In the Words of Chesapeake

Hardly The Time To Trim Your Sails

Hardly The Time To Trim Your Sails

April 07, 2014

GREENBELT, MD—While minor forecast disparities remain, the overwhelming consensus from analysts and observers is that 2014 is setting up to be a banner year for the hotel industry. Continued strong growth is expected, with hospitality research consultants PKF, STR and PWC all predicting a RevPAR increase anywhere between 5.3% and 6.6%. With both broad economic indicators continuing slowbut-steady recovery and industry momentum picking up, the pace of development continues to accelerate. While market-to-market variations remain, the current rate of development is higher than at any point since the recession began in 2007 and 2008, and many major hotel chains reported robust earnings at the end of 2013— additional evidence that the industry has been able to hit the ground running in 2014.
With so many indications that 2014 could be a strong performer, it is incumbent upon owners and operators to take full advantage of that potential prosperity. While a rising tide lifts all boats, now is hardly the time to trim your sails. On the contrary: owners need to ensure that their management structure and performance is optimized.
Taking full advantage of the industry upswing means ensuring that your management team is maximizing opportunities for growth and capturing a proportionate percentage of an expanding market, reemphasizing the strategies that many properties have used to successfully navigate the challenges of the last recession, and becoming both more efficient and effective at driving and retaining market share. Perhaps most importantly of all, it means understanding and leverag
ing emerging industry trends: the cutting-edge practices and evolving ideas that continue to move the industry forward.

Rates
Going forward, rates will be an industry focus, and the adoption of sophisticated rate strategies will continue to be an emphasis for successful properties. Consequently, understanding the important role that rates play for your property and your market is essential. Ownership needs to be vigilant about making sure that their management team is working hard to be proactive—as a rate leader—instead of responding in a passive manner to ebbs and flows in the marketplace. In many cases, ground that was lost to an overcorrection on rates in the midst of the recession has still not been entirely recovered, despite a sustained period of positive growth. The solution is to understand the importance of setting rates, and to take the initiative by getting out in front of the competition. The GM needs to hold the line and remain firm on rates, and should work closely with your revenue management team to design a strategic approach to rates that encompasses local and national negotiated accounts, group pace and selective sell targets. Make sure your rate strategy is consistent across channels, and identify which rate categories are most conducive to absorbing increases. Making subtle changes to group rates can be a smart way to introduce incremental increases. Ultimately, rate leadership is less about keeping up with the Joneses and more about understanding and embracing the right pricing structure for your property.

Results
Setting a culture of results is one of the most important things that any management team can do. And, in the context of an industry that is becoming increasingly sophisticated about gathering and utilizing key metrics and important information, a results-focused culture will continue to become less of a luxury and more of an essential asset. By far the key figure in creating that results-based culture is the GM. The GM communicates expectations, ensures that every employee is engaged and accountable, and reviews progress in the context of a detailed long-term plan. Measuring that progress—and understanding where there are existing weaknesses and opportunities for improvement—requires a management team to make use of the many resources and tools at their disposal. Information derived from backlog reports, Pace reports for groups and catering, day-by-day forecasts and comparisons, Hotelligence 360 data, market segment history data from budgets, P&L reports, Knowland reader board reports, brand and CVB leads and CVB reports, website reports, and STAR reports can all be used to understand where you are to make informed decisions about where you need to be.
An important and often underappreciated part of a results-focused professional culture is—ironically—difficult to measure: establishing a sense of teamwork and unity, and motivating that team to work collaboratively and enthusiastically toward shared goals. It is a commitment to not rest on your laurels, but to push for better results, to be willing to take chances, and to adopt an entrepreneurial and service-minded work ethic.

Technology advances
As hotels become increasingly competitive with respect to the coveted and influential Millennial demographic, the ability to offer tech-friendly conveniences and environments is emerging as a significant competitive advantage. This is a significant and potentially transformative trend that is likely to accelerate in 2014 (and beyond). As hotels continue to upgrade their technology infrastructure and evolve to offer a more streamlined guest-tech experience, hotel management professionals will need to continue to look for ways to push the envelope. As the USA Today reported in January, some Loews and Four Seasons hotels are experimenting with a texting-based service that allows guests to text the front desk for everything from room service to parking assistance, to fresh towels. Other brands are developing and deploying apps that promise to provide information and facilitate services in creative new ways. One intriguing new concept that is already being rolled out in select properties is the ability to use your smartphone as a room key. In a more general sense, keeping up relationships with OTAs and understanding and participating in other emerging tech platforms will also remain a priority for all successful hotel management professionals.
The bottom line is this: as the industry continues to heat up, and as deals are being done at a pace not seen since 2007, hoteliers looking to capitalize on that good fortune must be vigilant about maximizing their return on investment. For owners everywhere, that means staying on top of the hotel management trends that will define success in 2014—and beyond.