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July 1, 2012
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Cathy Mead:Learning from the crash - A hotelier's perspective




The world has changed post-crisis, but as business bounces back, Cathy Mead provides a hotelier’s perspective on how things were a few short years ago and the lessons learned since.

 

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During the first months of 2008, Dubai’s hospitality industry was ‘rocking and rolling’. Business wasn’t good – it was exceptional! But then the bubble burst.

Were those in the tourism sector really prepared for what happened in the last quarter of 2008? I think the answer to that is no. It caught the destination and the industry as unprepared as it did the rest of the world.

How many meetings were you called into at the eleventh hour, to ask what you were doing to drive sales? How do we steal business from our competitors? Are we talking to the right customers? Do we have loyalty?

It was a scary time. But for the hospitality industry it was also a major wake-up call.

As hoteliers, our favorite word back in 2008 and for a few years leading up to it, by default, became “No”. By nature, hoteliers are not particularly fond of the word, but properties were all enjoying high occupancies and a super high daily average rate (ADR). We could all pick and choose what business we did and with whom – a nice and very privileged position to be in.

Sales people during the boom time were not true sales people. They didn’t need to go out and hunt for business, it often came in through the window. The focus was on managing relationships. There was no time required to acquire new accounts as hotels couldn’t handle the amount of business being ‘given to them’.

With the onset of 2012, many in Dubai’s tourism industry are enjoying a heavy bounce in the upward direction. Occupancies are suddenly back to 2008 levels and hoteliers are talking price rises and counting the beans.

But things really have changed in the last four years and we have not beamed back to the past. Today, there are a lot more budget hotels in the market, who are also doing well and their no frills approach is exactly what certain clients want. This has certainly put pressure on the upper end of the market. Customers today have a clear perception of what they want to pay and also what they think something is worth.

The lesson for me from 2008 is that there was not much loyalty around as hotels were focused on room rates and the ‘take it or leave it approach’. This left a bitter taste for a lot of Travel Agents and Destination Management Companies. The balance on the weighing scales has tipped to the side of the customer and understandably so.

For 2012, we need to work hard to keep the balance. It is about give and take for both parties. You now have to be strategic business partners, who mutually support, taking a creative approach to marketing and willing to share the costs. It’s critical to see the bigger picture for the short, medium and long term. Those that focus only on today and tomorrow will surely suffer.

I have worked with some amazing hotels that have true entrepreneurial spirit – but when owners demand greater profit margin, or are you being asked, ”Did you leave money on the table?” Meaning that if you closed at such high occupancy, you could probably have been able to achieve a better ADR. Faced with that question, it comes down to the supply and demand rule and it’s hard to argue that the hotel positioned itself correctly.

But sometimes demand is stimulated by a promotion or package, so it’s all about the rate. This is where the true art of revenue management comes into play. It’s like a poker game. Should you fold, stick, or turn the card? Revenue management teams will make informed decisions based on all the odds. You have to know when to drive occupancy and when to hold out for rate. Owners will always ask whether their hotel could have done better.

Hoteliers must think about whom they want to be doing business with in the next one, three and five years. Have a plan for these accounts, targets in place and know what the market share is for the accounts and where they should be within the specified time scales.

To drive up price, hotels need to focus on high revenue markets – that is the meetings industry. Learn from the lessons pre-crisis and allocate room blocks for group business.

Traditionally, groups book further out and will commit to meeting space, food and beverage and leisure activities. Contracting these elements further out gives confidence when looking at future business on the books. For many hotels, a group’s spend per room is greater than an FIT guest and decisions should be made quickly to secure it. Hotels shouldn’t be afraid to add value as opposed to discounting to secure that base business – that is better than wondering why conference facilities are empty.

Remember that the Pareto Principle or 80-20 rule. 80 percent of your business will come from 20 percent of your client base. The same is true for hotels and top accounts need to be nurtured.

Now the tide seems to be turning, let’s hope that owners and assets managers don’t start to become too hungry again for the platters of 2008. Let’s hope they listen to the hotelier, let’s hope that hoteliers remain loyal to their clients and let’s hope that the word “No” stays out of discussions.

Cathy Mead is managing director of i4detail.ae and former VP Business Development at Atlantis The Palm


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