How to raise hotel rates—at any rate
24 APRIL 2015 6:01 AM
Now is the time to adopt specific strategies to maximize rooms revenue. These five tips will help you get there.
The topic of rate is one that is much discussed within the industry. While there is a great deal of talk about how important it is that owners get top rate (especially now, with 2015 projected to be another banner year for the hotel industry), there is much less focus on the specific strategies, techniques and best practices that can—and should—be deployed to accomplish that goal and maximize rooms revenue.
With that in mind, here are some insights, perspectives and specific strategies for owners to think about. If you are doing them already—great! If not, now is the time to implement strategies to capture your average-daily-rate market share.
1. Do a data review
Any effective attack on ADR must start with a comprehensive understanding of segmented data and its production by channel, day of week, season and booking lead time. It is simply futile to effectively attack the process without knowing for sure your inputs and desired result.
2. Lead the way with content
Generally speaking, you want your rack production to lead the way, because that is going to effectively drive ADR and waterfalls through your pricing strategy. Do not make the mistake of hurting the pricing model by “ego pricing” your hotel. Is it just a show rate or is it a rate that someone is going to actually book?
Rational pricing strategies must be well thought out and market appropriate. Regularly evaluate your transient rate efficiency, which is Total transient ADR/Rack ADR = TRE with a target of 75% or better. If you are out of line, something is amiss in your pricing plan.
With consortia, make sure you are really focusing on global-distribution-system marketing: Ensure your ads look good, your text is compelling and your graphic campaigns are strong. That holds true across all marketing platforms.
Make sure you have strategically identified your inventory and are paying close attention to detail in terms of room type. Focus on upgrades and ask yourself if the value equation makes sense.
With the explosion of online booking and online travel agencies, driving business to the least-cost channels and through your own website can have a dramatic effect on bottom-line results. The bulk of non-negotiated retail transient is driven by effective and relevant content across the Web. Your hotel data, photography, text content, placement strategies and ease of transaction are your greatest asset. Don’t be shy about investing here. The returns will come and perform at a solid return on investment. It is all about visibility.
Spend your online dollars at the right time during the research/decision-making process. Leisure guests decide in the dream/planning portion of the decision cycle and need depth of marketing to key a buy decision. Last-minute travelers or road warriors likely look for hard data that fits right in their buy cycle: location, amenities, ease of booking from mobile, business services, etc. Use digital marketing that is designed and deployed to catch potential guests in the segments that best support your plan. Understand that this content should effectively deliver an experiential sell: showing and supporting what the guest is getting for the quoted rate.
3. Consider packages
Leveraging customized packages for your hotel can be a significant value-add to your rack rate, pushing ADR higher in the process.
Come up with packages that make sense for your market, your area and your hotel. Understanding what guests want in that market and in each segment—food-and-beverage perks, reward points, etc.—is critical to making that happen. Packages can be among your highest rates, and as such, should be a consistent presence in your marketing and sales strategies. Make sure packages are available in all channels where they make sense, including GDS and your website. And because they are often paying the highest rate in the hotel, packages are also an opportunity to upsell.
Think carefully about what works in your market when putting packages together. Conduct detailed market research and consider attractions such as museums, restaurants, concert sites and other events/amenities. Review your packages monthly, recalibrating and updating those that are not selling. This is a key point. Do not make the “set it and forget it” mistake: If a package is not producing, change it. Play with price points and keep asking questions: How can we do this better; how can we do more? Consider seasonal and regional dynamics, and examine each individual market and market segment to make sure that you are getting the most bang for your buck. Stay away from generic brand packages; find what works for your market and your property.
Getting that extra few dollars in rate is typically a cumulative effect of multiple strategies being executed consistently and effectively. It takes tenacity to work harder and work smarter than the competition.
4. Maximize group
After many years of stagnant or declining group rates, this segment is poised to make a resurgence in 2015 and should be a positive factor in increasing ADR this year. Precisely how much impact can vary from market to market based on demand.
Keep in mind that no matter the market segment and average rate attached, any year-over-year growth will have a positive impact on your overall ADR progress. Assess the market dynamics as well as your own compression to create strategies to maximize your opportunities. The willingness (and the ability) to redeploy sales resources and refocus emphasis depending on what group market segments are producing is essential. If you want a bigger push toward higher rated corporate or association business, be willing to make strategic decisions about where and how to deploy your team.
When you are confident that you can capture a higher rate for transient business, it pays to make sure you are paying close attention to capping your group business on certain days. To do this effectively, revenue management must act as the gatekeeper. To help avoid the mistake of taking group business at the expense of higher paying transient rates, it makes sense to hold off until just before group cut-off dates before making decisions, and to look at booking windows for all different market segments and price accordingly.
Ultimately, building rate in your group business is an ongoing, active process. Forecasting, analysis and thoughtfully evaluating every rate, every segment, every day to continue to build that top line.
5. Do it now
As we know, it is virtually impossible to compete head to head with OTA advertising, but remember that sales goes hand in hand with operations. Consider devoting a higher percentage of your marketing dollars to those sites that customers use to research their decisions. Maintain a fierce focus on your TripAdvisor scores, knowing how critical they are, and understanding that guest satisfaction metrics have a tremendous impact on your ability to push rate. Use great content, great feedback and accolades to justify to potential guests why they should spend that extra money to stay at your hotel.
With at least a year or two of upside remaining in a rising ADR market—at a time when there has not been that much inventory that has been added—the need to drive rate is arguably more urgent now than at any time in recent memory. Achieving and maintaining sustainable ADR gains today will put you and your hotel(s) in a good position to flourish. Be relentless in your pursuit!
W. Chris Green adds more than 23 years of successful operations experience to Chesapeake's corporate team, including nearly a decade in the field at various Chesapeake-managed properties. In 2008, he led the team at the Crowne Plaza Houston Downtown to the Quality Excellence Award for outstanding performance from Intercontinental Hotels Group. Prior to joining the company, Green held a variety of key operational positions with three national hospitality chains. He also has a strong F&B background, including supervision of more than 40 restaurants with RMS Restaurants, S&A Restaurant Corporation and Brinker International. Green attended Florida State College at Jacksonville with a concentration in management. He holds the Certified Hotel Administrator designation, and has served as president and board member for various CVB, Tourism development, and Hotel & Motel associations in the markets he has worked.
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