings qualified data to your fingertips to make decisions in minutes instead of hours.”
U.K. Market in Flux
Change is constant, especially in the hotel industry, where one day can be very different to the next.
The UK’s independent hotel sector weathered the global financial crisis, (just 50,000 lost hotel rooms are testament to the hit the market bore). However, further change is coming in the form of Brexit, and the U.K. hotel market will have to prepare for it.
“We’ve gone through the credit crunch, the global financial crisis — it’s a similar scenario in a slightly different guise,” Nira Caledonia’s Lynch says. “If you manage it and make the best of it then you should come out on top.”
Michael McCartan will be participating in the Channel Hopping Operational Workshop at the Annual Hotel Conference on 13th October. For more information, click here.