Written by: Tracy Dong, Principal Industry Consultant, IDeaS
Launching a new hotel is challenging at the best of times, let alone in the middle of a pandemic. Many new hotels in Indonesia today struggle to reach their optimal revenue potential due to focusing purely on the product during pre-opening preparation. This results in a lack of clarity around a hotel’s market positioning and associated pricing strategies to address fluctuating demand and conditions.
According to a September 2021 STR report, the hotel construction pipeline of new properties is growing again with the room count of new hotels in the final planning stage up 16 percent compared to same time last year in the APAC region. With many new properties scheduled to go live in 2022, how best should hoteliers launching today prepare their properties from a commercial standpoint? And what do they need to consider before they even open their doors to ensure they attract and optimise all available revenue?
Nice rooms are just icing on the cake
It is no longer enough to build a great property, ensure the rooms are artfully decorated and have staff in place to service potential guests. An integral component to the pre-opening process should be considering the optimisation of room-type configuration, as well as the implementation and integration of revenue management technologies with the hotel’s IT infrastructure and platforms from the very start.
There are many areas of revenue management that must be considered throughout the pre-opening phase of a hotel—ranging from establishing market segment revenue and sales strategies, undertaking comprehensive competitor evaluation, pricing research, pricing processing and forward planning of market demand cycles. To ensure hotel revenues are maximised from day one, hoteliers should liaise with specialists who can access in-depth analytics to optimally price a property based on the ideal market positioning and validated segmentation.
Setting a pre-opening commercial strategy
It is important that properties follow a structured, standardised pricing approach to pre-opening to ensure consistent and effective results. Hotels under development should conduct a strategic analysis that includes a study of the micro-market and overall economic factors that could affect the hotel’s performance. Finalising a competitor analysis (which may change between pre/soft and hard opening periods) including competitor value and benefits positioning is also key.
Given the rapid change of market conditions as a result of the COVID-19 pandemic, hotels should develop a comprehensive forward commercial plan that incorporates:
- Strategic hotel analysis that includes a study of the micro market and overall economic factors that could affect the hotel’s performance.
- Finalised competitor analysis, including competitor price and value positioning.
- Set pricing structures including benchmarking rate (aka, best available rate), discount and promotions, packages, negotiated rates and long-term contracts, such as airline crew, or tour series.
- Established channel strategies according to product positioning and market environment and cement “product positioning” (i.e., hotel descriptions, room-type descriptions, etc.) through all channels.
- Market segmentation strategies and action plans with a particular focus on business segments with high revenue contribution, and this may be adjusted as the pandemic subsides. This should be developed in collaboration with the sales and marketing department.
Key travel reopening phases and how they impact new hotels
The first phase of opening, a new hotel today will likely focus on the domestic market and local leisure segments. Small to medium-size social events have largely returned but big events are still mostly restricted. In this environment, new properties should focus on generating healthy cash flow by targeting guests with high spending powers, such as staycation and families, and maximise total guest value/ancillary revenues.
In the second phase of restricted opening, hotels need to prepare for operating in an environment where international vaccinated travel lanes (VTL) are established between countries/states with high vaccination coverage. In this phase, new properties should target key feeder markets and travelers from the VTL countries. For example, when the Singapore government announced the VTL between Singapore and South Korea from 15 November without quarantine requirements, flight and hotel searches surged for these markets. This is when properties should maximise their presence in digital channels, such as Google, meta search and OTAs with attractive offers, and promote a best-rate guarantee for their own website.
In the third phase of international opening, where a new norm of travel has been established and restrictions have been relaxed, properties should re-strategise their market segmentation mix and geographic sources again. The percentage of domestic guests would drop as international travelers return and transient segment mix would drop as groups return. At this time, new properties should review lessons the industry learned from the pandemic.
Many Southeast Asian countries, for instance, were highly dependent on Chinese tourists pre-pandemic, such as Cambodia and Thailand, which harmed their business as Chinese tourist levels dropped dramatically since the start of the pandemic. In the future, all properties should ensure they have a diverse and sustainable business mix that can adapt to changing circumstances.
Prepare staff and stakeholders ahead of launch
Prior to launch, all new hotels must ensure all staff and stakeholders are fully trained, aligned with strategies and able to implement appropriate revenue management strategies across rooms and ancillary revenue streams.
This process should be undertaken at least three months prior to a hotel’s opening, if possible, and be focused on checking that all pricing and operational systems are in place and all tools and processes that track key competitor performance data, including daily competitor performance and competitor pricing activities, are functioning. Key tools used to support daily revenue management processes should be developed at this time, focused on the construction of a comprehensive 365-day demand calendar and the evaluation of tracking actuals and on-the-books (room nights and revenues) business by market segment.
Hotel teams should also have contingency plans in the event that the property couldn’t accommodate guests as per the reservation dates due to various reasons. Proper communication and alternative options (i.e., change of date, move to sister property, or refund) should be provided to the guests, and staff training in this sensitive area is critical to avoiding negative guest encounters.
All staff working alongside, or within the hotel revenue management team, should be provided guidance and support during the hotel’s crucial soft opening period, which occurs between 60 to 90 days after its initial opening. Once a new hotel has opened, continued staff support and additional training will ensure staff members are able to meet their defined strategic goals and handle developing market expectations.
Given the hospitality sector is currently facing a shortage of workers, it is critical that hotel departments work together to accurately plan how many workers are needed in each area of the hotel. After all, if a hotel isn’t properly staffed, it can put a ceiling on revenue and sales through not being able to cater towards the true demand of the business.
Go beyond guest room optimisation
Hoteliers have been talking about total revenue management for years, but the pandemic sped up the innovation process. As demand for guest rooms depressed, the total value of a guest has become vital to a hotel’s bottom line. As a new hotel, the very first step of total revenue management is data collection.
In order to track good quality data from guest spend, hotel guests should be encouraged to charge ancillary spend to their room account, where the full value of a guest is recorded within the property management system. Furthermore, standard coding for market segment, rate codes and other revenue streams should be established to ensure clarity and ease access to invaluable guest spend data, which future business decisions can be based upon.
Plan, test and adapt for success
In a disrupted and increasingly competitive marketplace, any new hotel must be able to meet the challenges of varying demand upon opening. The success of a particular hotel or resort can be determined in the initial few months, both in terms of industry reputation and prospect for long-term financial return. It is no longer enough for a property to simply open its doors and expect the right guest to walk in paying the right price. Hotels need to thoroughly plan, test and adapt to maximise their chances of maximum revenue and commercial success.
For more information on how your new hotel can develop a pre-opening plan that will help drive revenues from launch, please visit: www.ideas.com