News for the Hospitality Executive
Savvy Hoteliers To Steal A Bigger
of The Market in 2010
Start with the Basics, Add A Pinch of Grit, and A Whole Bunch of Common-Sense
By: Neil Salerno, December 2009
The economy will slowly improve in 2010, but just getting your fair share of business will not be nearly enough. Less business in the marketplace means your fair share is less, too. Hotels need a bigger piece of the smaller economic pie to dominate in the marketplace.
The best way to measure your hotel's sales success is to compare your hotel’s sales results with that of your competition. This is far more realistic than simply comparing results with your sales budget or last year’s numbers.
Many savvy companies use competition-set comparisons, like the STR Report, to judge the true effectiveness of their marketing programs. Hopefully one day, comp-set comparisons will find their way into monthly operating statements.
Some hotels attempt to operate in a vacuum, ignorant, and impervious to everything happening around them. They set rates, determine amenities, create promotions, develop their web sites, and establish operating standards, all without knowing or caring what the competition is doing. This doesn’t make sense even if your property is performing well; it's slow suicide if it isn’t.
How Well Do You Know Your Competition?
In the real world, consumers have a wide range of hotels to choose from. Experienced managers know that just having a great hotel is no guarantee of success. There are managers who sit back and wait for success to come; and those who go out and grab it. Smaller properties can play with the big boys, but they need to get much more aggressive about it.
Smaller hotels need to borrow some techniques from franchise chain operations by first performing a simple competition analysis. There are many tools to do this, but my favorite is called a S.W.O.T analysis, which compares your hotel’s Strengths, Weaknesses, Opportunities, and Threats.
This is not simply a brick and mortar report; it also goes beyond the normal quantity and quality of rooms/rates. It includes a comparison of management styles, sales talent, operating limitations, website effectiveness and productivity, and front desk staff ability.
An honest appraisal of your hotel as compared to your competition will reveal and suggest many ways to improve your position in the marketplace. From the S.W.O.T. report, you will be able to define your competition's comparative weaknesses, weigh them against your strengths, and develop your plan to exploit them.
No evaluation can be complete without comparing financial results. I know of no better source of competition-set financial data than STR reports from Smith Travel Research. If you are fortunate enough to be in one of their participation areas, the STR report can provide you with occupancy, average rate, and RevPar comparisons with other hotels that compete with yours. Check STR out online; it could be the best marketing small investment you’ve ever made. No, I don’t receive compensation from STR; they are simply the best.
Revenue Per Available Room (RevPar)
We all know that comparisons of occupancy and average rate can be very confusing and deceptive; after-all, would you prefer to have 68% occupancy at a $125 ADR or 64% occupancy at a $138 ADR? Unless your competition has exactly the same number of rooms and rates, comparing occupancy and ADR is futile. This changed when some great minds gave us RevPar or revenue per available room; a perfect tool to compare revenue performance.
RevPar gives us the ability to compare hotels of different sizes and varying average rates. Since revenue generated is the primary goal of every hotel, RevPar allows us to combine average rate with occupancy by measuring the amount of revenue generated per available room in the hotel.
RevPar is also simple to compute; simply multiply your average rate times the occupancy percentage for that period; the result is the amount of revenue generated for each room available for sale.
Take Names and Kick Butts
It’s important to assign a face and name to your competition; get specific. Too often, I hear managers refer to “the competition”, but have to sit down and think about which hotels they actually are and why. In slow business cycles competition increases. During times like this some hotels, which would normally love to have much higher rates than yours, are forced to compete with you and so on down the line.
Generally, there are only one or two hotels that present the most serious threat to your ultimate success. Your hotel is probably on their competition lists as well. It always amazes me how many hoteliers have so little information, beyond brick and mortar, about specific competitive hotels. Get to know them well; at least as well as you know your own.
Unless your hotel completely dominates your competitive environment, one or two hotels in your competition set are preventing your hotel from fulfilling its full potential. From your new S.W.O.T. report and your new STR report, you can determine who they are and develop ways to take advantage of their weaknesses and your strengths.
The Great Equalizer
The great equalizer today is the Internet. In essence, your hotel competes with two separate competition sets; online and offline. On the Internet, your hotel's competition is generally much broader than your offline comp set. Hoteliers, which present their hotel with a professionally-developed website, better search findability and effective sales-oriented design, can command an edge in the marketplace.
Any casual trip through the Internet exposes too many hotel websites which appear as an after-thought; sites which make their hotels appear worse than they really are as compared to the competition. You will also find sites for hotels which appear much nicer than they really are, getting more than their fair share of business.
I've said it many times before, the Internet produces the best and fastest return-on-investment than any other form of marketing…ever. It's time to make that commitment. Make sure that a monthly expense for Internet marketing is in your budget for 2010. If you haven't done so, revamp your website to include the latest technologies and elements to make your site successful.
Focus Your Team On Challenges Not Just Procedures
As a rule, people can be very creative in dealing with the challenges to your top-line. In far too many cases, owners and managers present procedures and solutions instead of the challenges. Try empowering your team to solve the challenges presented in your market and let them create the procedures and solutions. Put aside all your prejudices and “knowledge” of the market and let them create new ways to capture business. You might be amazed by their innovation.
All hotels operate in a competitive environment; smart hoteliers take advantage of that. Competition is a good thing if you learn from it.
|Also See:||Gobble-Up Your Hotel's Competition: Start with the Basics, Add A Pinch of Research, And a Dash of Common-Sense / July 2006|
|Are You Still Discounting? You Might Gain Some Occupancy, But Lose RevPar to Your Competition / Neil Salerno / December 2004|