What do you do?…always you run the house on demand, and occupancy is number one, but these are strange unusual times in between the travel business’s strange and unusual times, cycles come and go, travel demands always go up and down, but unless you have a Mumbai or Thailand situation you can always see or pretty well guess the right strategy for the coming year, but 2008 was like no year before it, and 2009 will be even worse, to a point when a disaster happens there is still focal point of the situation bottoming out, no matter how bad it will stop sometime, from that position you can slowly rebuild and put ideas into place, but 2009 will be very different as trends and surveys or loading times will be completely turned around on their heads, people are lost after the storm, confused, frightened, that the big black monster of the economic climate is going to devour them and their house, no jobs, no money = no travel…well not for the next ten years anyway, which is complete crap..people will still need to travel..life still has to go on.
but 2009 will be a hard hard period, money will not flow, rooms will be empty, but it will take only one or two years to get some balance, so use it to your advantage and not throw the chance away, restructure or renovate, fix your needling problems, even close a wing or two to fix them and clean up problems, yes money will be tight, but maintenance is always spread out over a period anyway, but now you can focus and do everything, and when demand does come back and you will be ready with open arms a new bed and those annoying amenities fixed for them.
Should I lower my Tariff?..yes to a point, the problem in this internet age of bidding online for cheap accommodation is the prices are being blurred, a 5Star is auctioning its last rooms off at $65 or £50 per night is good in one way but really bad in another, It gets to be a normal price fix on the property if it keeps constantly giving rooms away at cost, you have a market and the price is always king, and we have to change that model, if not the costs will always be marginal, people will expect that rate all the time in that market and its not your true PAR, Internet engines will always try to sell the lowest price, and fight each other to get the buyers dollar and that is going to cost you, yes it fills your rooms but it gives you no yield at all, and the more bodies you have at those prices the bigger your problem,s hotels are in business to make money, not be a lovey heart charity as they have the tax breaks and you don’t, so what to do..
get the best price in your market and stick to it, don’t let the Internet engines control you no matter how much they offer, try to put most of the business through your own sites were you can control the pricing and rewards, get the Rack rate and specials to work for you and not turn potential guests off, don’t worry savvy Internet customers will find you if you have what they want at the right price, so there is no need to throw money away of low cost nonprofitable specials, and that is the best way to see past the current climate, keep them coming in, but make a fair profit as well and if the business is very slow you will still make a few dollars on each room, its best to have 60% occupancy making you money than 100% making you nothing, but give rewards to customers if they are loyal..they will come back.
Number one problem with this planet is we have too much of everything, including hotels and airlines, entrepreneurs bless their world domination hearts think that if they keep building these things people will come and come back again, s0 bigger is better and onwards and upwards, 6000 rooms, 10,000 rooms, my wallet is bigger and fatter than yours, so it comes back down to one other thing, usually one upmanship…the biggest bloke on the block wins..
well no not really, because if you have 10 x 6000 room hotels in an area of other 6000 room hotels, then there is no way on god’s earth your going to fill all of them, Las Vegas or no Las Vegas or Macau,my point is that even Hotels built only 4 or 5 years ago are struggling to repay their finance, floors full of empty rooms losing you mountains of RevPAR, so what do you do, you build a bigger better one across the street, I’ve Trumped yours now, so beat that…The important word here is consolidation…no Trump or Wynn knows what the word means or its function, but they will soon, but better still they could even be removed from the market altogether so that managers can do what they are good at, Manage properties, not turn them into sideshow alley of extravagant ego boasting, At least if you are a cruise company and if your market is over supplied like the Caribbean you can send your mega palaces to markets in Asia or Australia, but these mega casinos are routed to the ground, so 2009 will be a disastrous year for these over wrought empty ego building palaces, they will survive, but none more should be built, at least for five years for demand needs to desperately catch up with supply, even then they should be built to real growth demand and not ego.
There is an even bigger oversupply of 5 star Hotel and Resorts as well, some of them will be culled but most are thankfully situated in major cities or major tourist areas that will give them constant if far reduced supply, they will now have to adjust to the new market of abundant cash in short supply, but most of the old school have been there before so they will adapt, in fact they will go back to business as usual, with just a renovation here and there to keep the lights burning, a few have will to down market, some will specialise more to certain markets, but that has been the flavor of the month in last few years anyway so things for them are still to go that way only with now even more focus on their niche.
Its in the low end market it could be the most interesting in 2009, here will it be feast or famine, people shifting down will have to go to smaller cheaper properties, but many chains are already on the very edge of the abyss, they have run their properties like a low cost airline, minimum on everything, mostly staff, and if the occupancy slips a even a slight notch then they are in real trouble, Folio Hotels in the UK have already gone, and far too many are burdened with very high debt, acquiring too many properties the on top of the too bigger bigger unrepayable loans, these quick pop up Hotel Chains are asset huge but very cash poor, it will be here that the market will be hurt the most, and at the time they could have reaped the benefits of their price range, many will close, many will be sold off, large layoffs of staff will happen, and just when we need them the most…consolidation is again a word not in their complex road maps of creating a huge brand, that they forget the basics of business management 101, too much cash in markets is worse than not enough, when you don’t have enough at least you look at the numbers and the basics to see how you can make the business work, if the numbers don’t work then the buyer will walk away, or wait for a better deal, but in times of abundant, if unlimited funds, the heads of trendy businessmen lose all total perspective of rationality, not just in the Hotel Business but other businesses too, delusions of grandeur abound, upscale is in full swing, some don’t even check if the business is even making money or keep throw unlimited funds at a poor property, they can because its not their money to throw away…or to lose.
…that was the last 10 years, till 2008.
2009 is about firming your ground, knowing your market, and marketing it well, but don’t get me wrong and I love new and trendy, but it needs to happen, the chaf needed to be chaffed, 2008’s economic crisis is a good thing people not a bad one, the heat in the market will be taken away, the poorly managed and over extended will bite the dust, get through this and in a few years your occupancy levels will be steady, demand for your accommodation will be steady, cash flow will be steady, because the demand will be there in your market, the mantra should be to reduce debt and get a good strong cash flow, not the other way around, simple good business sense, and the biggest advantage of all is to invest in good staff, there will be plenty to chose from, so don’t go down again the Low Cost Airline route and get cheap trainable staff, they are in it for the money not for the career, you need good solid reliable staff, cheap staff are cheap and very hard to manage as you have to always manage them and follow up on their mistakes, most in this category are untrainable or not have the personality for hospitality, even McDonalds have untrainable staff, and poor staff will always lose you custom quickly in face to face contact at the reception, or with poor maintenance, slow room service and sloppy management.
Good staff will manage themselves and make your management role easier, good staff will keep your guests happy, if your guests are happy, they will come back, and if they come back you will make money….simple really!