London Supply Boom: How to Maintain Your Market Position
With more than 11,000 new hotel rooms set to open by 2020, London’s hotel growth is predicted to outpace many destinations in Europe.
NB: This is an article from Duetto
The UK’s capital set a new record for overnight visitors in 2017, so arguably the city can take the extra supply. But with Brexit uncertainty ahead, as the UK and Europe prepare to part ways in 2019, hoteliers currently operating in the city need to take action now to ensure they don’t lose out to their shiny, new competitors.
According to the London Hotel Development Monitor Report 2018, published by JLL and London & Partners, London had around 140,000 rooms as of July 2018, offering visitors a huge and varied choice of accommodation.
The city set a new record for overnight visitors at 31.9 million in 2017, with visits from the US, London’s largest inbound market, up 13%. The Chinese visitor market is one eyed for exponential growth with London seeing an 111% increase in Chinese visitors between 2012 and 2017, with further growth predicted.
In total, 11,600 hotel rooms are in the pipeline and set to come online by 2020. This growth outpaces that of many major European cities, including Paris, Berlin, Lisbon and Milan. But should arrivals figures dampen, those hotels currently operating in the capital could find themselves fighting for position against new properties boasting pre-opening marketing budgets.
3 Ways To Keep Your Hotel On Top
Remember, as an operating hotel you have one huge advantage over market newcomers – you have an existing customer base. However, you can’t afford to be complacent. Remember that people like to try something new. Consider how you are going to counter that in order to win your customers back.
Follow our top 3 pointers to remain competitive:
1. Know your customer
Leverage your existing customer base with more targeted communication and personalised campaigns based on all the valuable information you have been able to capture on these guests.
Segment customers based on booking behaviour, demographics, spend and preferences and identify what triggers will resonate with them and incentivise them to book direct.
Don’t consider your segmentation as set in stone. Rather, see your new competition as offering an opportunity for you to better understand your market and your consumers. Who are these new hotels targeting? Are they going through OTAs, driving business through GDS’ or pushing direct channels? What is their breakdown of corporate, business, consortia and leisure business? Look for opportunities. For example, if they are targeting the corporate market, do you need to invest in a booking widget for your corporate contracts, in order to make booking with you even easier?
Remember, you have something the new hotel doesn’t – historical data and future rooms already on the books. Look at this data to see what is coming from where and consider how your business is going to develop in the future. Be prepared to put some work in to identify new segments and opportunities.
2. Know your competition
Make sure you know your competition as well as knowing your own product, and understand their appeal to your customers. Consider why and how you compete: do you target the same segments, have a similar room count and rooms offering, or do you have other things in common such as location or services?
Also bear in mind that the new hotel on the block may be way more aggressive in promoting their product, thanks to marketing support and pre-opening budgets.
3. Experiment with pricing
Review your pricing often and don’t be afraid to implement new strategies. Many hotels are reluctant to change their pricing and are afraid to take risks. But some risk is good.
Use personalisation to suggest the most relevant products and packages to your existing customer base.
Look at real time booking engine data such as regrets and denials to get a clearer picture of how your customers engage with your products. This will help you more accurately define price elasticity and respond quickly to market opportunities.
Experiment with new price points and new strategies. Look at what your competitors are experimenting with but also be mindful of your brand message and value.
And encourage a testing culture across your organisational departments and have them work in synergy to share intelligence, identify, test and measure the success of these strategies.
The more dynamic your pricing, the more opportunities you have to convert new business. Make changes up and down; the more you adjust your pricing the more opportunity you have to grab the consumer. This is what we call Open Pricing.
Avoid Price Erosion
Hotels in London have seen record rates in 2018, with HotStats reporting a 12.5% increase in RevPAR to £178.57 in July. Performance growth was fuelled by volume, with room occupancy achieving 92.1% in the same month. City events such as Wimbledon and the Hampton Court Flower Show helped push occupancy levels up.
But with a raft of new hotel openings on the horizon, and market uncertainty looming, hotels in the city need to stand firm and avoid a knee-jerk rate drop if business stalls.
“London needs to avoid being in a position where we have an over-supply of hotel rooms. This has happened in other markets. Rates drop and all you do is create such enormous instability in terms of price erosion. If there is an over-supply then the independent hotels are the ones who usually suffer because they are the ones without the connections to pull business from other markets,” explains Joyce Galvao, Duetto’s Director of Customer Success in EMEA.
“These hotels need to be proactive and look at segmentation and changing their pricing strategy. It’s hard when you don’t have the marketing dollars and the power behind you. That is when you truly have to differentiate your offering and show increased perceived value to your guests.”