Holidays are coming home

11 September 2003 by
Holidays are coming home

Two years ago today something happened that would change the world forever. On 11 September 2001 al-Qaeda terrorists flew two planes into New York City's World Trade Center, causing its twin towers to collapse, killing 2,792 people and igniting fear in the hearts of many of the world's travellers.

The effect this incident had on the tourism industry was massive. In the first year following the attacks international travel from the USA fell by 60%.

The UK was an inevitable long-term casualty of this fallout. Figures from the British Incoming Tour Operators Association (BITOA) show just a 0.2% increase in overseas visitors to the UK in June this year compared with the same period in 2002.

So how did the hotel industry, particularly the sector that relied on corporate and American business, respond to this decline?

Quite simply, it changed the way it did business. It looked at the domestic business and leisure markets and did its best to get them to fill the gap. The move has hit profits as we Brits aren't such big spenders as our cousins across the Atlantic, but it has enabled many hotel groups to weather the storm.

Jonathan Raggett, managing director of Red Carnation Hotels, says the mix of business at his group of eight hotels has changed quite dramatically since 11 September. It has responded by developing its customer relations management system. "Eighteen months ago we took from our computer system all the guests who had stayed with us three or more times, which was just under 60,000 people," Raggett says. "We put a survey together to learn more about them and got 35,000 responses."

Red Carnation then used the survey to find out what their customers liked doing and how much they spent doing it, and used the information to design specific packages. From the responses the company was able to compile a list of 500 people who had spent more than £500 a night on a room. Of these, 80 were particularly interested in sport. Red Carnation acquired four tickets to the motor racing at Silverstone and e-mailed those 80 people, offering them a three-day VIP package to the racetrack for the bargain price of £10,000 a pair! The deal attracted more than 20 responses.

Red Carnation also took to the road, visiting travel agents in major cities around the UK, introducing the company to a domestic audience. "The road shows more than paid for themselves," Raggett says. "Red Carnation around the UK is widely unknown, so we were fighting against the big boys. But once we get them here, we do a jolly good job at keeping them."

And in a bid to get US guests back into its hotels, Red Carnation also teamed up with the Lowell hotel in New York City. Its Milestone hotel recommends the Lowell to guests heading to America on its website, and vice versa. Since launching the partnership seven months ago the Milestone has filled 145 bedrooms on recommendation from the Lowell.

Two-for-one deals
London-based private hotel group Radisson Edwardian launched a Let Loose in London weekend package in a bid to entice leisure visitors into its hotels. The direct-mail and web-based campaign provides guests with a freedom pack full of money-off vouchers for a range of London tourist attractions, including £50 off the Orient Express, half-price tickets into Kensington Palace and the Tower of London, and two-for-one deals for wine museum Vinopolis.

Marketing director Linda Plant reckons the group could have crumbled if it hadn't offered packages like the Let Loose campaign. "We would have risked not repositioning ourselves into the luxury segment and could have paled into insignificance if we hadn't continued our advertising to send a strong message about our new product," Plant says. "Moving with the times and focusing on the key players rather than trying to be all things to all people meant we were focused and held on to market share without having to heavily discount for volume business."

Wolfgang M Neumann, area president of Hilton UK & Ireland, says Hilton had to refocus its marketing efforts from the international business traveller to the domestic market as the mix in business changed from 60:40 in favour of the business traveller to 60:40 in favour of leisure.

Its response was to create a leisure breaks programme, with a range of packages for the theatre-goer and golfer as well as family breaks and a pamper break for customers who fancied treating themselves to something special.

For the InterContinental Hotel Group, giving customers a reason to travel became the main thrust of its marketing activities. David Hughes, senior vice-president of sales, marketing and commercial for Europe, the Middle East and Africa, says it was important not to become involved in a rate war and start dropping prices in a bid to attract customers. "You've got to give people reasons to travel, to encourage them to try a hotel," he says. "We said come to Legoland and stay at the Maidenhead hotel rather than just come to Maidenhead for X pounds."

Hughes adds that the group also offered a number of deals, such as weekend breaks and bundling, where a customer would pay a certain price and get entrance to an attraction as well as the stay at the hotel. But again, the main focus of the initiative was to give people a reason to travel.

But making that switch from US corporate to UK and European leisure guests has not left the industry unscathed. A glance over the financial figures of any hotel company will illustrate just how badly affected the industry was by 9/11 and the subsequent fighting in Afghanistan, the war in Iraq and the Sars outbreak.

Earlier this month Hilton Group recorded a massive 43% slide in profits in its hotel division, citing the already "frayed confidence" of travellers which was further undermined by the Iraq war and Sars crisis.

And Hilton isn't alone. Room rates, occupancies, revenue per available room and hence trading figures across the UK hotel industry have all tumbled since October 2001, and are likely to remain far from the peaks of 2000 for several more years.

While some in the industry expect business to be back to normal by 2005-06, there are still many who think the way hotel business is done will never be the same again.

Chain hotels across the UK

Room rate Occupancy Revenue per available room

Room rateOccupancyRevenue per available room
2001£70.6572.3%£50.04
2002£68.3872.2%£49.36

Source: TRI Hospitality Consulting HotStats

Overseas tourist numbers

Changes in the numbers of overseas tourists to the UK compared with the same period 12 months earlier

July 2001-15%
August 2001 -17%
September 2001-23%
October 2001 -26%
November 2001-20%
December 2001-17%
January 2002 -10.7%
February 2002 -3.64%
March 2002 -1.95%
April 2002 -1.62%
May 2002 - 4.8%
June 2002 -1.3%
July 2002 - 4.7%
August 2002 -1.45%
September 2002 +3.7%
October 2002 +4.6%
November 2002 +6.8%
December 2002 -2.2%
January 2003 +22.5%
February 2003 -8.4%
March 2003 -12.5%
April 2003 -6.8%
May 2003 +2.4%
June 2003 +0.2%

Source: BITOA

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