As we enter budget season and look forward to 2023, what is everyone's predictions? Can we hold these high ADRs? How are you planning to manage potential inflation related price increases?
Alex Cass General Manager at the Carousel Inn on the Beach;
‘’My budget and forecast for my market will be different than everyone else’s. Every hotel should have their own budget and not base it on a similar market nearby or a similar type city. For example, I am a small beachfront property in Fort Myers Beach, and there are a lot of other small beachy islands in Florida that are similar, but our forecasts should and will be completely different.
I predict that convention and conference business will begin to rebound further, but I am most confident that vacation destinations will continue to explode. Our ADR has been record breaking since COVID, but I have hotel clients that are in the conference and convention space that are really struggling for group business, because let’s face it, some companies and groups just have found ways around face-to-face conferences now.
As I always say, “you can’t take ADR to the bank.” What I mean is that ADR is not as important as overall room revenue. If you set new records this year for ADR but fell short of your revenue goals, then what was the point? Make sure that your ADR makes financial sense. If you aren’t meeting your occupancy and revenue goals, then ADR means nothing and most likely means that your ADR was too high or your business mix was off.’’
Robert Speirs, marketing manager at Cheval Collection;
‘’As Alex has pointed out, predictions for this year look to be just as tricky as in 2022. We are currently operating serviced apartments in city centre locations, namely London and Edinburgh, for which demand has been extremely strong since about April of this year. About 2/3 of our market is international inbound, with North American and Middle Eastern guests making up the biggest components. The recent funeral for the Queen showcased both cities in a positive light, and with the weakness of the pound we expect demand from the leisure market to hold up at least in the first half of 2023.
The other surprise is how quickly corporate demand has recovered, as at one stage during the pandemic people were saying 2024 at the earliest to reach 2019 levels. We are already past that, and many companies have adjusted their budget caps upwards to account for the new reality in a market environment where inflation is suddenly a factor.
Totally agree with Alex that pursuit of too high an ADR risks missing out on crucial revenue, and backs you into a corner when you have to budget/forecast for the year ahead. Owners tend not to be as understanding when the ADR goes down!’’
What’s the most impactful distribution channel right now and are there any new ones you’d recommend investigating for 2023?
Chris Peppers, Director E-Commerce, H-Hotels;
‘’I think there is always a way to reach more potential guests by trying out new channels. But in this case I am not talking about certain new OTAs that suggest that they solely focus on a niche user group, I am talking about affiliate channels or channels with a closed user group. Affiliate channels/networks can be very cost and time intensive but if you invest the time and the money, there will be some partners that drive surprisingly good revenues and attention to your website. Also, affiliates are always a great way to share all the great stuff you offer on your own website anyways e.g. member rates, mobile discounts, newsletter signup voucher, non refundable rates and so on. We all probably have a Valentine’s Day offer, an easter discount etc. With the right placements you’ll be able to get a decent return.
Within the last 1 ½ years the biggest surprise to me has been a channel called corporate benefits. That’s a membership site where companies subscribe to and create access for their team members. They can now buy stuff from different industries such as retail, electronics and travel at a discounted rate. But also, you as a company can promote yourself and your services/items on this platform.’’
Alex Cass General Manager at the Carousel Inn on the Beach;
‘’This question has a lot of facets, and many of you won’t like my answer. I, in all honestly, am not anti-OTA. If you were at my talk during last year’s Direct Booking Summit, you would have seen how I take my OTA bookings and turn them into repeat direct bookers. I also get those OTA guests to leave reviews on public sites like Tripadvisor. I take advantage of all OTA cancellations and convert them to direct bookers. I let the OTAs do all the work and I reap the benefits.
If you do business with OTAs, do it whole-heartedly, do it honestly, and make it worth your while. We don’t need to look at OTAs as the ‘enemy’ but rather a funnel of new business. I have reviewed a lot of why and how I do this during my presentation at the recent Direct Booking Summit in New Orleans. There are of course, a lot more pieces to this question, look out for the recording and slides from my Direct Booking Summit presentation coming soon!’’
Robert Speirs, marketing manager at Cheval Collection;
‘’Our web channel has outperformed all expectations this year, and is definitely our most profitable even when you factor in expenditure on paid search and meta. To compete with the OTAs we introduced a Member Rate this year which displays publicly, but requires an email to access. It has proved to be a great way of getting visibility without sacrificing your best rates.
I’m also not anti-OTA per se, but we can use them intelligently to reach markets we otherwise wouldn’t, and it’s still a win-win for both sides. We experimented a little with AirBnB this year for the first time, but logistically it’s been something of a hassle, where we’re chasing payments after a guest has departed, which is not ideal.’’
I’ve recently noticed customer expectations from a 5-star luxury stay are changing. For example, sustainability is becoming much more important. What’s your advice for providing a luxury customer experience with sustainability in mind?
Alex Cass General Manager at the Carousel Inn on the Beach;
‘’Sustainability has become a huge buzz word for hoteliers because some of us have taken cues from the effects of COVID to implement some cost saving opportunities with housekeeping and F&B labor. Hotels have been able to hide under the guise of ‘sustainability’ when in reality, they have just cut back on labor due to staffing shortages and antiquated COVID protocols. We are all guilty of it. Hotels have forever changed how we staff and how we clean rooms and what we offer.
The short answer to this is to be very transparent about what you offer, up front. Don’t sugarcoat it, only to fall short of guest expectations because you want everyone to think you are the same Ritz-Carlton that you have always been. People like honesty, people like knowing up front what services are offered. If you bar now closes at 8pm instead of 11pm, be honest and clear. If you only do housekeeping service upon request, embrace that, advertise that, and don’t be afraid to explain why. The most luxurious service in any hotel is the personality of its team members. It’s not the chocolate on the pillows or the expensive silverware, it’s the friendly young face behind the desk that can make or break an entire 5-star hotel experience.’’
Robert Speirs, Marketing Manager at Cheval Collection;
‘’On the sustainability angle, we ran a survey earlier in the year which got around 2,200 responses and included a question on the issue’s importance with respect to booking accommodation. The figure was about 25% that would take a property’s sustainability story into account before booking. I’m sure that will grow, so we’re not going to ignore the issue, but I don’t think it’s massively influencing booking behaviour right now. Certainly not for our audience.
We have engaged a third party organization to benchmark what we are (and aren’t) doing, and as with most things, honesty is the best policy. We will likely publish the first of what I’m sure will be an annual report in the coming months, and look to take our guests on the journey with us. People don’t like to be lectured, but if you can show them how much progress we as an organization are making, the nudge factor will hopefully influence their behaviour.’’
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