After enjoying years of unprecedented growth, the hotel industry now needs to prepare for difficult times ahead, for example Alan Lewis and Dan McKone, CEOs in L.E.K. Consultant.
2016 has finally seen a slowdown in the growth of revenue per available room. And in some bellwether markets such as New York, recently they experienced declines. Meanwhile, many of the properties that construction started during the boom are connecting, adding supply to the market, they say.
"Hotels have had a relatively easy time finding growth in recent years, and some may have become complacent," says Lewis. "To survive a downturn, they have to work harder to protect margins while keeping their full beds."
Added services key to surviving the downturn
With base rates under pressure, more powerful strategy available for hotels - in all price points - is to create a series of addressing the needs of different customer segments optional supplementary services.
"Hotel chains need to rethink that one size fits all cuts across many of its products," says McKone. "With more options, which can better meet the needs of its customers, increasing its total income per person and win the loyalty that is based on more than price and promotion."
Lewis and McKone are authors (Harvard Business Review Press, 2016). The book demonstrates how business leaders can unlock new value by taking a closer look, and perhaps modify, intersections of the assets they already have and customers who have already paid. Continually doing this leads to what they call a "mindset Edge" and opportunities for new revenues and profits with little risk.
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