2020 has been a challenging year for us all, and has certainly been a confusing one to navigate for the hospitality industry. The revenue collapse during the first lockdown was saved only by the significant domestic demand, booking and rate increases during summer months.
In this sense, demand has been a key focus for revenue managers - but we couldn’t rely on traditional metrics and normal analysis such as year-on-year benchmarking.
There have been two scenarios post COVID-19:
Attempts to stimulate demand thanks to poor consumer confidence - something that’s most common for city centre destinations, airport hotels and those typically relying on business travel;
On the opposite side, leisure hotels, particularly in the luxury segment, have seen huge demand spikes, and the opportunity to increase ADR and recoup losses was plentiful if managed correctly.
With all eyes on demand, the largest business switch was forecasting. With booking windows at an all time low (just 7 days on average in October for the UK), hoteliers had to switch to tactical short-term forecasting. Thanks to the booking window, hoteliers also had to be brave in a period of uncertainty and hold rates - a strategy that paid off for many seasonal leisure hotels and resorts.
Now we are facing more adversity, but what we can be certain of is another SURGE in bookings post lockdown - a trend that is already prevailing with bookings up in December, already surpassing those of 2019. We’re also expecting that demand for staycations in 2021 will continue to rise. For a number of our clients, we have seen a staggering rise in staycations of 348%, year-over-year.
Calling all Hoteliers: Here’s Your Lockdown Checklist
Turn NRF (non-refundable rate) cancellations into vouchers to protect cash flow. Better still, ensure they're redeemable online to reduce the manual admin;
Launch spring campaigns now. We anticipate this spring will see a higher domestic demand than normal for leisure hotels, typically held back with seasons;
Load 2021 prices if they have not been released yet, and even 2022 prices for international resorts;
Use lockdown to make a change for the better. If there's something that's not working for you, now is the time to change it where there will be less business disruption;
Maintain your marketing and brand visibility. Don’t lose market share over your competitors - focus your efforts on the areas with the biggest value. Invest in projects such as video or photography shoots or updates to your website.
Using Revenue Management Software and Techniques to Re-establish Business in 2021
There was a lot of scepticism surrounding how RMS (revenue management software) would handle the unexpected fluctuations. Most RMS systems factor a balanced mix of BOB (business on the books), demand, YoY (year over year) analysis, competitor benchmarking and OTA insights to forecast and make price recommendations.
Eyes were on these tools to see how they managed the unknown, and algorithms would have to adapt quickly to cope with the new emerging patterns. In hindsight, these tools proved essential in delivering more data to the hotel management team, who had to make huge business decisions - which would have been practically impossible without the insight.
We have seen three key segments pacing ahead; repeat customers, domestic guests and locals. Focusing on these segments for growth will provide a hotel with more focus in short/mid and long-term planning.
We’ve noticed a further increase of almost 20% in repeat business for hoteliers from the leisure market. In times of uncertainty, people want to feel safe and secure - so travelling back to a place that’s familiar is more attractive. Hoteliers should engage with previous guests to unlock this potential.
Domestic tourism has also obviously increased, given the ongoing travel restrictions. On average, guests are willing to travel one hour per night - which means hoteliers can use this to promote special packages to the domestic market, based on geographical booking patterns and trends.
Holding Prices Whilst Attracting Maximum Bookings
It goes against a revenue manager’s instinct to hold prices when occupancy pick up is behind the budget, especially for short/mid-term scenarios. However, in times like this, it’s important to put your trust in accurate data. A metric which has seen considerable change is the booking window - so if rates are being reduced, hotels need to ensure they’re in-line with the booking window.
In addition to this, the domestic market is saturated, and you still need to be competitive to attract a higher value guest and increase GOPAR. Think about creative ways to be different from your competitors:
Added value, unique and one-off experiences -
Work with local partners in the area to enhance the guest offering and provide eye-catching experiences;
One thing that guests are placing more and more value on is a personalised experience; they want something that fits their needs and their interests. If you’re able to tailor packages to the individual, then they’ll be more inclined to book with you.
Video and compelling imagery
Create a connection and tell the story of what the guests’ stay might look like, and what they might experience when staying with you.
Seasonal stay campaigns
Tap into the seasons and the great outdoors, for example ‘Winter Hygge’ packages to attract them at certain times of year.
How Will the Pandemic Influence the Way Guests Book, and How Operators Manipulate Pricing?
Hotel guests have become accustomed to flexible, advance purchase rates and direct booking rewards. However, business as we know it has been flipped on its head. The once-popular advance purchase rates amongst bargain hunters, and those confident on travel plans, have significantly reduced in popularity. The same can also be said for negotiated business rates, which are all but non-existent.
Online Travel Agents vs Booking Direct
What’s more, there’s evidence to show that guests have lost trust with third party booking sites like Booking.com. We’ve seen a direct booking growth of 34% compared to an OTA decrease of -24%. This is a trend that’s continuing; so now, more than ever, hoteliers have a real opportunity to take back business on a direct platform.
With the OTAs being in a weaker position, hoteliers will have the advantage. Hotels can take back control of pricing strategies and penalise rough OTAs who produce lower rates, creating rate disparity. This is a tactic that will be most successful for luxury leisure hotels. It’s important to also consider metasearch as a direct channel, too - and this should be built into a direct booking strategy to take back OTA market share.
The Year Ahead: What Do Operators Need to Keep in Mind When it Comes to Revenue Management?
Firstly, 2021 will continue to be the year of staycations. Hoteliers need to remember that they can’t create demand by lowering prices. Demand is now a balance of perceived value regarding safety and trust.
There’s also a larger social responsibility expected from hoteliers in the local community. This isn’t just about giving back and engaging to build brand awareness and presence; it will also support the green shoots of recovery, should another forced closure take place. For example, collaborating and engaging with like-minded brands and local businesses in the creation of new seasonal packages and unique experiences will become essential to support incremental spending, as domestic travel restrictions and a tiered lockdown becomes an inevitable factor in the months to come. If your brand values and your target audience aligns, it’s a great way to tap into new, relevant audiences and build your guest CRM.
More hoteliers will look towards developing experience-led packages designed with guest personalisation at the forefront; it will be essential to ensure booking flexibility.
At Profitroom, we have provided our clients with the ability to turn cancelled bookings into rebookable vouchers to help retain income on-the-books.
A Good CRM
Whilst it’s true that the risk-averse are the ones most likely to travel, hoteliers should also remember to value their loyal guests first - especially where tight restrictions are in place. A good CRM is essential in executing this strategy with success.
It will also enable you to personalise communications via guest segmentation; segmenting the right audience means you can target them with the most relevant packages.
Finally, remember that a hotel's target audience might change over time, so you need to regularly review this. For instance, due to the tier system, we might see an increase in demand from the immediate locality - and this is something that hotels should look to capitalise on.
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