By Digna Kolar
Hoteliers, are you tired of uncertainty? Experts across the hospitality industry continue to forecast “cautious optimism,” emphasizing caution as the International Monetary Fund chooses to lower the projections for their annual economic growth forecast to 2.9% from an initial 3.4%. These trends continue to be driven by worldwide inflation and a retraction in consumer spending, but hotels persevere despite the naysayers. More than 80% of all markets achieved higher RevPAR in 2022 compared to 2019. Amid a backdrop of persistent uncertainty, how do these results compute?
The hotel industry remains beholden to significant macroeconomic trends, including the potential for a new recession on the horizon and a prolonged recovery period sustained by higher and less sustainable rates. Hotels can also anticipate more significant shifts in their business mix going forward, with 75% of global consumers admitting to adjusting their shopping habits throughout the pandemic. This allows hoteliers to acquire their travelers of choice with the right pricing strategy as the economic recovery continues.
Hospitality remains caught between worrying economic trends and travelers’ persistent drive to book rooms despite rising prices. Amid these mixed messages, hoteliers are understandably confused about where they should stand during the recovery process and how they can position themselves to best acclimate to future trends. The answer for many across the industry will consist of a mix of new technology and adjusting how it is used to measure success.
Hotel technology’s North Star
Hotels are getting used to confronting the unknown, but that doesn’t make adapting to uncertainty any less uncomfortable. By now, however, it is clear which elements have helped hotels overcome one recession after another: proper planning and forecasting supported by technology. When hotels can access strong consumer forecasts, they can better plan how to staff their properties, choose which amenities they can offer and decide how to maximize their potential revenue when occupancy is high. Today, this process is supported end-to-end by revenue management technology.
As more hoteliers across the industry apply revenue management strategies and technology to the rest of their core business, they are finding new ways to improve operations, efficiency and guest satisfaction. However, revenue management technology cannot right a struggling property’s performance on its own. Deploying a successful revenue management strategy can help hotels forecast against uncertainty as long as the technology aligns with a hotel’s strategic vision. This begins with outlining what your property’s tech stack will look like and what capabilities they hope to access. When a hotel’s decision-making is supported by a clearly defined strategy outlining how technology will support it going forward, the property will have found a digital North Star to guide its continued development.
Hoteliers must outline a clear technology strategy as early as possible to establish a hotel’s tech stack. Once a technology plan is set in motion, it can be challenging for operators to change course. This process often takes time to iron out correctly. Still, when executed well, hotels can turn their focus from growing individual areas of hotel performance, such as occupancy and rate, and instead focus on a guest’s “consumer lifetime value (CLV),” or the potential revenue each guest expected to spend at a business over the course of their relationship. By growing this CLV, hotels can mitigate future uncertainty by forming closer bonds with guests and building more accurate consumer models to plan future business.
Reworking the guest journey
At this point in the recovery process, some hoteliers have paused to consider Maya Angelou’s famous advice to “hope for the best and plan for the worst.” This outlook has been shared by operators across the industry with some regularity over the past few years. Still, hospitality is now flying through its recovery period without the necessary improvements in place to benefit from such a significant return in occupancy. Hotels taking this seriously have begun reworking the UX behind their stay experiences from the guest’s perspective.
How are guests finding your hotel? What is your property’s presence across multiple channels and searches, particularly third parties? Once guests are on property, how is your staff convincing them to book direct in the future? Success in these areas is driven by a hotel’s available technology and capabilities and its internal culture.
Operators must embrace optimism to overcome tomorrow’s uncertainty. After all, hoteliers have achieved record ADRs during a period of economic recovery, even as demand surges across every segment. Hotels have invested more in hospitality technology, increasing consumer and worker confidence across the board. Additionally, advancements in data-backed insights have improved hoteliers’ ability to hit the perfect price for each stay, and this technology is only getting better. Now, operators have more reasons to look forward to the future than ever.
Reframe the hotel success story
With all the above in mind, why are hotels still uncertain? This mentality often concerns how the industry measures success, which must be reconsidered going forward. Hoteliers remain overly fixated on growing ADR and occupancy, often enacting strategies to improve one metric at the expense of the other. This leaves hotels stuck in limbo, always wondering if they missed out on greater revenue opportunities rather than seeing the bigger picture of how their decision-making is leading to future growth. Overcoming this mindset will require a new approach to how we as an industry discuss revenue management.
One way hospitality can reframe its success story in the future is to look into the potential of measuring “return on collisions (ROC),” a term used to determine the value of each interaction between operators and guests. Guest interactions are one of hospitality’s main strengths and selling points, meaning ROC will become a vital measurement to consider in the near future. Revenue managers will be tasked with finding ways to profit directly from these interactions and how to measure their success to foster growth.
Revenue management has officially completed its transformation into both art and science. However, the more revenue managers measure, the more they realize how many potential pressures can influence the industry—from outside and within. Fortunately, hoteliers have much to look forward to in the coming year as new technology and techniques are being introduced to manage uncertainty.
Digna Kolar is director industry consulting, IDeaS.
This is a contributed piece to Hotel Business, authored by an industry professional. The thoughts expressed are the perspective of the bylined individual.
