Stay focused on giving value

09 October 2008 by
Stay focused on giving value

Beppo Buchanan-Smith, proprietor of the Isle of Eriska hotel and Master Innholder, says the credit crunch could widen the gap between small and large hotel operators once again

The gap between large chain hotels and small privately run family businesses used to be huge in terms of service, but advances in technology have narrowed the gap considerably.

Where once the memory of the owner or long-term staff was relied upon to recognise and recall guests' likes and dislikes, hotel IT systems are now filled with their every conceivable detail, which can be reproduced at the touch of a button.

Where the smaller hotels used to stand apart on the service element - making up for their lack of facilities - the personal attention of the larger competitors can now often match up. This means the smaller properties are forced to invest in facilities and amenities to help them survive and thrive.

However, given the state of the economy and the pressures on businesses, the differential may be about to grow again.

When there is a reduction in demand, there are two ways to stimulate interest. You can add further benefits, such as including meals or spa treatments, which means reducing the margin but maintaining rate integrity.

The second option is to either reduce the price in general - and risk reducing margins - or reduce what is being offered and strive to maintain occupancy and rate integrity.

Typically, smaller businesses will tend to hold prices but offer additional items or packaged deals, due to their understanding that they need a certain amount of income to survive.

Larger businesses can offer lower rates, due to their excess capacity and their need to meet a minimum turnover level to keep their owners at bay.

While it is good news for the customer when the industry starts to reduce both prices and margins, it tends to be the start of a general reduction in essential investment. This can lead to the customer losing trust in the product.

The current downturn is clearly worrying, but the industry's experience with the reduction in trade due to, for example, foot-and-mouth and the 11 September attacks should help and keep our mind focused on providing value for money through both options.

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