NY Times: For the Hotel Industry, Recovery is a Long Way Off

Monday, November 23, 2009

For the Hotel Industry, Recovery is a Long Way Off


Great article by Joe Sharkey from the NY Times, first paragraph really says it all and I can't help but agree 100%

In these uncertain economic times, I am wary when I hear someone proclaiming, “We have finally bottomed out.” After all, who knows how long we may stay on the bottom?

So that’s why I urge caution in evaluating small recent indicators that might mean better times ahead for the hotel industry.

On Monday, for example, the hotel investment services firm Jones Lang LaSalle Hotels released a survey showing that investors saw some signs of improvement for hotels, but not for at least a year.

For business travelers that means hotels will remain a buyers’ market, especially as they continue to discount rates. But because hotels have cut spending on staff, maintenance and renovations, it means the general quality of the hotel experience could continue to decline.

Every couple of months, I like to take the temperature of the hotel business because, like most business travelers, I generally like the way domestic hotels steadily improved services for about a decade. On Monday, I spoke with two experts at New York University Tisch Center for Hospitality, Tourism and Sports Management. Both say the hotel industry needs to think differently about how it does business, even after it gets back to a firmer financial footing.

Hotel operators, who recall past cycles when booming growth came after business downturns “have to get over the idea that things are going to get back to the way they were,” said Lalia Rach, the dean of the hospitality program at the Tisch Center.

She sees a number of hurdles once hotels start to recover, including improving person-to-person service, which has slipped as many hotels laid off staff and added extra work for those still on the job.

“They’ve cut so much labor that there is perhaps the question, ‘Do they really still have a customer service attitude?’ ” she said. “Do people still understand they’re in the hospitality industry?”

While traveling last week, Ms. Rach said she made it a point to observe airline workers and found them dispirited, reflecting the deteriorating condition of the airline business. “Going through O’Hare, I was struck by the realization that the airlines just didn’t care, and the workers share that attitude. There used to be a smidgen of concern for customer service, but not any more. And that’s a concern I have for the hotel industry.”

As demand improves, hotels will try to raise room rates to previous levels, she said, “but then all of these things will come back to haunt them.

“Will customers be asking, ‘You really want me to pay this kind of money — for that kind of service?’ The American consumer now really understands the quality-value price equation, and I’m not sure that has sunk into the hotel industry. That is the new normal.”

Bjorn Hanson, a clinical associate professor at the Tisch Center, said that average domestic hotel occupancy this year would be about 55 percent.

Average national occupancy has dipped below 60 percent only twice before since the 1920s, he said, during the Great Depression, and in the aftermath of the 2001 terrorist attacks.

He said that “occupancy in 2010 will almost certainly be up a little bit,” mostly because of continuing heavy discounting. Average room rates, he said, are likely to be slightly lower next year.

It has been a year since the hotel industry felt the sudden blows from the recession after a period of record prosperity.

This year, Mr. Hanson said, revenue per available room, the crucial measure of hotel performance, will be off 16 to 17 percent for all hotels — a far steeper drop than any analysts were predicting earlier this year.

For luxury hotels, the numbers are far worse.

Mostly because of the economy, but partly because of public resentment of conspicuous corporate spending, five-star hotels took the biggest hit as company travel managers cracked down on spending and luxury meetings and conference planners either canceled events or went more downscale.

For luxury hotels, per-room revenue will probably show a drop of 25 percent this year, he said.

No one expects that to change drastically anytime soon, either. Until a year ago, “there was a sense at some executive levels that there was no limit to opulence” on the road, Ms. Rach said.

The limits have arrived.


FelCor Reports Third Quarter Results - Continues to Accomplish 2009 Goals

Wednesday, November 4, 2009

FelCor Reports Third Quarter Results - Continues to Accomplish 2009 Goals

Felcor Loding - FCH continues to impress as they are some of the victors in the Hotel Industry Trade-Down sell-off. With a portfolio primarily consisting of Embassy Suites Hotels, Doubletree, Hilton, Sheraton/Westin, Holiday Inn, and Crown Plazas.

Felcor Lodging is positioned perfectly in the current market for Hotels. As perfect as something can be in the Hotel Industry these days. With continued declining RevPAR's 13 months in, and no end in sight, these upscale hotels have nestled themselves in the perfect mix. They have been making huge leaps in Market Share (RevPAR Index) and flow-through by cutting expenses only 11.6%. I say only as I believe this is where Felcor can make even further gains, as my belief is, that many companies cut MORE than 11.6% in expenses, and as the market begins to recover this will only hamper the others as it will take longer for them to recover and give Felcor the edge as the market regains balance.

Another key factor helping Felcor is that by being a Upscale not luxury hotels, they have the flexibility to pick off higher rated "Trade-Down" business who was previously staying with higher rated business and is looking for a similar product but at cheaper rates. (Which are still higher than traditional Upscale rates) And the flexibility to continue to dominate the mid-range corporate business.

Some highlights from their Third Quarter Results:

Even though RevPAR decreased 17.8 percent for the third quarter at their 85 consolidated hotels. Market share increased approximately two percent for the third quarter.

“Once the economy begins to improve, we expect the lodging industry will lag behind the broader recovery. As such, there has not yet been a widespread improvement in demand trends and the shift of the customer mix continues to pressure rates." Richard A. Smith, FelCor’s President and Chief Executive Officer.

"We will continue to benefit from our high-quality portfolio, the renovations we completed in 2008 and the redevelopment of the San Francisco Marriott Union Square. As a result, we expect our hotels will continue to gain market share from their competitive sets and RevPAR at our portfolio to outperform our peer group and the upper-upscale segment."

Best of luck to Felcor with those RevPAR gains!

4 ways to rev up your RevPAR (RevPAR Guru)

Tuesday, November 3, 2009
4 ways to rev up your RevPAR (from RevPAR Guru CEO & Founder Jean Francois Mourier)

There are few things more important to hoteliers right now than finding ways to increase bookings. This is evident everywhere, from large chains advertising across-the-board rate discounts to boutique properties launching campaigns designed to put heads in beds. Here is a list of four highly effective tactics.

By Jean Francois Mourier

Hotels’ occupancy and RevPAR, always key metrics for the industry, are in desperate need of revitalization.

We’ve compiled a short list of four highly effective tactics that can help hotels increase both RevPAR and occupancy through the fastest-growing (and most important) sales channel currently available to them - the online channel.

1. Re-evaluate your Compset

The time-honored Smith Travel Research compset, once the only way to define a hotel’s competitors in a geographic area, has become outdated. Online Travel Agencies (OTAs) have changed the way consumers shop for hotels, so it stands to reason that the definitions of a property’s competitors should change as well. Smart travelers will compare price and star ratings to obtain a quick assessment of what they can get for their money within their location, regardless of location. Hoteliers should do the same. By being objective and realistic, looking outside the traditional or STR-dictated compset, widening the vicinity or sub-region of the hotel, comparing guest reviews, and generally expanding the amount of hotels considered competitors, a hotelier can get a more realistic sense of what their compset actually is. Soliciting an outside objective opinion of what the hotel’s compset seems to be, as well as ranging ½ star up and down in quality rating, can help complete this exercise.

2. Hands Off!

Manually manipulating hotels rates and yield is, by definition, limited. The world of electronic sales moves too quickly for sales teams and revenue managers to optimally match rates to supply and demand fluctuations. Human operators lack the capability to yield at night or during weekends when it matters most. One of the worst things a hotel can do in an era of transparent pricing is to keep rates the same, so hotels need to take the appropriate steps to yield rates in a way that doesn’t leave money on the table. The booking window is shrinking even more as consumers turn to mobile bookings, so automation becomes the ultimate yield-empowering tool. Automated revenue management systems can integrate distribution simultaneously with rate decisions so a hotel doesn’t have to compromise on rates and occupancy.

3. The Power of Page Position

Just as with search engine optimization (SEO), the order in which a hotel appears on the pages of an OTA is critical to bookings. Whether a hotel is listed at the top of the first page, or in the middle, or at the top of page 2 can mean the difference between successful occupancies and disappointing vacancies. Today, travelers use OTAs as hotel search engines- using it the way that they would use Google to see what hotel options exist in a particular destination- so a hotel’s position on these sites corresponds directly with occupancy and sales. Hoteliers must anticipate their competitors’ rapid rate changes to ensure the property does not fall off page 3 or 4, which, to online consumers, might as well mean that the property doesn’t exist. To gain maximum market share, hoteliers should calculate optimal pricing positioning by star rating, guest reviews and location. A multiple-page positioning approach can benefit a hotel’s prospects for OTA-driven bookings.

4. Monitor & Control Inventory

Hotels routinely allocate rooms to their OTA channels, but what happens if that allocation falls short of demand? What if those rooms run out on nights or weekends, when the revenue management staff is off the clock? A good hotel will take a page from big box retailers and keep their inventory out on the shelves (or available to the public through OTAs) instead of in the back storage room.

Hoteliers should allocate resources in their budgets for real-time dynamic rate optimization with automatic room inventory control. These powerful tools will ensure proper room inventories on all electronic channels day and night giving the hotel a proactive attitude versus a reactive stance. Continuously monitoring the pace of bookings and having automated GDS and OTA allocation updates can help maximize online bookings.

While these strategies cannot always guarantee profitability for hotels, they can certainly help increase bookings on that most important of sales channels: online. It is through successful electronic sales that many hotels can reach positive RevPAR and high occupancy rates.

These four strategies will most certainly rev up your RevPar, and represent a solid starting point for a comprehensive revenue management strategy that will take your property through the end of this recession and into a more profitable and long-term recovery.

Jean Francois Mourier is CEO & Founder of RevPARguru, a company that has developed an alternative type of revenue management and real-time pricing solution (combined with automated online distribution) to help hotels maximize occupancy and increase their profits.

Industry Turning Around?

Friday, October 16, 2009

What you are seeing above is for the first time in ages that Luxury and Upper Upscale Chain Scales have seen a Year over Year Occupancy Increase! On strong Occupancy, 69.1% and 71.8% respectively.

Industry Turning Around?? Lets hope so!

Revenue Management for Independent Hotels

Monday, October 12, 2009
Revenue Management for Independent Hotels

As I recently learned from the EyeForTravel conference, the Big Boys (Yeah you Hilton, Marriott, Hyatt etc.) have the advantages in automating Revenue Management features. There are umpteen different automated Revenue Management toys and tools out there these days, and without the backing of an army of team members, how can you sort through what is best for the Independents, how can they keep pace?

In an interesting interview from John Enright, Executive Director - Revenue Account Management, Preferred Hotel Group on HospitalityNet

John explains - "Small companies and independent hotel chains refer to lack of resources and a limited budget to invest in high-end technology as major challenges associated with revenue management. Key executives in such organizations manage several roles simultaneously.

They oversee all revenue divisions, including sales, marketing, e-commerce, revenue and reservations. They need to ensure that these departments are communicating and working together so that revenue can be maximized across the company. On the other hand, large hotel chains have more money to invest in technology and people, so their roles within the revenue division are more defined."

As someone who works for an Independent hotel chain I can personally testify to the truth of these statements(While I do disagree with some of the rest of his interview...), and it really requires a much more personal touch from the Revenue Managers. Working in a smaller scale does have it's advantages however, there is no one size fits all method as far as Revenue Management goes, everyone is a unique and new situation. The Roller Skating championships in Lincoln Nebraska is just never quite the same as the Outdoor Retailer's convention in Salt Lake City. While both provide huge compression in their markets, the cancellations for the SLC convention are through the roof and can be anticipated at almost a 10% of total reservations, where the Roller Skating if you get over-booked you're in trouble.

While every other day I read about another new Revenue Management product coming on board, this time with the perfect algorithm for accounting for all unconstrained demand generators, shifts in market segmentation etc. There are still some things that the Independents have advantages.

"Enright pointed out that smaller organizations are likely to be more nimble and may have less barriers for expeditious adaptation to new strategies in a rapidly changing marketplace."

The nimble and the quick still have a chance in this market, in 2010 the Year of the Travel Deal, don't forget about the little guys, they're still out there kicking, scratching and biting their way into the travel industry and looking for any advantages they can find.

John Enright is the Executive Director of Revenue Account Management for Preferred Hotel Group.

BTN Reports: Sabre Sees Disappointing September Bookings

Thursday, October 8, 2009
Title says it all:
Sabre Sees Disappointing September Bookings

---Not good news as many analysts were claiming that the final 4 months of this year will really determine how the economy will affect 2010's travel numbers as a whole. As we all know September and progressing into the final Quarter of the year is when heavy RFP Season sets in, and rates are quoted and set for 2010. If the perception of the industry is still disappointing, rates will be down, leading of course to Hotel RevPAR's dropping.

Seth Harris reports for BTN Online that - "Sabre's air and hotel booking data from last month indicated little overall improvement in travel demand, as they were relatively flat, year over year, from last September's economic meltdown, which brought U.S. corporate travel to a near standstill, according to the company's top executives.
September usually is a good indicator of the corporate travel industry's performance as it is the first month of the shoulder season in which business travel traditionally increases following the summer months."

As all of us Hoteliers know, 2010 was a tough year with how Labor Day was situated as well as Religious holidays, and hopefully this was part of the reasoning's for which why September did not pick-up as many were hoping.

As actual numbers flow in from the Hotels we will keep a close eye on the most recent results, as the upcoming months will be our biggest indicators to forecasting (and budgeting) 2010.

Here's to an increasing RevPAR Q4!

Collette Vacations on Revenue Management & Pricing in Current Economy

Thursday, October 1, 2009
Continuing on our subject from EyeForTravel Session 1 on "Adapt & Update Your Revenue Management & Pricing Strategy to Profit in the Current Economic Climate".
Jeff Roy, Director of Air Revenue Management from Collette Vacations brought us some great information from some of the other side, the Air Travel side which is basically a direct flow through to Hospitality Revenue Management.

The highlight I pulled from Jeff's address was this "Discounting may not stimulate demand, but it can, and will affect Market Share."

Jeff really touched on how every Revenue Manager's first reply to the infamous "What do you think about discounting?" Question, will always reply with "Discounting does not create demand!" Basically, this mentality is BS, every one of them will say that to your face, then we all watch our Competitors and Market's rate's just dive and the rate war begins. The key thing to remember is that discounting done inproperly will result in Long-Term rate loss, importance in proper fencing should never be underestimated.
Here are some strategies Jeff suggested in fencing and providing value instead of straight discounts:
  • Booking Incentives: Using Pre-Pay and Extended Booking Windows to fence discounts
  • Best Rate Guarantee- Rate Change Guarantee's
  • Door to Door pick up shuttle services
  • Various Value Adds: Internet, Meal-Plan, Drink Coupons etc.
In this difficult time, forecasting has been one of the hardest things to do, Jeff has experienced success by breaking his forecasting into different channels. Such as forecasting Internet bookings versus call-in bookings and repeat customers.
They also have established Short and Long term goals to help keep their teams motivated. Long Term goals to keep the team from panicking due to the current economy, and focused on remembering that the downturn is not permanent. The Short Term goals are to keep the team motivated in the current times and maximizing that which they still are getting now.

The absolute best measure for success in the downturn is Market Share coming out of the downturn. The validity of your pricing in the new economy can be determined by your actions in the downturn.

Do you Chase Profits or Revenue?