The Asia Pacific market ended 2016 with a mixed bag of results, marginally increasing occupancy 1.6% to 69%, but also posting a 0.9% fall in average daily rate to finish at US$100.46, according to data from STR. Hotels grappled with balancing stable demand and steadily increasing supply of inventory into the market.
Globally, the year was one of unexpected outcomes — particularly the results of the Brexit vote and the U.S. presidential election. In Asia, it was mostly business as usual, although it can be said that in today’s connected and globalised world, nothing can really happen in isolation.
As the world, including Asia, waits and watches how 2017 will pan out, the climate of uncertainty and anxiety persisting amongst the business communities is not surprising. The furore around restricted and banned travel to the United States has added to it.
Given this environment, it’s hard to know what the distribution and rate strategies of hotels in Asia should look like this year.
One thing is clear: Hoteliers must not wait till they are in the storm before they look for an umbrella. The time to start planning is now. Often hoteliers are caught unprepared and end up responding with knee-jerk actions. The key to not reacting that way is to have a plan in place — to have an early and clear view of all the data, information and metrics and then be able to make smart decisions, not rash and impromptu ones.
Making a plan
Make a plan ahead of the storm.
- Pay attention to your benchmarking data
Having the right information to make the right distribution decisions and then having the fortitude to stick with them is going to be key in winning the battle when times are lean.The most important metric in an uncertain or recessionary environment becomes RevPAR Index — how you stand against your competitive set. If you can take market share from your competition, it means you can maintain your revenues and drive bottom-line results even if the overall market is contracting.It is commonly thought in a recession that maintaining occupancy at all cost was key. Hotels would cut their room rates aggressively, and they turned over more inventory to distribution intermediaries such as online travel agencies. These moves, however, resulted in eroding revenues and neutering of pricing power. The race to the bottom is the race you want to lose.
- Do not follow the herd
Depend on your data-driven strategies, and do what you know will be best for your hotel. Have the confidence to hold your rates when other properties are seeing how low they can go. On those days where there is still compression in your market, yield your prices higher when your competitors hesitate.In a downturn, it is important to check if the prevailing gloom and doom story about demand is indeed true and relevant to your hotel. See if the market on the whole perceives the negative news to be impacting consumer demand, or is it simply a few hotels that are overreacting?Check your own website to see if conversions from look to book are indeed falling off. And while the market is adjusting to the volatility, pay attention to your pick-up. Build a more complete picture of trends that are emerging. If it is a slow-moving change, don’t overreact.
- Revisit segmentation strategies
Because one size never fits all when it comes to hotel room rates, nailing down who gets what price and why can be an intensive and complicated exercise, especially without the right tools and tactics. Hence a well-designed (and frequently updated) hotel segmentation strategy is necessary. First to do as you begin rate segmentation is to break down the different types of customer groups and booking channels and be aware of how much each contributes to occupancy and revenue.Remember that savvy pricing and distribution methods cost less and drive more revenues over the long term than any remodelling or marketing initiative will. The more data you gather, the better you can adjust your revenue strategies to fit new and changed conditions.
Finally, know that the plan needs to be in place now — well before economic indicators turn negative throughout the market. While you can’t predict everything that will happen, you can certainly plan for how you will respond and react when the storm comes.
