A high tide floats all boats

We all know that the global economy rides the economic tides that wash in and out in the form of ‘boom’ and ‘bust’ cycles. One valuable lesson that we’ve learned from a healthy hospitality market is that a high tide floats all boats – echoing what John F. Kennedy once said – “A rising tide lifts all boats”. When consumer demand is strong, it’s easy to hide poor revenue management strategy or bad distribution decisions, because the market will carry you.

Tempted by the seemingly good performance, during such periods, most hotels happily slide towards complacency. But, as soon as the high tide recedes, or there’s a market blip, the sins of bad marketing strategy are exposed and hotels without a strong foundation for decision-making begin to suffer. They start to lose occupancy points and weaken RevPAR. It’s not hard to guess what’s next. Rate cuts. Hotels that start the race to the rate floor by following their competitors every price drop will hurt the market in the long run. Soon, everyone accuses each other of ‘undercutting’ and room rates spiral downwards out of control.

Developing a robust strategy that holds up to fluctuating consumer demand for whatever reason is important. However sticking with a strategy through good times and bad is the greatest challenge, and, it is here that a great majority of hotels simply surrender.

During good times, hoteliers are more likely to pay attention to their own needs and price as a standard of what the market will bear. There is an upward surge on rates, (sometimes driven by ‘gut instinct’), to levels that put pressure on consumers. The resultant lost business goes unnoticed. Who cares anyway, the times are good after all. Things change dramatically during bad times and what inevitably occurs is often predictable. These same hotels shift to ‘groupthink’ and merely follow the herd to the bottom of the rate bucket. Lost business is now ‘high’ on the agenda as hotel managers court customers with tender loving care.

A strategy that includes investing in automated revenue management technology will not only deliver considerable increases in revenue, it will also generate significant return on investments and opportunities to retain market share or hold rate – even in bad times.

Revenue Managers will be required to model their approach. They need to be proactive and creative – constantly researching, focusing on demand generators, harnessing support from competitors on common ground issues, maintain the hotel’s reputation and not least of all, be actively involved in channel management

Bart Barsky

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