By Kristi White
You might look at the headline and think this writer has finally gone crazy. But, if you bear with me, I promise I haven’t. Have you taken a look at your STR numbers lately? Remember the days when we lived and died by those crazy numbers. Perhaps over the past year, you’ve opened that report with a little less glee on Wednesdays.
But, lately, things are starting to look up. Not for all markets (yet). As a matter of fact, overall U.S. occupancy just peeked over 50% for the first time since the pandemic began, according to STR (week ending March 20). For a handful of the top 25 markets, things are starting to look much rosier than they were, but if you are solely comparing it to last year, it still might not be looking all that rosy. However, there is an alternate way to look at those weekly numbers that should put a smile on your face.
Think about the numbers less as a comparison to the prior year, and even less as a comparison to your comp set, and more as a barometer of things to come. Hotels need a variety of different segments to reach certain levels of occupancy: transient (both leisure and corporate), contract, long-term and group to name a few.
These segments combine to create those daily, weekly and monthly numbers. They create their own ecosystem which shapes and defines the health of our industry. If you frame your weekly and monthly STR numbers in that image, you can begin to see the light at the end of the tunnel. In fact, you might even get a bit optimistic about where the industry is headed.
Let’s take a step back and look at the worst to understand better what is coming. At the beginning of the pandemic, we saw almost all segments of business except the most essential contract. In March 2020, occupancy in the U.S. fell to 39.4%; April dipped even lower to 24.5%.
Even over the summer and into the fall, as short-term leisure demand asserted itself, occupancies peaked at 46.5% (August and September). But then November and December hit and a second wave of shutdowns descended. Occupancies dipped back into the 30s.
However, as the new year dawned, the markets began to shift a bit. Perhaps the promise of the vaccine and accelerated delivery brought about green shoots. The point is—any way you look at it—we are seeing signs of recovery.
Where are the green shoots?
To understand fully, you have to look at the performance at the market level. It breaks into three categories:
- On the Move (Occupancy at or above 50%)
- Poised to Take Off (Occupancy between 40-50%)
- On Hold for Now (Occupancy below 40%)
There are six U.S. markets sitting in the On the Move category. Each of these markets are above 50% year to date through February. Additionally, each of these markets have grown occupancies above where they ended last year from an occupancy perspective (not one ended 2020 above 50% occupancy.) The markets sitting in these categories are Atlanta, Dallas, Houston, Miami, Phoenix and Tampa, FL.
In the Poised to Take Off category, there are eight markets sitting between 35-50% occupancy year to date. While their occupancies compared to 2020 haven’t grown as much as the On the Move markets, they still have sustained growth and are ready to take off. The markets in this category are Denver; Detroit; Los Angeles; Nashville, TN; Norfolk/Virginia Beach, VA; Orlando, FL; Philadelphia; and San Diego.
The remaining top 25 markets, including Boston; Chicago; Minneapolis; New Orleans; New York; Oahu Island, HI; Orange County, CA; St. Louis; San Francisco; Seattle and Washington, DC, fall into the On Hold for Now category. These markets fall below 35% occupancy for the year. With the exception of St. Louis and Washington, each of these markets year-to-date occupancy is lower than the year-end number for 2020. A handful of these markets are still under heavy restrictions, which is inhibiting growth. However, others are not and even factoring in natural seasonality this continued malaise is somewhat worrisome.
What does it mean for my hotel?
The simplest answer is to compare your hotel to the market. How is your hotel doing by comparison to your market? Is your hotel in the same category as the market or even your competitive set? If not, you need to take action before you are left behind.
It is possible your hotel and your market might not match. There are things you should make sure you are doing to maintain or adjust as necessary. Once you determine where your hotel sits in the market, below are guidelines to help you better determine next steps.
On the Move hotels
If your hotel is in the On the Move occupancy range category and it is doing as well as, or better than, the market, chances are you are doing most everything right. You probably have at least a small sales team keeping up with what’s going on around you. It’s important you don’t lose this momentum. As we have seen throughout the past year, things turn on a dime. Beyond that, here are three takeaways for your hotel:
- Assess what your team is doing: They are doing something right. Make sure you understand what it is and that they have the right tools to continue doing it.
- Start playing the rate game: Of the six markets in the On the Move category, all except Tampa are down 30% or more in rate from 2020. Is your hotel in the same boat? If so, it’s time to start the move upwards. This will jumpstart your recovery and drive even more profitability.
- Understand your market mix: What is driving your impressive performance and how can you protect it? Make sure your team keeps a close watch on each segment and has an action plan, not only to protect the business, but also to grow it where possible.
Poised to Recover properties
If your hotel is in the Poised to Recover category, you have some work to do. The work stays the same even if you are in this category and your market is in a different category.
- Understand your market: If your market is outperforming you, what is driving that performance? If you have good business intelligence tools you should be able to understand market segment mix. Compare that to yours to find opportunities for your sales team.
- Get your team moving: If your sales team is still involved in operational activities, it’s time to curtail that. Your sellers need to be selling. Work with your team to pull together an action plan to start targeting business occurring in your market.
- Be nimble: As your market shifts, new segments will appear. Be prepared to shift activity, spend and do practically everything to capitalize on new opportunities.
On Hold for Now
Hotels in this category may not be completely in control of their destiny. The takeaways for these hotels will vary depending on the cause of the malaise. If you are in one of the markets where COVID restrictions are still impacting performance, the following are your best next steps:
- Stay in touch: Your top accounts need to know what is happening in your market. They may still have transient needs and you can help them navigate the murky waters of restrictions. An understanding of where their travelers will be able to eat, what they can expect when out and about and what activities are available. These same things will apply if any leisure travelers should wander along.
- Prepare for reopening: This doesn’t just apply if your hotel is actually closed. If your hotel is in a market with significant restrictions, having solid messaging for when things reopen will help you get the word out more quickly. You should have cohesive messaging for email campaigns, as well as all social channels you use. This way when your market (or hotel) is open for business, you can easily let everyone know.
- Have staff available: Even in markets with the heaviest restrictions, small meetings (within the guidelines) are happening. Those meetings are typically booked short-term and often in the same call inquiring about availability. During normal business hours, have at least one person who can handle those inquiries and book a meeting.
If you are in a market where there are minimal or even no restrictions and you are in this category, it’s more important to understand where you stand. Are you outperforming or underperforming relative to the market? If you are outperforming your market, you can look to the steps for hotels in the On the Move and Poised to Recover categories. A combination of those will serve you well.
However, if you are in the On Hold for Now category and your market is in another category, your efforts will be more remedial.
- Assess your sales team: If you don’t have a team in place, now is probably the time to bring at least one team member back. That person should be dedicated to reaching out to all key accounts and reestablishing relationships with them. If you haven’t had a dedicated sales resource for the past year, this will be akin to opening a new hotel.
- Analyze your business: This will require both internal market segment reports and external business intelligence tools. It is vital you understand what you have lost and what the market is capturing that you might be missing.
- SWOT (strengths, weaknesses, opportunities and threats) analysis is your friend: Perhaps the malaise is not related to the market and more related to your position in the market. Now is the time to be brutally honest about your hotel compared to your competitors. It’s important to remember in this process that you are likely competing with hotels you might not consider as a competitor. Business is shifting across all segments. This is not the time to narrow your scope.
The tide is turning
The hospitality industry has been through the worst year in its history. However, good times are right around the corner. What you do now will determine how quickly your hotel will encounter recovery. Getting your team focused on existing business, new opportunities and how to protect, capture and grow that business will serve you well today and into the future.
Kristi White is VP of product management at Knowland. With two decades of experience in the hotel and revenue management side of the industry, she has advised hundreds of hotels worldwide on improving their business strategy, hotel performance and overall profitability.
This is a contributed piece to Hotel Business, authored by an industry professional. The thoughts expressed are the perspective of the bylined individual.
