5 Events That Influence Hotel Performance
By David Eisen, Director of Hotel Intelligence and Customer Solutions for HotStats
In 2008, when the U.S. economy took a nosedive, Wall Street execs weren't the only ones panicking. Hoteliers across the country had to brace themselves for impact. On its face, the Great Recession that followed would mean less leisure and corporate travel, tighter wallets and empty rooms.
Even though the 2008 crash—a so-called "black swan event"—was in a class of its own, it's not uncommon for events to influence the hotel industry. And each event serves as a miniature lesson for hoteliers.
Here are some prime examples of how events can impact the hotel industry and what preparations can be made.
In 2005, when Hurricane Katrina tore through the Gulf Coast, it left almost 300 hotels unfit for occupancy. In one fell swoop, a hurricane, tornado or other natural disaster can wreak havoc on a specific location and have a pernicious impact on hotel revenues and profits.
On a less severe scale, simpler weather changes can alter plans and influence the industry. Flight cancellations or unexpected cold can put a damper on high seasons at seaside resorts. At the same time, a stellar snow season can boost attendance at mountain recreational areas. Overall, weather events can affect who's traveling where.
The good news? Resilient hoteliers can bounce back. Ten years after Katrina, the area's hotel industry surpassed pre-disaster numbers. It's a reminder that by focusing on profitability and operational figures, hoteliers can shrug off catastrophic events and increase value.
New Product and Technology Releases
When Airbnb exploded onto the scene, the immediate effect was far from rosy for the hotel industry. In fact, early estimates pointed out a 1.5% revenue loss for hotels. But that's no reason for hoteliers to look down on new products and technological shifts.
In recent years, savvy hotel professionals have been able to use technology to cash in. Technology is enabling hoteliers to segment and reach customers in ways that were once unimaginable. Positive social media and blog reviews can spread like wildfire, bringing in droves of new visitors. More importantly, hoteliers now have access to the kind of data that reveals what is or isn't working and can make adjustments quickly.
Political Unrest and Crime
Whenever there's an act of terrorism, political unrest, or an alarming crime report, it has the potential to affect the hotel industry. These scary events can create a global ripple effect of hesitation to travel.
Fittingly, we can see the power of this reaction in the recent protests in Hong Kong. That event has hit the bottom line of hotels in the area, with some hotels seeing profits fall by more than 20%.
According to HotStats data, Hong Kong YTD GOPPAR (Jan.-Nov. 19) is $130.41, which is down a striking 30.4% over the same period in 2018, when GOPPAR was $187.33.
At the same time, when dangers are exaggerated or quickly resolve, it can lead to solid investment opportunities for hotel hopefuls. Hoteliers who can see through the hype can brave uncertain climates, jump on inexpensive opportunities and ride the financial wave when the public catches on.
Changing Commodity and Transportation Costs
Commodity prices can swing the hospitality industry to and fro in both operational cost and revenue generation.
For instance, escalating food or drink cost of sales can drastically affect a hotel's restaurant or bar business. At the same time, swinging commodity prices can completely change how much revenue hotels bring in.
Consider gas prices. When they're low, domestic travelers are much more willing to drive greater distances for vacations, which can mean a hotel stay farther from home.
Conversely, when the price of filling up the tank jumps, they'll be quicker to cancel that upcoming trip or take it, but stay at a hotel closer to their home base. At the same time, when the cost of fuel goes up for airlines, oftentimes it is passed onto the consumer via higher ticket prices.
For travelers, a location's value isn't always fixed. The attractiveness of an area can change drastically based on third-party events. Whether it's Omaha during the NCAA College World Series or last year's UEFA Champions League Final in Madrid, events can completely change the travel landscape.
Additionally, even more fixed attractions can have an impact on the hotel industry. For instance, if a major amusement park has a publicity disaster or a popular beach is shut down, it can slow down business.
Using Events to Your Advantage
The hotel industry doesn't operate in a vacuum. Events can completely change broad demand trends. However, when events pop up, hoteliers can use data the way a captain uses a sail to propel a ship. By focusing on operational data, they can minimize exposure to negative events and capitalize on upswings. By being alert to events, you can recognize when the winds are starting to blow, adjust operationally and use the current to push your hotel past the competition.
David Eisen is Director of Hotel Intelligence and Customer Solutions for HotStats, a monthly profit-and-loss data benchmarking service. He is responsible for business development activity in the Americas and developing marketing strategies to drive HotStats’ brand awareness. Prior to joining HotStats, David served as Editor-in- Chief of the Questex Hospitality Group, which includes Hotel Management magazine.More from David Eisen