Over the past two years, words such as ‘recession’ and ‘slowdown’ have become pretty common. As business confidence wobbles, there’s been a significant volatility increase in capital markets. And not long after surviving disruptions such as low occupancy as a result of the global pandemic, the revenue manager is now dealing with fragility in financial markets and rising inflation levels.
New revenue sources are drying up. Therefore, revenue leaders must show more grit and determination if they are to survive such an economic peril. But operating in such a disrupted economic environment is nothing new for hoteliers. Despite the prevailing economic challenges in the industry, there is some positive light for the Asian Pacific hotel sector.
Unfortunately, while market recovery, especially in the regional hotel sector, seems genuinely underway, that doesn’t seem to be playing well in all regions. Vietnam, Macau, Beijing, the Philippines, and Kyoto are still performing very poorly in terms of revenue generated per available room (RevPAR).
These regions are still highly affected by the dwindling number of Chinese tourists. Hopefully, with China easing the COVID restrictions, Chinese travelers will boost travel destinations in these regions.
Impact of Flight Capacity Constraints on Room Occupancy
There have been positive signals showing the likelihood of regional markets performing better in 2023. However, one issue that might continue to hold back business performance is that Asian Pacific Airlines are in no hurry to add flight capacity. There are still several Asian Pacific regions that have not yet returned to standard airline levels of capacity. That has primarily affected the cost of available flight seats, making it harder for hotels to secure seats for their guests.
Remember, hotels usually are less flexible than airlines, especially when it comes to adjusting the capacity of their offering to the market. That has required hotel revenue managers to be more mindful of the balance between prioritizing rates and occupancy.
Most Asian Pacific regions are experiencing lower demand due to the restrictions on airline capacity. And for that reason, hotels must start to actively test their customer’s willingness to pay for hotel rooms to maximize revenues in this recovering economy.
Revenue Managers Can Protect Hotel Revenues in Uncertain Economic Times
Bryan Bailey, the Vice President of Revenue and Distribution at the Minor Hotels, recently shared in a webinar that revenue managers should be focused on balancing rates and occupancy levels to achieve the best total revenue per available room (TrevPAR). Inflation has primarily affected hotel costs and profitability in all their other revenue streams.
Bryan Bailey’s strategy at the Minor Hotels is driving up revenue by achieving an average daily rate while at the same time not trading off so much on the occupancy. Minors Hotels now pays more attention to the average spend it can achieve with spas, foods, and beverages, among other revenue sources. When looking at performance, it focuses more on the total revenue generated.
Bailey explained that Minor Hotels’ incremental revenue had been gained mainly through Average Daily Rate than occupancy, which is more likely to achieve a more significant profit for the hotels. As the industry continues to face bottom-up pressures, Bailey explains that focusing on average daily rates and the average spending performance could work out better.
Source: Travel Daily – Ideas