Storm Doris caused chaos when it raged through the UK in February. Motorists struggled through the snow, vehicles fell prey to slippery ice-lined roads, and massive trees were uprooted.
Now that was a while ago and life has returned to normality but, the same cannot be claimed for the UK hotel sector.
As per recent findings, 1,800 UK hotel companies have a 30% chance of going insolvent in next three years.
NB: This is a viewpoint from Hotelogix.
Top factors responsible for this possible slump:
Rise in Food & Beverage costs with higher import prices
Living wage introduced in 2016 is expected to increase from £7.2 to £9 per hour by 2020, creating additional budget pressure on hotels
The popularity of online booking channels over direct booking mediums mean hotels must part with their earnings in the form of high commissions to OTA’s (Online Travel Agents).
This commission rate can range anywhere between 10-30%
New alternatives like vacation rentals Airbnb and budget chains Premier Inn are eating into the profit margins of small hotels
The uncertain economy has hit the business travel sector majorly. This means a significant reduction from corporate bookings, a major source of revenue for hotels
According to Jeremy Willmont, head of restructuring & insolvency at Moore Stephens:
“Greater costs across the board because of the Brexit vote, and competition from Airbnb are putting some hotels at risk of insolvency.”
In addition, as Joanne Allen, head of Hotels & Leisure says:
“Small hotels have tighter profit margins, and are often more reliant on seasonal trade. This can make it difficult to budget for the whole year. Also, Staff shortages have the potential to get worse with changes in immigration policies.”
Now that the ‘insolvency bomb’ has been predicted, hotels must quickly come up with smart ways to navigate around it.
Rather than join the list of 1,800 hotels which are predicted go bust, create your new survivors list.
Here’s four ways to help guarantee your survival:
Get your ROOM PRICING right
Getting the correct pricing to create the best rates for your hotel is crucial. Apart from usual methods like accessing historical data from your hotel to predict occupancy and demand, create memorable experiences by building attractive packages.
Revenue managers must explore rate intelligence tools, which help you make smarter pricing, channel, and budgeting decisions.
Involve your marketing department
Seek your marketing team’s’ assistance on:
What are the appropriate keywords you must invest in?
How to attract people to your hotel website and drive direct bookings?
What stellar description of your property are you going to put up on OTAs?
These simple, but effective, changes go a long way in getting you closer to your revenue targets.
Adopt a smart cloud system
Not just any modern cloud PMS (Property Management System), but a smart one.
Most PMS’s in the market will cater to basic functions like reservations. Adopt a comprehensive system that will take care of reservations, reputation management, distribution, pricing strategy and an analytics tool that will analyse past data and help hotels decide on future course of action – all from a single window.
With an simple and user friendly system, hotels can invest in fewer staff, with limited tech knowledge.
Since the system is automated, it will end up saving valuable hours.
Plan your hotel distribution
Understand the world of distribution in detail.
Online travel agents like Booking.com may be working well for a 100-room hotel in Southcliff but may not be profitable for a 20-room property in Brighton.
Create the right mix of channels by identifying popular booking channels, apart from just OTAs. For instance, a healthy combination of select OTAs and ramping up your hotel website design can go a long way in optimising your distribution strategy.
Weather the storm!
NB: This is a viewpoint from Hotelogix. The article originally appeared on online marketing blog Hotelspeak and is published here with permission from Hotelogix.