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Viewpoint: How to surf the room rate waves

12 November 2018 by

With the sale of hotel rooms beginning to resemble the stock market, revenue managers must resist dumping their rooms at low rates, says Peter Hancock

We are fortunate in the hospitality industry to have many sources of information from which to deduce how business is going generally. In fact, there is so much data out there you can cherry-pick the most optimistic or gloom-laden stats to confirm whatever you want to believe. And, as always, the use of averages can obscure what is really happening at individual locations.

To give you an example, Hotstats reported that chain hotels in the UK recorded a 9.2% year-on-year increase in profit per room in August. This is extremely encouraging and the company explained how a great summer has contributed to stronger than usual leisure demand this year. Our own findings within Pride of Britain, made possible by our collaboration with STR, shows an average revpar among our 49 member hotels of £148 for the year to the end of September, which represents year-on-year growth of 7%.

At the same time, confidence is being hammered by worries about staff recruitment and the lack of certainty as to when and how the UK will emerge from its complicated, and now protracted, EU divorce.

It is quite possible that we shall look back on this period as a boom, even though

nobody is using the term just now. While roaming the recent Independent Hotel Show I had the chance to chat with dozens of hoteliers who all wanted to know how everybody else was doing. Listening to each of them I find the averages melt away to reveal a very mixed bag indeed, with some properties rammed to the gunwales and others struggling to fill even at peak times. A common thread, however, seems to be rising daily rates, perhaps helped by the industry's increasing mastery of revenue management using both brain and computer power.

It strikes me that our collective access to data, combined with this new-found ability to flex rates by the day or hour, according to perceived demand, is turning the sale of hotel rooms into something very closely resembling the stock market. I do not pretend to understand how the stock market works, but I do know that the value of shares can rise or fall dramatically if there is a shift in confidence, the very same force that now drives the decisions of hoteliers in regard to room rates.

Can we do anything to maintain confidence in such a fluid market? My guess is that our revenue managers hold the key. If they can resist dumping rooms at ridiculously low rates we have a chance of preserving the public's idea of a fair price and, in so doing, will be able to meet the rising cost of employing the great people upon whom we rely.

Peter Hancock is the chief executive of Pride of Britain hotels

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