Seasonality strategies key to driving demand
 
Seasonality strategies key to driving demand
13 FEBRUARY 2012 9:42 AM

Understanding the seasonality of demand will help hoteliers maximize their channel mix during peak and shoulder periods.

REPORT FROM THE U.S.—The ebb and flow of seasonality can be cause for much angst among hoteliers. However, having a distribution strategy in place to combat shoulder seasons while capitalizing on peak periods can help maintain healthy levels of demand, sources said.

“The best way to deter a bad season is to build around it,” said Paul Wood, VP of revenue management for Greenwood Hospitality Group.

“Be proactive and take measures against it. If you know the first quarter is going to be bad, steal demand or shift demand back on the third or fourth quarter. Have promotions in place, book transients and have marketing materials ready so you’re able to communicate and market to the public,” he said.

Hoteliers should be aware of all channels available to them, as well as looking at the local-market demand that online travel agencies bring to the market. From there, the best practice is to find the optimal channel mix, especially during shoulder periods, instead of discounting rates, said John Hach, senior VP of global product management at TravelClick.

“Hoteliers that lower the rate have a problem because they’re lowering profitability for the hotel. They’re not bringing in new travel, they’re just redistributing demand that will come in anyway,” he said.

Partnering with OTAs, especially when it comes to pricing, helps hotels to not have to sacrifice retail rate, Hach said.

The benefits of using opaque channels and packages means the “consumer doesn’t know the individual parts. The hotel has an advantage. People don’t know the value. On (its) own, the hotel is exposed without a bundle. The lower price will drive the market down. The benefit from having that package price is that it’s harder to determine hotel value within that bundle,” he said.

 “The trick is during demand or high season, you can yield price and fine-tune promotions and maximize revenue on all channels. Off-season strategy changes; promotions and discounts should reflect more value,” said Chinmai Sharma, VP of revenue management at Wyndham Hotel Group.

But never discount irrationally, he said. Discounts should add incremental value.

Traci Mercer, VP of market management for Expedia, said the challenge during peak season is to yield the highest return.

“The No. 1 fundamental rule: Don’t turn off a marketing or demand channel. Leverage that channel to drive demand during peak season. Leverage lengths of stay, and keep as much demand as there is to ensure that you’re hitting your goals.”

During shoulder periods, “You can’t create demand,” Wood said, “but shift it.”

To do this, Mercer said hoteliers should look at hotels within their competitive set or overall marketplace to see if there’s a customer base they can target and shift demand to their hotel. OTAs such as Expedia, she said, can see where customers are booking, where demand is being aligned and how to satisfy those needs.

Hach also said understanding the vacation schedule is key. The leisure segment in the United States is stimulated by family and when children are out of school, usually from June to Labor Day, he said.

OTAs captured the largest share of demand during the 2010 summer season, according to total channel demand data from STR, parent company of HotelNewsNow.com.

Bookings made through the merchant and opaque models increased during the 2010 summer season, while those made through the retail channel remained steady, according to STR data.

Get ahead of trends
Because seasonality is variable, often fluctuating based on various events, group or transient bookings, hoteliers should know “the biggest thing is not keeping up and understanding the trends,” Wood said.

“Past data is really important,” Sharma said.

Market trends are so dynamic that Sharma advised not to look beyond one or two years. “The trends used to be so steady, but given what we’ve seen in the past four to six years, hoteliers can’t rely too much on history but on current trends,” he said.

“The key is to look at the market build 30, 60 and 90 days out,” Hach said. “… The key takeaway from hotels is to invest in business intelligence with forward-looking data. It allows (hotels) to look at seasonality trends,” in the market.

In fact, looking at the broader picture, outside of shoulder and peak periods, is also conducive to understanding seasonality, Berry said.

“If our horizon is so short that we’re making decisions for a month or a week, we’re making some kind of price decision that will inevitably hurt us and hurts market pricing over the long term,” he said.

“Make smart long-term decisions, which may result in taking short-term pains in anticipation of long-term gains,” Berry said.

“The trick is to plan as much in advance as you can,” Sharma said. “… In the busy time, the lead time can be shorter and doesn’t need planned so much—there’s enough demand. In lean times, you need to plan in advance; plan six to eight weeks out in lean times.”

TravelClick’s Hach shared a similar sentiment. “Hotels need to know what their average lead time is for reservations. It helps (them) have crystal-clear decision making,” he said.

Knowing this will help “hotels take proactive steps opposed to reactive steps,” he said.

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