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