A new world of hotel pricing requires revenue managers to take new approaches and look more closely at the data to thrive.
GLOBAL REPORT—To succeed during the COVID-19 crisis and once the pandemic fades, hotel revenue managers know comp sets need to be enlarged, with a much wider picture of the industry required to make the right decisions as revenue strategies are essentially reset, according to sources.
Success will derive from the relaunch of commercial strategy and a base of adequate or good capitalization.
Speaking at the recent virtual Hotel Optimization Conference, Joe Pettigrew, SVP of commercial strategy at Yotel and director of revenue maximization for Europe at Starwood Capital, said revenue managers must re-evaluate their entire strategy.
“It is almost hitting the reset button. How does the new norm apply to each of our revenue streams, and what do we need to pivot to retain our market share?” he said. “Bars are down 70%, for example, so how do you effect pricing to withstand those losses of revenue?”
Data will remain as important as ever, said Rachel Moniz, EVP of operations at HEI Hotels & Resorts, an owner and operator of more than 70 branded and independent assets.
“Use data to understand where there is demand, and then leverage that. It is no secret now it is leisure, and then we have to make it easy to do business with us,” she said.
Moniz cited free parking in an age where customers mostly will not be happy with valet parking.
“We need to be creating customer collateral for our salespeople to take to clients,” she added.
Guests now require a total experience in hotels they trust, panelists said.
Donald Wise, co-founder and senior managing director of Turnbull Capital Group, agreed hoteliers must analyze their existing demographics to better understand guests.
Wise said now is the time for hoteliers and hotels to resonate with guests, to see the situation from the guest point of view and to sharpen their social media skills to create a new image and find out what guests want.
“Savvy hoteliers, and this is obviously subject to being well-capitalized, who (have) an opportunity to cannibalize some of their market share (should) go ahead and do a (product improvement plan), spend that $10,000, $12,000, $15,000 per guestroom,” Wise said. “It will see your recovery faster, your occupancy come back faster and a better chance of achieving your average daily rate quicker.
“And again, you’ll be able to cannibalize your market share as you will probably be the only hotel in that market that has a new, fresher product. If your occupancy is 30%, what better time to do a PIP?”
Moniz said the industry needs to “get real.”
“We need to fish where the fish are. When it comes to pricing, we need to cast a wide net, look at other markets, not just our comp set,” she said. “Find a price point where we can gain occupancy share, and balance that with your cost of operation. We have to be very nimble, and to see how we can bring back fixed costs, such as the management team to further empower staff.”
Moniz added that her hotel firm has set a floor for ADR to consider that more frequent and deeper cleans of guestrooms do increase costs.
Wise said the industry is far better placed today than it was during the Great Recession due to the increased skills of hoteliers and the far greater wealth and understanding of what he called “deep data.”
Business travel is nearing a return, Moniz said.
“There are signs of life in the corporate travel world, and we are looking closely at travel policies so as to target those customers, trying to match corporate markets that might not be able to go to some markets to get them into ours,” Moniz said.
She said proactivity is the name of the game to help reduce cash-funding needs from owners, to secure as much revenue as possible to stop red flags and to rebook canceled business.
“At our larger hotels, we are looking at base business to develop those possibilities and price up,” Moniz said, who added she is seeing business come in 24 hours and 48 hours before check in and also booked blocks of 60 or 70 rooms for that day.
“We are looking at base to obtain pricing power,” she said.
Pettigrew said even though Yotel is a “very contactless experience,” it, too, is applying the same thinking.
“We’re rebuilding a lot of our core systems and procedures so we are in a much better position when we emerge from this,” he said. “We’re embracing all the types of data points out there—flight data, search data, arrival dates, what time is it happening online, how many guests—to get a better sense of overall demand.”
He added that one thing to keep in mind about comp sets is that they can be more limited now due to hotels closing and no longer submitting data.
“Right now, more brands are coming into our comp sets theoretically as ADR has been dropped and hotels have less visibility on online travel agencies,” Pettigrew said. “The elasticity between (hotel) segments in regards to ADR is not that high.”