What's Next for the Hospitality Market

How Much Longer Will This Up Cycle Last?

 

It’s the question of the hour at every industry conference and every hotel conference room.

How much longer will this up cycle last — and how bad will the downward trend be?

No one knows the answer, but we have the data to make an educated prediction.

If you haven’t read the recent article in Hotel News Now by STR’s Jan Freitag, you need to check it out. In a clear and simple way, it presents the historical trends across the most recent, relevant hospitality industry cycles. There’s agreement that the rest of 2016 will continue on the up side, but in 2017 — you can expect a change. Jan cites these three specific observations for the next phase:

  • Supply overtaking demand as a result of the latest new inventory boom, coupled with a slowing economy
  • More empty guest rooms resulting in lower occupancy rates for hoteliers
  • Threat of a “race to the bottom” as hoteliers are tempted to reduce rate to get more rooms

The key is that hoteliers have the choice. The choice to follow their competitors with rate reductions — or to think differently and act differently to protect rate and maintain occupancy.

Tools for the Next Cycle

In a recent ViewPOINT by nSight Founder, Rich Maradik, we analyze past recessions to explain how yesterday’s intelligence tools are inadequate for optimizing performance in today’s always-connected, web-dominated world. (Get the full ViewPOINT with analysis here.)

“Tools used in the last recession are ill-equipped to guide hoteliers through the next market downturn,” said Maradik. “Today’s fast-changing market dynamics are the new normal and require a new perspective.”

Using historical data alone to guide decisions on how much to discount or where to spend digital marketing dollars just doesn’t paint the full picture today. Hoteliers to think differently in order to battle the downward push on rates in a slowed market.

A Call to Innovate

The reality for the industry is that we’ve just gotten comfortable with a strong market. When guests are coming and rates are high, we don’t really have to work as much to get new business. Hard times force us to be smarter about doing things better. We look different strategies and tools to help us gain a competitive advantage. And there are ways to innovate, as described here in our recent post on

And there are ways to innovate our way to success in a downturn, as described here in our recent post on Innovation in Good Times v. Bad Times. Our takeaways here are five ways that hotel Revenue Management and Marketing are innovating in 2016:

  1. Integrating goals and strategies of marketing and revenue teams, enhancing collaboration and data sharing
  2. Looking at consumer shopping data beyond hotel website analytics to elevate consumer targeting and ROI
  3. Moving beyond banner ads to more creative digital strategies, trying video, messaging, social media branding and online PR/influencer outreach, conversion rate optimization (CRO) / improving website experiences and more
  4. Leveraging Big Data on consumer behavior for guest profile insight and predictive analytics
  5. Using content management to tell the story of the hotel and engage guests, bringing more visitors to the hotel website

 

In conclusion, yes – we are likely headed for a downward trend in the next cycle. Hoteliers can minimize the impact on ADR andoccupancyy by thinking differently and applying new tools. Your ability to innovate will determine how successfully you manage through the changes ahead.