QHA_February_Mag_Web

Judy Hill
ACCOMMODATION UPDATE
MAINTAIN PERFORMANCE IN COMPETITIVE MARKETS
With a record supply pipeline in many Australian
destinations, the diversity of new bedroom product
and contribution to the overall tourism product is
excellent. Having lacked investment for many years,
incumbent operators have never had it so good with
increasing demand, stagnant supply, and an optimum
performance environment.
The pace of average annual new supply is now
outstripping the pace of demand growth in many
markets. This can squeeze operational performance,
often resulting in a lack of real RevPar (revenue per
available room) growth. Year-on-year average room
rate declines or growth significantly below CPI levels
are a true testament to increased competition.
The following strategies may assist hotel operators to
consider their position to maintain RevPAR growth :
Revenue management strategy – if a defined
strategy with a 13-month planning outlook is not in
place, it is needed. The loss of opportunity through
a lack of understanding of the effectiveness of a
combination of long-term revenue management
planning coupled with a daily pricing strategy cannot
be understated. Accessing the right data and tools to
effect this strategy efficiently is paramount.
Distribution strategy – distributing, or not distributing
inventory to the most appropriate channels at the
optimum time can significantly reduce the overall cost
of distribution. Understanding demand markets and
business drivers are key to making the right distribution
decisions. A lack of understanding leads to overreliance
on online travel agents (OTAs) and in particular,
low margin channels.
OTAs vs franchising – More recently, the argument
has centred on the benefits of franchising given
continued loss of booking conversion to OTAs by
franchising distribution platforms. Accessing the
expertise of franchising at the right
price to off-set OTA commission is the new
franchising model. Question the traditional fixed-fee
franchising model.
Top-line vanity vs bottom-line sanity – achieving
the most appropriate mix and focusing on Gross
Operating Profit per Available Room (GOPPAR) is the
new mantra. A net RevPAR mindset drives distribution
decision making toward a more profitable outcome.
Actually achieving more direct bookings –
conversion of consumers is the key focus. A close
examination of the website offering and in particular
the effectiveness of the booking engine compared to
OTAs is warranted. For many years, the hotel booking
engine market has lacked innovation and is a key
driver of the continued pace of growth of OTAs.
Take action with variable costs – with a decline
in performance, quick action to rebalance the cost
base is critical. These are often tough
decisions, perhaps with human consequences;
however, these decisions will only serve to provide
for a sustainable business.
Reposition or renovate – with significant new
bedroom stock in local markets, a rethink on
competitive positioning and whether the current
price positioning remains relevant is required.
Renovation
or repositioning may not involve a bedroom centric
strategy. Being smart with how hotels are presented
with a presentation strategy are effective
repositioning tools.
Use data and tools – the hotel software environment
is fragmented and complex, producing significant
quantities of useless data. Streamlining and integrating
various software systems whilst producing relevant
management reporting can save endless hours of
lost productivity.
Engage experts – with the gig-economy growing
apace, relevant experts are available at ever more
competitive rates. The low-risk, time and direct cost
saving potential from contractually engaging with an
expert and learning from their knowledge has the
capacity to drive significant efficiencies.
One percent at a time – there is rarely a silver bullet.
Pursuing multiple minor strategies concurrently can
gradually claw back operating margin. Some strategies
can achieve results in particularly short periods of
time, particularly effective revenue management and
distribution strategy.
Downward pressure on average room rates in
particular markets that are either experiencing high
levels of new supply, falling demand or a combination
of both is not a permanent characteristic of the
market, simply the current stage of the investment
and development cycle. Weathering this stage and
being prepared for further downward pressure allows
significant enterprise value to be generated should an
eventual exit from the business be sought. Maintaining
the business profitably during this stage of the cycle
is an artform that requires experience of such market
characteristics.
QHA REVIEW | 39