Carol Verret Consulting
Improving Economy =
New Hotel Development
Carol Verret / October 2003
All the signs are there -- the economy, for the hotel industry in particular and the country as a whole, is improving. TIA is forecasting an increase of 3.5% in business travel and a 3.2% increase in domestic leisure travel for 2004. This follows an estimated decrease in business travel of 3.7% in 2003 and an increase of 2.8% in domestic leisure travel for this year. (TIA Annual Travel Forecast, TIA.org).
The hotel industry is collectively waiting to exhale. It would appear that business travel is firing up although TIA president and CEO, William S. Norman cautions that "it will be some time before business travel returns to its peak levels of the late 1990s."
There is speculation that 2005 will see the industry hitting numbers close to those of 2000, largely considered to be the last good year in the industry.
These are all positive signs. What could possibly go wrong? The conundrum of an improving economy is that new hotel development will increase proportionately. Patrick Ford of Lodging Econometrics, foresees this in an article entitled "Improving Economic conditions Point to a Mid-Decade Development Upswing."
The industry has reason for optimism, but will demand improve sufficiently by 2005 to absorb that new supply and will the revenues and profits of 2000 really materialize with increased inventory supplies?
This is of special concern to operators of aging hotel products who may not have been in a position to inject capital into their properties. It is also of concern to those who have because a renovated 20-year-old hotel still has an uphill battle against new hotel product.
The bottom line is, can we go back to the days when demand was sufficiently strong and all that was needed was to manage rate and inventory? Will hoteliers be tempted to cling to their rate structures of the boom years and will developers have the "build it and they will come" attitude that was so prevalent during the mid 1990s?
For every new hotel that opens, a re-positioning in the market occurs. The existing hotels have to re-think their positioning strategy in terms of the price/value equation in the mind of the consumer.
This requires an honest and agonizing re-appraisal of the property in relation to the new products entering the market. I am not just referring to lowering the rate -- that is a knee jerk reaction. On the other hand, stubbornly maintaining one's rate and incremental increases in the budget is to bury one's head in the sand.
To re-position an existing hotel in the face of new competition requires a comprehensive strategy in terms of value, rate and allocation of sales resources to reflect the shift in the market that will occur. This strategy should also include an evaluation of the franchise affiliation and its alignment with the changes in the market.
The process of re-thinking a strategy should include everyone from the
ownership, management and sales department. The process should ultimately
include the following:
Price/Value Equation. What will be the competitive advantages that a new hotel can exploit to increase its market share? How can an existing hotel build value into its product and rate structure to offset the new competitors strategy? Which benefits of the new property will be appealing to an existing property's guests and how can the existing property offset them?
Sales and Marketing Strategies. This is no time to re-cycle the marketing plan of years past. Which market segments is the new competitor going to target? Can you identify additional or previously ignored market segments to offset potential inroads into a market segment targeted by the competition? Can you pursue these market segments more effectively by reallocating sales resources, both people and marketing dollars? Can you effectively track the ROI on marketing and sales initiatives that are now in place and any new ones that you envision?
There are no set answers -- it is different for each hotel in each market. The process is an essential one to conduct. If you don't aggressively take control of the situation then you will be in a position of waiting for demand to increase sufficiently to absorb the new supply so that you can regain market share. That is, if you and your existing hotel can survive long enough for that to happen.
copyright © Carol Verret, 2002-2003
3140 S. Peoria St, PMB 436
Aurora, CO 80014
Web Site: http://www.carolverret.biz
|Also See:||Leadership - General Managers Managing the Sales Process / Carol Verret / October 2003|
|When the Crystal Ball is Cloudy; Marketing Plans for 2004 / Carol Verret / July 2003|
|Partnership of Sales and Technology; Using Tech Tools to "Sell" the Hotels / Carol Verret / July 2003|
|Back to the Basics? The Basics of Hotel Sales Have Changed! / May 2003|
|Creating Sales "HUNTERS": The Skill Sets Required in the New Hotel Sales Environment / April 2003|
|Heightened Security Requires New Strategies in Hotels Sales / Carol Verret Consulting and Training / Mar 2003|
|Revenue Recovery - Building The ‘A’ Team in Sales / Carol Verret / January 2003|
|Contingency Marketing Plan – War In Iraq! / Carol Verret / November 2002|
|Playing the Rate Game - Positioning -- Positioning -- Positioning! / Carol Verret / October 2002|
|The Rate Game - Playing to Win / Carol Verret / October 2002|
|The Challenge of Marketing Independent Boutique Hotels / Carol Verett / August 2002|
|Hotel Sales in a Limited Service Environment - The Rules Have Changed / Carol Verett / August 2002|
|The General Manager’s Role in Sales -Chief Marketing Officer of the Hotel / Carol Verret / April 2002|
|100% Market Share Penetration is Not Good Enough / Carol Verett / January 2002|
|The Key to REVPAR Recovery – New Business Development / Carol Verett / December 2001|
|Trash the 2002 Marketing Plan - And Just Start Over / Carol Verett / September 2001|
|How to Use Consultants Effectively – A View From the Other Side / Carol Verret / August 2001|
|How Soft Is Your Hotel's Economic Landing? / Carol Verret / Aprl 2001|
|The ‘Value Proposition’: Marketing Yourself to Prospective Employees / Carol Verret / January 2001|
|Generation Y: Motivating and Training a New Generation of Employees / Carol Verret / November 2000|
|Why Customer Service Seminars Don't Work / Carol Verret / October 2000|
|Creating a Culture of Customer Service / Carol Verret Consulting and Training / Sept 2000|
|FAT, DUMB AND HAPPY – The Seasonal Boom and Bust Cycle / Carol Verret / August 2000|
|Surf's Up - Ride the Wave or Miss the Boat -The Effective Use of Technology in Hotel Sales / Carol Verret / July 2000|
|Measuring Effectiveness of Hotel Sales Departments / Carol Verret / June 2000|
|Hotel Sales Training - The Need for Immediate Results / Carol Verret/ May 2000|