Tourism Industry News
Marketing to succeed in difficult economic times
Every sector of business, including hospitality, faces momentous challenges stemming from the global recession. Occupancy is suffering, and all indications are that the deterioration will persist for quite some time.
The latest Blue Chip Economic Indicators Report, a composite forecast of 52 economists, projects the worst recession since World War II with an upturn not beginning until late 2009. Some predict it may take longer.
PricewaterhouseCoopers estimates 2009 average U.S. hotel occupancy will fall to 56.5% - a decline of 5.2% from 2008 and the lowest in more than 20 years. More importantly PwC projects RevPAR to decline 11.2% this year. It is hard to imagine any hotel getting through this year unscathed. In fact, many hotels will see occupancy and RevPar decline much more than the 5.2% and 11.2% averages predicted by PwC.
There will be a substantial number of underperforming hotels in the months ahead. Likewise there will also be hotels that perform significantly above the PwC “norms.” While occupancy and revenue for these hotels may dip, it will be significantly less than competitors and their subsequent recovery from this recession will be much quicker. These hotels will capture more than their fair share of profitable customers still traveling.
How will this be accomplished? What are these overachieving hotels doing to outperform competition? One of the answers can be found in the way they approach marketing. Here are six strategic drivers of the marketing programs you are likely to find in more successful hotels. These are what will help them outperform their competitors during this recession and beyond.
Focus More on Delivering Value
In past downturns, many hotels slashed room rates in an attempt to fill beds. Remember the 2001/02 recession where inventory was literally dumped into the emerging online travel agencies? Following this tactic results in both short- and long-term damage, for two reasons according to Smith Travel Research:
First, lowering rates to stimulate demand and increase occupancy is extremely difficult when the tactic is so easily copied by competition. You have to make up a whole lot of occupancy points to break even when you and your competition are both lowering rates. And in these recessionary times with slack demand that is a tough (some say impossible) proposition.
Proof that rate reductions are easily copied: According to John Lindelow owner of Travel Hawaii, “3rd Nite Free is the new norm. We now have 33 hotels offering 3rd Nite Free.” The impact on RevPAR will be substantial.
Second, and most importantly, cuts to ADR are difficult to recoup when travel conditions eventually improve. After dropping room rates, attempts to restore them to previous levels are likely to be met with significant resistance. The ability to benefit from an improving economy will be delayed.
While a few well positioned and prepared hotels were able to make it through the 2001/02 recession without significant price reductions, today’s economic downturn is far more serious. This one isn’t localized - it’s global - so even the more successful hotels will need some rate flexibility. Instead of “slashing” rates, however, they will focus more on reducing rates slightly while adding value for their guests.
This requires creativity and focus for the hotel and its marketing partners when developing marketing programs and promotions. The creativity is in the packaging and the focus is on the customer.
Begin by listing all the possible value-added services and amenities available. Look for those that can enhance the guest experience for little or no cost to you - free upgrades, late check-outs, a $50 resort or drink certificate, free parking, etc. Then think “outside the hotel.” Look to partners to help out. Negotiate a free day at a local car rental company, two dives for the price of one from a local water sports operator. Make sure your offerings are delivering value and then package them so they stand out from competition. Creative genius has never been needed more than now.
Get the full story at: Travel Daily News