Building a strategy for 2020 is a means to being successful, to achieve your objectives.
NB: This is an article from Duetto
The starting point is knowing your objective, which is usually achieving your budget forecast but can also be, for example, beating your comp set by x%. Strategy is how you plan to achieve this objective.
Strategy can be summarised in four boxes: supply, demand, your own performance and your relative performance (v competition). For each of these boxes, you will have a lot of specific KPIs, data and metrics. All are important even if some might impact one hotel a lot, and another hotel very little.
What’s important to proactively look at (e.g. a year prior) is the number of rooms you have as a city and specifically in your market segment, because this will have an impact on your performance. Knowing an oversupplied market a year in advance will help you to beat your competitors by having a proactive strategy. This might be to start will lower rates a year in advance rather than last minute, talk again to some corporates that you denied previously due to too low rates, have more promotions on discreet channels, etc…
Consider things such as what special events are coming up in the next year? Look at the economics. Is there a recession coming? Look at GDP figures and consider how these could affect your performance. The earlier you know about them the better.
- Your Performance
This should include more than just your RevPAR, occupancy or average rate. Consider KPIs such as how many times you sold out, how many times you had to reduce your price last minute. Identify the things you don’t want to see recurring.
- Comp Set
No hiding with benchmarking your performance versus your market. You can spot lots of opportunities in those numbers, even if a blend number (which doesn’t tell you what you need to do, for each segment, at what time, etc…) and be careful of not reacting too much at too granular a date level. A bad performance for one month might be due to only a couple of dates where one competitor had an amazing group, or your competitors might have exposure to a different segment that means their price last minute is always higher than yours.
All these data sets will influence your strategy and will be specific for each hotel. For example, you may have 90% occupancy at two hotels. For one, the strategy for 2020 might be about average rate, because you had lots of constrained nights in 2019 where you sold out too early. Whereas, for the other hotel, same occupancy and rates, but your rates might be well optimized and never selling out (the danger of looking at average in general, in this case average occupancy and rates), and then the strategy is more about selling those extra room nights (e.g. via overbooking) rather than ADR. This is when you need to look at your performance relative to the market, using data from STR, for example.
Understanding Your Market Mix
Your optimal mix is not just about ADR or occupancy for each segment, but about the size of each segment.
You need to have clear visibility of each segment performance: how it performed last year, what was its size in terms of volume and in terms of revenue and ADR. And what was the cost attached to each segment. You need to understand your cost of acquisition and operational costs. For example, longer stay guests may provide marginal savings on room cleaning costs.
Then, when you look at your strategy for the following year, you try to see opportunities in terms of mix. For example, if you see an opportunity to run at a very high occupancy on certain days of the week, you may decide to sacrifice a bit of one segment, because you know you can achieve a much higher profit from another segment. This needs to feed next year’s budget.
Knowing your cost is really important, because if you make decisions based on revenue only you might actually sacrifice some profits. Some segments might have higher ADR, but they also have a higher cost of acquisition, or channel cost, or even costs related to lengths of stay, so they might not be your most profitable segment.
Duetto is really powerful for this, because it will show you clearly your different segmentation, and your mix, and you can have an historical view and a forward view, as well. So when you are discussing budget or strategy the following year, you can try to define what will be the optimum mix for the following year. And that is absolutely key to achieving your objective in 2020.
So, the starting point for me is, be clear on what’s your objective and then look at your four boxes: supply, demand, own performance, relative performance, and the different KPIs for these four boxes, including cost. That will be your starting point to being successful in 2020.