As a hotelier, you’re in a busy, demanding industry, always looking to improve performance and guest satisfaction.
NB: This is an article from Demand Calendar
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It’s easy to rely on ‘tried-and-true’ principles that have guided hotel management for years. But what if some of these beliefs are now ‘tired’ and even misleading?
I’ll challenge three outdated ideas that may impact your operations: the notion that hotels can create demand instead of capturing it, the myth of constant guest loyalty to a single property, and the over-reliance on room capacity metrics as the key to success. By debunking these, you can refine your approach, make better decisions, and build a stronger, more profitable hotel.
Misconception #1: Hotels Can Generate Demand
The Common Belief
It’s a tempting and often subtly perpetuated idea within the hotel industry: that an individual hotel, through savvy marketing, irresistible promotions, or sheer brand magnetism, can actually create new demand for accommodation. The underlying thought is that if you build a compelling enough offering, or shout loud enough, you can conjure guests who weren’t otherwise planning to travel or stay.
The Reality: Hotels Capture Existing Demand
While a hotel’s efforts are crucial, the reality is that hotels primarily capture existing demand, rather than generating it from scratch. Demand for travel to a specific destination is driven by a complex web of external factors, including the allure of the destination itself, seasonal attractions, major city-wide events or conferences, prevailing economic conditions, business travel needs, marketing efforts by the Destination Marketing Organization (DMO), and global travel trends.
If hotels could truly generate demand at will, “there would never be a low season or shoulder days because hotels could easily generate the extra demand they need to fill the hotel to 100% occupancy.” This simple but powerful observation cuts to the heart of the matter. The existence of fluctuating demand periods is clear evidence that hotels are primarily responding to, not creating, the primary desire or need to travel to their location.
The role of a hotel, therefore, is to position itself to attract and secure bookings from the pool of travelers already intending to visit its specific city or region. Hotels compete vigorously for their share of this pre-existing pie, differentiating themselves through service, amenities, price, and experience to win over guests who have already decided to travel.
Why This Distinction Matters
Understanding this distinction between generating and capturing demand isn’t just a semantic exercise; it has profound implications for how you manage your hotel:
- Impacts Marketing Strategies: Instead of the costly and often futile effort of trying to create primary demand for travel to your area, your marketing resources can be more effectively deployed. The focus shifts to sharp differentiation, understanding your target segments within the existing traveler pool, and crafting compelling messages that highlight why your hotel is the best choice for their pre-existing travel needs. It’s about market share, not market creation.
- Influences Revenue Management: Accurate demand forecasting is the cornerstone of successful revenue management. If you operate under the illusion of being able to “generate” demand, your forecasts can become overly optimistic and disconnected from market realities. Recognizing that you’re capturing existing demand leads to more realistic forecasting, allowing for more strategic pricing, better inventory control, and more effective channel management aligned with actual booking patterns and competitor behavior.
- Sets Realistic Expectations for Performance: Understanding this helps set achievable goals and evaluate success more accurately. Performance isn’t just about hitting an occupancy target in isolation; it’s about your hotel’s performance relative to the market (e.g., RevPAR index/RGI). It allows for more informed decisions during slow periods – perhaps focusing on cost control or targeted niche marketing rather than expensive, broad attempts to “create” guests who simply aren’t there.
By acknowledging that your hotel operates within a larger demand ecosystem, you can make more intelligent and targeted decisions that truly drive profitable business from the available market.
