|Kirby D. Payne, CHA, is president of The American
Hospitality Management Company which provides consulting and management
assistance to hotels in the U.S.
Faced with over built markets, ever-changing market demands, and deteriorating physical plants, hotel owners are seeking to stave off decreasing, and often disappearing, profits. Lenders, too, are eager to reduce the possibility of adding the hotel to their REO portfolios. These players have turned to market repositioning as a way to improve operational and financial performance in order to survive.
Unfortunately, however, many so-called repositioning projects are no more than directionless rehabilitation projects or haphazard reflagging (upscale or downscale). Both of these tactics no only fail to reposition the hotel but also worsen its deteriorating financial condition.
These and other undesirable outcomes can be prevented. Here are some tips that are crucial to know for a successful repositioning program:
Learn from manufacturers and apply the principles of consumer product development. A hotel essentially sells many products and services. As such, repositioning a hotel must incorporate the same steps as developing and introducing a consumer good. These include: market research, identification of demand and its needs, test marketing, cost-benefit analysis, design and packaging, distribution channels, public relations and promotion, direct sales, customer service, etc. If any one step is skipped or poorly planned, an otherwise well-conceived program could fail.
Develop a cohesive, all-encompassing repositioning plan. Create a business plan which addresses every step, component, and issue of the repositioning process. As with most business plans, though, not everything can be anticipated and the plan must be flexible and adjusted to circumstances as they arise.
In addition, you must designate one point person to coordinate the various and often distant persons involved to ensure constant and effective communication when implementing this plan.
Create a discernibly different hotel. You do not have to be come a fantasy hotel to accomplish this but you must change the product and particularly the services in order to change the hotel's market position. And repositioning does not always mean going up a notch or two in quality. The condition of the industry is such that often the most financially beneficial goal is to reposition down a notch or two.
Do not hesitate to retain third-party professionals. An effective repositioning program requires dollars, time, and personnel. It is unlikely that in-house personnel possess all the necessary skills. Some professionals to consider include engineers, architects, market research firms, food and beverage consultants, personnel trainers, among others.
There is no substitute for experience and expertise and the risk is too great to do otherwise.
Before you retain them, however, be sure to see their completed and in-progress projects if possible, interview clients, and ask to review a comparable report (if applicable) in their office.
Do not fall into the trap of concentrating on physical renovation at the expense of other components of the program. A hotel's image, quality, and market position are not determined solely by its furniture, fixtures, and equipment. Although physical renovation is important, regardless of whether you are upscaling or down scaling, its visibility frequently distorts it into being the primary focus. Equally as essential to repositioning is the modification of all functional and operational areas through redesigning procedures, marketing, servicing, etc.
Interview and consult with our current guests and patrons during the market research phase. First, this will provide you with a wealth of insight into your hotel. Second, this will also instill in them a feeling of ownership of the changes through their participation. It is essential to minimize the loss of currently loyal guests and patrons during this process.
Interview and consult with your line employees, both back and front-of-the-house, during the market research and planning stages. Just as with your current customers, your employees experience the hotel more intimately than most managers. In addition, this involvement will create a sense of ownership in the new product and services and enable the staff to genuinely and enthusiastically promote the improvements to the guests and patrons.
Perform a thorough and unbiased cost-benefit analysis in order to make an informed "go-no-go" decision. Do not go forward just because significant costs have already been invested in the research and planning process. The potential loss can be many times larger than the investment in studies, etc.
In your analysis, remember to include all marginal costs attributable to the project since the beginning and throughout implementation (you should isolate items such as additional long distance telephone expense to get a true picture of the cost.)
If the projected increase in profit is insufficient to recoup the entire cost of the project in a reasonable period of time, don't do it. Any increase in the hotel's market value should come from the profit projections so don't count it twice.
Make your guests, patrons, and employees aware of the plans and excited by the prospect of a "new and improved" hotel. Interest and support is vital to the success of this always disruptive process. Forewarn everyone of upcoming inconveniences, whether they be physical or operational. Tell your customers and employees how certain changes-in-progress will negatively affect them in the short term (for instance, conversion to a new computerized guest history) and, of course, sell them on the ultimate benefit to them, in the long run.
Retrain the entire hotel staff from guest contact areas to back-of-the-house. Poor, inadequate, or incomplete training will undermine all other repositioning efforts. As stated previously, service and procedures are part of the new product created and must "match" the sought-after new market position. Absolutely crucial to achieving the new position is proper, thorough, and appropriate training of all hotel staff to deliver this new product and provide the attendant services. Considerable money, time, and other resources will have been lost if this crucial step is bypassed or only partially executed.
Take a critical and fresh eye to your Marketing Plan. Although the very prospect of creating this document generally evokes groans, a redesigned and reconceived Marketing Plan is an essential component of the repositioning program. The Marketing Plan should focus on the target market segments in all revenue areas and detail the method of capturing the demand.
Although always important, it is especially critical for all managers and assistant managers to be involved in the development of the Marketing Plan when implementing a repositioning program in order to ensure complete coordination.
Create methods of quickly and regularly measuring the property's advancement toward its stated goals. The very existence of a repositioning program means that the property is experiencing financial and/or market difficulties. Therefore, management cannot afford to wait six months or a year to review the program's effectiveness. Results must be measured and reported continuously. Modifications to strategies, procedures, etc. should be implemented quickly so as not to lose momentum, enthusiasm, and good will.
Secure the full support of owner, lender, and management. This means commitment to the hotel over at least the "near long term" which means through the planning and implementation of the program and at least until some improvements have become manifest.
Often a repositioning program is undertaken by the owner and supported by the lender to increase the hotel's market value for an as-soon-as-possible sale.
With that perspective, there is a tendency to focus exclusively on immediately visible changes. Although often effective for those goals, this will not reposition the hotel or increase its medium-or long-term financial, operational, or market strength.
For additional information, contact:
Kirby D. Payne at the firm
American Hospitality Management Company
1500 South Highway 100, #375, Minneapolis, MN 55416
Phone: 763-591-7640 Fax: 763-591-1593
email: [email protected]
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