The New Normal – The Impact on Hotel Sales and Revenue Management – By Carol Verret

Any hotel sales person and revenue manager can tell you demand patterns are different than they have been in the past. The question then becomes — will this pass at some point and demand patterns of the past ‘snap’ back into place or have been demand patterns been permanently or semi permanently altered? The question is important as it is the difference between ‘hanging on’ until things resume their previous demand streams or developing new processes and paradigms.

Reporting on the Association of Corporate Travel Executives (www.acte.org) in Washington DC, Tom Belden in the Philadelphia Inquirer April 13 described the term. ‘People in the travel business now have a fresh buzzword to describe what’s happening. The term is new normal, meaning that airlines, hotels, conference centers, and car-rental companies are expecting their revenue has plunged to levels that could be typical for years to come.’

IHG is realigning the responsibilities of its executive staff in order to focus on the priorities of the driving revenue at the unit levels. ‘This is not a knee-jerk reaction to the economy,’ Francie Schulwolf (VP of Corporate Communications) said, but a strategic approach by management to ‘the new normal.’ (As reported in the Atlanta Business Journal April 17)

We all know that the impact on business travel has been profound. According to Dorothy Dowling, senior vice president of marketing and sales for Best Western, though business travelers are employing a number of techniques to control costs and reduce spending, they are opting for shorter trips rather than canceling travel across the board. In addition, more companies are looking to mid-market hotels for corporate travel to streamline costs.

Leisure travel patterns, while a potential source of demand this summer has also changed. Ypatnership’s latest TravelHorizons survey found that nearly two-thirds of U.S. adults are planning to take at least one overnight trip for leisure purposes during the next six months. That February number is up from 60 percent in January of 2008. The study goes on to say that current travelers, however, are looking to save money wherever they can. The survey of 2,200 Americans found that 87 percent plan to book a package to save money, 84 percent plan to spend less overall and 64 percent plan to take more day trips. In addition, 51 percent plan to stay fewer nights while on vacation. (South Florida Business Journal, April 7)

The knee jerk reaction has been to cut rates in an effort to gain a larger price of a smaller pie. A recent Cornell Study indicated that this strategy was self defeating. Cathy Enz, in a column for Hotel News Now, described the research based on a gaming model. In short, if one hotel discounts and the other doesn’t, it is a Win- Lose game, if both discount it is a Lose- Lose game.

The positive in this is that it is an opportunity to reinvent hotel sales and revenue processes, which in the end will create more knowledgeable hotel professionals. How then should hotels adjust to the ‘new normal’:

Business Travel: A study indicated that business executives are trading down and with that, so are their expectations of their selected hotels. When asked which features they simply could not do without, business travelers were impressively devoted to productivity on the road: internet connectivity is indispensable to more business travelers (76% of respondents) than a quiet room (56%), good transport links (54%) or central location (52%). (Hotel Resource, 2/10/09) Give them what they want – FREE internet service and a good clean and quiet room. Value adds such as reasonably priced room service, free breakfast, restaurant coupons to keep them on site also contribute to a good ‘road warrior’ experience. Companies are still in a cost containment mode – focus on new economy companies and associations related to alternative energy, etc.

Meetings. Bill Marriott announced that group cancellations are slowing down, and there’s solid business growth for 2010 and 2011 group bookings. If anyone should know, Mr. Marriott should. Solid growth may not mean a return to the demand of 2007 but it is a positive sign. Focus on emphasizing the functionality of the hotel for productive meetings – leave out the spa and the golf course. Use testimonials from other groups to reinforce this fact. Maximize every RFP and networking opportunity, have a social networking strategy to stay in front of planners and establish relationships. Be prepared to value add extensively! Companies are still going to be critically aware of ‘appearances’ and justifying off site meetings for a long time!

Leisure. The great American Road Trip is back! Family travel is going to be ‘in’ this summer! People are booking packages – make sure that you have packages that appeal to families. Make sure that they are on every internet site and your web site. Invest in a pay per click strategy. ‘Most people (46%) do a little research, finding a few comparable choices and selecting the most suitable. But one in ten (10%) simply choose the first ok one that they find,’ says a new global survey by Travel and Leisure (HotelMarketing.com, April 29). ‘Walk Ins’ are back — the front desk is again key to closing walk ins at a good rate. Train them on the ‘drop dead’ rate for every evening based upon occupancy and demand.

Revenue Management and Rate Discounting. Every time I say that hotels should not lower their rate structures on a wholesale basis, I get an eye roll and an ‘Easy for you to say!’ Offer packages that disguise the rate, limited time offers, web site only hotel dates and rates. The perceived value of a hotel that offers and emphasizes the value of these compared to their regular rates is in a better position than the hotel that just offers a low rate. The hotel that reduces their rate structure has very little room to do the above because no matter what the regular rate structure is, the consumer is going to want a ‘deal’.

In a subsequent article we will focus on what a recovery may look like but make no mistake, the economy is undergoing a paradigm shift. Those hotel sales and revenue management professionals that can learn flexibility in response to changing demand patterns will fare well in the recovery. Those that cling to processes that served them well in the past and don’t make the adjustment in their processes will suffer the most and, well, you know how that could turn out!

Carol Verret And Associates Consulting and Training offers training services and consulting in the areas of sales, revenue management and customer service primarily but not exclusively to the hospitality industry. To find out more about the company click on www.carolverret.com. To contact Carol send her an email at carol@carolverret.com or she can be reached by cell phone (303) 618-4065. Visit www.hotelsalesblog.com.