Shifting Gears: Showcasing Value in Elevated Hotel Rates After Revenge Travel
In light of the anticipated economic ripple effect and its impact on the hospitality industry, revenue managers must proactively adapt to the changing landscape. As we navigate these uncertain times, a paradigm shift is necessary, transforming revenue management roles from active investing to passive investing. Active investment strategies involve attempting to outperform the market by making precise predictions about when and where to invest in specific companies. Conversely, passive investing focuses on identifying solid index funds and allowing the market to drive the investment's growth. Shifting from active revenue management to a more passive approach centered around investing in your property's value is a prudent move, particularly as rate compressions become less predictable and prominent during traditionally busy seasons. By embracing this transition, revenue managers can secure wins even in turbulent times, positioning their properties for sustained success.
The hospitality industry has faced numerous challenges and opportunities in recent years, from economic downturns to revenge travel. One area that has seen a significant impact is the booking rates. Inflation and changing market dynamics have disrupted the traditional driving forces behind hotel bookings. As revenue managers, it is now essential to adapt to these changes and shift gears towards showcasing the value of the elevated hotel rates in order to maintain integrity as things get slow. This post explores the need for this shift and provides insights into creating value for guests amidst rising interest rates and changing consumer behaviors.
The Changing Landscape of Hotel Booking Rates: In the United States, the average revenue per available room (RevPAR) rate growth has followed an upward trend since 2018. However, it's important to recognize that constant annual growth rates are no longer guaranteed moving forward. As the economy recovers from the pandemic, various factors such as inflation and rising interest rates will impact consumers' disposable income, leading to a potential decline in hotel booking rates. Revenue managers must be prepared to navigate this new reality.
The Importance of Showcasing Value: To avoid margin deterioration and maintain profitability in this evolving landscape, revenue managers should focus on highlighting the value of their daily rates. By creating a perception that guests are booking a better deal at their property compared to the competition, hotels can retain customers and enhance revenue potential. Demonstrating value goes beyond simply offering discounts and promotions; it requires a strategic approach.
Creating Value through Differentiation:
Professional Photography and Staging: Investing in high-quality visuals are crucial in capturing the attention of potential guests. Professional photographers can showcase your property's unique features, highlighting its appeal and creating a positive first impression.
Amenities in Room Types: Identify specific room types that offer additional amenities or unique features. Promote these room types to guests who may be seeking an enhanced experience. This targeted approach can justify higher rates and differentiate your property from competitors.
Free Early Check-In: Offering the convenience of early check-in without additional charges can be a significant value-add for guests. This gesture shows that you prioritize their comfort and convenience, making their stay more appealing.
Personalized Concierge Service with Automated Emails and Messaging: Leverage technology to provide personalized recommendations, local insights, and automated communication throughout the guest's journey. These services enhance the guest experience, making them feel valued and further justifying the rates charged.
Investing in showcasing value in your hotel or vacation rental has a significant impact on guest satisfaction and their overall experience. When guests perceive value in their stay, they are more likely to leave positive reviews and share their experience through word-of-mouth recommendations. Positive reviews and recommendations serve as powerful marketing tools, attracting new guests and building trust in your property. Additionally, when guests feel they have received a great deal and exceptional value, they develop a strong inclination to book again with your property in the future. By consistently delivering value and exceeding guest expectations, you foster guest loyalty and create a positive feedback loop that drives ongoing success for your business.
Conclusion: As the hospitality industry faces the challenges of inflation, rising interest rates, and changing consumer behaviors, revenue managers must adapt their strategies. Shifting from the traditional focus on driving hotel booking rates, occupancy and ultimately RevPAR, towards showcasing value is crucial for sustained success. By investing in professional photography, highlighting amenities, offering free early check-in, and providing personalized concierge services, hotels can differentiate themselves and create a perception of value. Remember, the goal is to make guests feel they are securing a better deal at your property than at competitors. Embracing these strategies will help revenue managers navigate the evolving market and maintain profitability in the post-pandemic era.
As the great value investor Warren Buffett says “Price is what you pay, value is what you get.”