Supply growth will continue to stifle average daily rate in New York City, but revenue managers see possibilities in growing midweek rates and ancillary fees.
NEW YORK—Revenue managers in New York City still are struggling to grow rate in the face of significant supply increases, but revenue managers speaking at a recent event here said they believe improvements can be made through strategies like optimizing weeknight rates.
Revenue managers from Marriott International, Denihan Hospitality Group and the Beacon Hotel spoke about their latest strategies during a meeting of the New York chapter of the Hospitality Sales and Marketing Association International.
Carolyn Fredey, senior team leader, revenue management for Marriott in New York, said the next 12 months will be “rough” as supply continues to come online. And Dominik Gomez Muschenborn, regional director of revenue management for Denihan Hospitality Group, said that there had been projections for rate stabilization in 2018 but that now it is looking more like 2019 or 2020 for that development.
“Right now there is too much supply growth for (average daily rates) to grow,” Muschenborn said.
Focus on the 'small things'
Fredey said the focus should be on growing rate on Monday and Tuesday nights by as little as 2%, which she said would be “so much better than selling out on a Sunday” at a rate that is not maximal.
“Do the math a bit and you can see the profitability impact of that kind of weekday increase,” she said.
Muschenborn said “small things” can make a difference – “like winning those Tuesdays and Wednesdays and focusing on those market segments where managers can have an impact and optimize our business mix.” No big strategy will raise ADR overnight, he said, “but taking advantage of small opportunities and maximizing them as much as possible will make a difference.”
The revenue managers saw tougher cancellation policies and some success from loyalty member rates as positive highlights of the recent past. Fredey said that a 72-hour cancellation fee is “a no-brainer,” adding that owners “are very vocal and want transparency. They are looking for us to have creative strategies. They are testing us. They are asking us more about distribution costs, asking us to worry about that.”
Owners also want properties to grow revenue per available room Fredey said, because wages are rising 4% annually “so when we go flat on rate it hurts profitability.” She said that hotels generally don’t lose occupancy unless there is a crisis or a recession. With a healthy economy now, she said, there are opportunities to build rate.
Milja Perkovic, director of revenue management for the Hotel Beacon in New York City, said that member rates have had “a huge impact” on direct bookings, and agreed that the 72-hour cancellation fee “is also great for the industry.” She added, “We have educated customers to wait until the last minute for the best rate. This is our way of taking control.”
Muschenborn said managers need to focus on customer acquisition costs, which he said is “fairly easy to do.” He said the hotel industry should also look to the airline industry and “how they get away with all of those fees.” While he noted there is a lot more competition in the hotel world, “we should still look to the airlines to see what we can do.”
The managers expressed some positive sentiments about OTAs, despite the perennial tension with that sector. Fredey said that she finds OTAs “easier to work with” than wholesalers, who have been “struggling with what their niche is.” She said this situation is a challenge because wholesalers account for 25% of New York hotel business “so we still have to work with them.” She said OTAs are easier to work with because “they have the technology and marketing spend.”
Consider total RevPAR
Noting efforts to integrate all revenues into one platform, moderator Ioana Popa-Gaskins, key account manager for Booking.com (USA), asked if managers were looking at total revenue management and profitability, including F&B and retail in determining financial results. Perkovic said each hotel department has a different level of profitability, adding, “Our owners are not asking for these metrics yet but that is where the industry is going. However, we can’t do yield management for food like we do with rooms.”
Muschenborn said that using metrics like total RevPAR or GOPPAR (gross operating profit per available room) are not widely adapted or used enough at this stage. “We should start to get into those metrics,” said Muschenborn.
The managers said technology has had a decided effect on their jobs. Fredey said she remembers when rates changed once a week and are now changed twice or more a day. She said revenue managers need to make data into meaningful but concise messages and ideas for GMs. These messages, she said, should be as brief as possible, perhaps even the subject line of an email.
And with all the technology, it still takes human beings to make sense of revenue-management systems, according to the panelists. Noting that luxury hotels are particularly good at this, Muschenborn said “When a recession hits, the first thing cut is this type of position, the type of people who make you most successful and who bring guests who will become most loyal.”
There are positive signs for New York, according to the speakers. Fredey said the construction of Hudson Yards, a huge residential and commercial development on Manhattan’s West Side, should bring in significant business.
There was also good news on the international visitor front. Maria Wilcox, SVP, hotel relations for NYC and Company, the city’s tourism office, told attendees that international visitor numbers were more positive than had been predicted earlier this year. A February projection was for a drop of 300,000 but that number will be more like 100,000 with a slight increase forecast for 2018. There have been some pleasant surprises, including Canada, which has seen an increase rather than an expected decline. Wilcox also said China would hit the 1 million visitor mark this year for the first time. She said visitation from every market except Brazil is expected to increase in 2018.