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It is no secret, and currently happening in the whole Hospitality world, management take overs. As more properties getting into financial problems to create a return, they are focusing on the help of the bigger brand to help them out.

In the past 4 months, Phuket has seen changes in management in many sectors. As there is a current oversupply in the property sector, owners are sometimes desperate on the look out for the right firm, or in some occasions,  just any firm. As these hotel management firm rely on growth to cover their costs, deals are being closed in a very quick pace.

Most recently La Tour company took over another property, that of Grove Gardens, which has increased the total presence in Phuket with 3 properties. Selecting the firm is a delegate job. Most owners might choose based on popularity or brand awareness in the industry. Often forgotten is the success rate of these management firms in the Revpar contribution. Comparing your future management partners by Revpar succession rate, is an easy differntiator of success.

Second choice the owner have to make is the cost of this transition. It’s is by far more expensive then hiring the right management team. You will buy into a brand, which is the far most highest fee you will have to pay (a cut on your profit). To line up your property with this Branded firm, requires additional funding to set all your FF&E to its standards. Adding all these cost up together you might have to ask your self if a management firm is THE SOLUTION.

But as an owner you never ever have to forget that these firms have to take care more then one property. In some of these cases these are properties owned by private equity firms or investors, which are driven on result. We see the trend happening in the world of the OTA’s, the more commission you pay, the more interesting you will become to them. But how much they are really care about your investment and your profit? The incentive structure should be clearly examined as you as an owner have not created a charity fund.

The success factor is the profitability of the branded management firm, which can be checked based on Revpar. Revenue management is the very basic you have to ask yourself in such a choice, “what is my future management partner doing in the field of Revenue management?”.

This Video interview with the founder and CEO of Revpar Guru, explains the dynamic of the online travel agents in nowadays market.

Being top ranked on a OTA website, might not always be good for your Revpar. A carefull analysis of the positioning related to your property star ranking and pricing helps in order to optimize your revenues.

Have a look at this 11 min video and learn more about the importance of online travel agents and how they work. Understand how your customer is search the web to find the best deal and how revenue management assists you to let this customer book at your property.

Click for the link to the Video here

Last year hotels have sold against a lower room rate then 2008. The selling rate for hotels was about 16% lower than previous year according to Hotels.com.

The current pricing strategy for many hotels is based on offering discounts, free nights, etc. These are efforts which will hurt your ADR and Revpar. According to a latest article in Reuters, Mariott has seen a dramatic decrease of the rate (about 19%) in the luxury collection. It has been mentioned that the luxury segment will not get back on their feet in the short term as market conditions have changed. In 2009 they have closed about 5,000 rooms, which is a normal fact. This year they will close over 6,000 rooms.

So what is the right strategy to follow for pricing your products? For this we have to go back a few years to find out how the business was selling at that time. Price differentiation is another technique and nothing to do with discounting but by adding value. To compete with your direct competitor we have added value to our product. Free transfers, free meals, spa vouchers, all to add value to your product. You get more for the USD of Thai Bath then when you spend it with the competitor. Added value will help you to keep your existing rate. In a normal market condition with inflation and a positive track record, hotels add 5- 10% to their room rate each year. A drop of 15%- 25%, due to discounting, in your rates, means you have to take another 3 years to recover from this. While if you add value in this year but keep the room rates, you can change your conditions the next year and keep a steady room rate.

Pricing and the internet

Still many hotels have not been able to utilize their website. The website is confusing and not focused on selling but on information. The prices are fixed and aren’t changed with the current situation in the market. Offers which you can get from 3^rd party websites are not available on their own website. The implementation of Facebook and twitter has been made, but Tripadvisor has been forgotten.

The internet is a very important partner for your sales. As it is a dynamic medium you can update and alter at any given time. Because search engines enable customers to find information easy, your own website will be visited more once you are visible on third party websites.

The pricing strategy for this market is not really looked after by the management, and business is lost because of this. Intelligent pricing, based on supply and demand, value added offers and rate parity in all markets are key elements to lift your business.

To let your website work, investment is needed. As all future business derived from your website is commission free, there is money on the table if you not free budget for internet marketing activities. Carefully analyze your current market share and set your target for the next year, Take 3% from your current revenue retrieved from your direct internet business and invest this in improvements, optimizing your booking engine, pictures and a webmaster service. You will see that the incremental investment will pay off itself within the same year.