Hotel Industry Blog

Monday, December 7, 2009

Hotels shouldn't assume they will follow the same path through the economic cycle that they did before

It's reasonably well documented that the hotel industry goes through a cycle of peaks and troughs in its economic behaviour. Data from STR Global, Forrester and our own Bookassist data, seasonally adjusted, all show cycles of 7-10 years depending on location. Current data on RevPAR, ADR and occupancy across European main destinations would seem to indicate that we are leveling out at the bottom of the trough, or have already done so, and that recovery is likely in mid to late 2010 on average, assuming nothing major throws a spanner in the works.

The idea of the cycle is a welcome one for the industry as a whole. But averages are averages - they are not an indication of what will happen to your hotel directly. Hotels shouldn't be complacent and assume that they will follow the same safe path through the economic recovery cycle that they did before. As usual, statistics need to be interpreted very carefully.


Economic Cycle, we are currently at about 5 or 6 o'clock in the cycle and some may begin to see upswing to recovery in the next 2 quarters


While the industry as a whole will undoubtedly rise again to another recovery and peak, the hotels that followed that path at any time in the past did so successfully because they seized the market opportunities and adjusted to the realities of the market at that time. Likewise, those who will lead the recovery and benefit from it this time are those who have to embrace the clear shift towards consumer direct booking online through hotel websites with hotel booking engines. Those who miss this opportunity will be left behind in the economic trough.

The recession has accelerated the consumer's use of the internet to research and book hotels. This is because the consumer has increasingly shifted towards examining the detail of what is on offer and searching for value before booking. The simplest way to do this research and comparison is online. Online booking through hotel websites with booking engines like Bookassist's, as a proportion of total business, has continued to have double-digit growth right through the recessionary period. Consumers are now used to this online approach and are likely to continue the trend of internet research and booking as recession gives way to recovery. Also, supply has altered since the last peak and trough, and in some locations it has done so dramatically. This will have a strong effect on the manner in which the recovery takes place, with weaker hotels being forced not just downwards but fully out of the market.

Hotels must seize the opportunities afforded by direct booking through their own websites, while managing distribution through third party channels appropriately. Hotels who cede control of their online inventory to third parties alone are increasingly losing control of their online presence and damaging their long term viability. Now is the time to develop and sharpen your hotel's online strategy to focus strongly on building business and loyalty through direct booking on your own website, ensuring that it becomes the primary revenue generator for your online business. Not only is it the cheapest channel, saving you multiple euros for each and every booking shifted from channel to direct, but it puts you rather than a third party in control of your revenue as the industry rises through recovery.

Dr Des O’Mahony is CEO and Founder of Bookassist, the leading online strategy and technology partner for the hotel industry. Follow Bookassist on Twitter at twitter.com/bookassist

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Variation also published on hotelmarketing.com as:

"What hotels must do to rise from recession" http://bit.ly/5AsgdX

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1 Comments:

At December 9, 2009 at 5:19 PM , Blogger YAHYA said...

I think that most hotels have a website and a booking system already. What they missing are proper direct online strategies and investment to support these strategies. Hotels are happy to pay third party distributors 15% to 25% and more in certain cases and markets, yet they are still afraid of spending a small fraction of that to promote their own website or to protect their brand. Hotels really need to wake up before it is too late. Yes, fully agree with the assessment of the article. Yahya Fetchati

 

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