The Chesapeake Point of View

Operators Must Prepare For Industry Growth

Operators Must Prepare For Industry Growth

March 31, 2014

For the first time in nearly a decade, hospitality research consultants PKF, STR and PricewaterhouseCoopers find themselves in disagreement when it comes to their industry forecasts. While all expect continued positive growth, they disagree over how much growth is on tap for the year ahead.
While these forecast disparities have gotten some attention and sparked some conversation between industry professionals accustomed to less divergent predictions, that discussion should not obscure the key takeaway: continued industry growth in 2014. Ultimately, what is important about these forecasts is not about how they differ, but how they are alike.
In that context, with favorable forecasts and multiple metrics indicating 2014 could be another strong year for the industry, owners and operators need to be particularly vigilant about maximizing opportunities to capitalize on that strength. With sunnier than normal forecasts for the year ahead, riding the wave of today’s hotel industry requires paying special attention to the solid business practices that have been such a point of emphasis for many properties coming out of the lean recessionary years.
This leaves many owners looking at their own positioning in the marketplace. Except for a handful of markets that have seen weaker recoveries, the industry is forecasting positive revenue-per-available-room gains. If your hotel is not that should be a red flag. It should be a reminder that now is the time to examine your best practices and ramp up your efforts to provide great service, recruit fresh talent, evaluate management and training practices, implement progressive revenue management strategies and ensure you are doing what you can to appeal to influential demographics.
A time of shared prosperity is not the time to coast; it is a call to action to define and refine the key techniques and best practices that will ensure your property is claiming its share of that projected growth. In some ways, it is a reminder that getting back to basics is the best way to control your own success.

The little things
It might not be a news flash to point out details matter. But consistently applying that reality in the day-to-day operation of a hotel can be tricky.
Understanding and unlocking the power of the little things means implementing simple and costeffective changes in strategy and practice.
Keeping up with brand standards is obviously critical, but keeping your property in prime shape means more than simply doing what is required. It means being proactive with regards to fixing small issues, and understanding that while safety and security are paramount, the small aesthetic details can have a meaningful impact on the guest experience.
It also means understanding it is good business to fix small problems before they become larger and more costly concerns. Identifying and rectifying capital issues in a timely manner should be an ongoing priority, not only for the brand and for your guests, but ultimately for your bottom line.

Follow the leadership
It is impossible to overstate just how important the right leader is for a hotel—especially today. The culture of your property—the personality—and everything flowing from that, including employee enthusiasm and work ethic, customer service standards, and a mindset aimed at always going above and beyond, is driven by the management team, led by the GM. The GM not only sets expectations, but he or she also sets the tone.
Part of the role of a great leader is to communicate clearly, consistently and often. That communication needs to flow both upstream and downstream: meeting regularly with members of the management team to provide strategic guidance and gather updates, while also delivering reports with detailed information about property performance. In that way, the GM is both demanding and delivering accountability for ownership’s shortterm goals and long-term expectations.

Run the numbers
Hold yourself accountable to the budget you set at the end of 2013, and review budgetary goals regularly to monitor progress. This is not just an exercise in financial responsibility, but an important way to ensure the budgetary framework in place is sufficient to optimize segment production and enable you to meet segment mix targets.
One area of consensus among the prognosticators is average daily rate will be the driver to positive RevPAR gains. The key to success will be maximizing your ADR share. While transient growth will continue to be strong, those hotels with a large group mix will be closely monitoring their pace and looking for a bounce in group demand, thus increasing their ability to grow group ADR. Make those strategic decisions now to ensure your property is taking advantage of market conditions.

Revenue management 101
In 2014, the right revenue management strategy might make the difference between modest and spectacular growth. When assessing an existing strategy, be sure your team is gathering and sharing information, and be sure the GM is providing them with the leeway to respond appropriately when that information dictates a shift.
Make sure there is a process in place to compare existing numbers to goals and trends, and hold market intelligence review sessions to analyze strengths, weaknesses, and opportunities for improvement. Your team should be encouraged to take a step back and evaluate property performance in context, considering the regional marketplace and the larger industry direction. Be flexible, but also hold your property to high standards: modest improvement is not always good enough.
Ultimately, the differences in forecasts are not dramatic. PKF predicts a 6.6% RevPAR increase, while STR sees a 5.3% boost and PwC 6% as the likely outcome. Regardless, it is clear there is a broader consensus: The market seems poised to move forward significantly in 2014. Savvy owners understand if they want to move forward along with that market and maximize growth, refocusing on hotel management basics is not just preferable, it is essential.