Rain, hail, and even snow. In July 2024, Germany saw a record in precipitation, with more liters per square meter than any year since tracking began in 1881 (Zeitonline).
NB: This is an article from berner+becker, one of our Expert Partners
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The Statista graph of monthly precipitation paints a similar picture.
Not only was the weather bad, but it also contributed to a rise in outbound travel from Germany. This situation strained hotel demand, and many hotels struggled to meet their targets, with some resorting to price dumping. But what should hotels do in such an environment? Should they lower prices or maintain them? What other strategies can capture demand?
To address this, let’s establish a key principle: as a hotel, you can’t control demand; you can only control your share of it. For example, imagine a small town with four hotels, all equal in size and standard. Each should capture 25% of the total guests – that’s the “fair share.”
For example, as a hotel on the Baltic coast, we can’t control summer rain, just as an alpine hotel can’t control snowfall in February. What we can do is ensure we capture our fair share by following these three steps:
- Know if we’re getting our fair share
- Adjust our expectations
- Change our commercial strategies accordingly
Know if we’re getting Our Fair Share
The first step is to subscribe to a market share report provider, such as Costar in Germany, and define a competitive set of 5-6 hotels that target similar guests. We do this to be able to track three very important key performance indicators: Market Penetration Index (MPI), Average Rate Index (ARI), and Revenue Generation Index (RGI). RGI is crucial, as it measures your RevPAR against the average RevPAR of your competitors. An RGI above 100 means you’re earning more than your fair share.
The next key is to set a RGI target together with your budget. For now, let’s assume a target of 100 RGI. If in that summer month where it rained, we end up with a RevPAR is €75 while the competition averages €70, our RGI is 107.14, indicating we’re getting more than our fair share—even if our budgeted RevPAR was €90. Hence, we did a good job!
