Differing Revenue Management Strategies for New Vs Established Hotels

“Besides being new, we also need to know whether it is part of a well-known brand, or a completely new and independent property. For the former, creating buzz and attracting customers is much easier, as the allure of the brand precedes them. In the case of the latter, the investment in campaigns, PR, offers, etc., will have to be higher to gain that recognition. Social media influencers can generate great ROI with their campaigns, at a fraction of the cost that an offline media campaign would cost you.”

“You need to have steps. A Business Plan is not just something pretty to do and show to managers and investors. A hotel is built to serve a market or achieve a goal. There are often lots of changes between the time the hotel starts to be built and the time it opens. So, doing some sales homework before it opens is crucial:

• Understand the market (what are the OR and ADR of your competitors?)
• Who will be your direct competitors? Visit them and understand their work environment
• A SWOT analysis is always very useful.
• What will the business purpose of your hotel be? Why should a guest choose your new hotel or others?

Also, it’s important to analyze the segments:

• Do you need Groups? Corporate? MICE? Will your hotel need much from OTAs/Tour Operators?
• Who are the main players bringing clients to the region? What are the cities/countries that generate businesses?

Revenue Managers can contribute a lot with these visions and also understand seasonality, calendar dates, events and sources of business.
Creating a wide & open rate and distribution strategy will surely be an advantage. Additionally, by working with Revenue Management, Sales and Marketing, your hotel can profit from strategic Offers and Promotions to help the market know your new property and unique selling points.”

“When launching a new property, an accurate study of the market and a strategic pre-opening plan are necessary to set clear goals and vision: where will you position your property within the competitive set and how will you implement a coherent commercial strategy in support? I believe that when launching a new hotel, the first phase is critical because if you e.g. set the wrong pricing, it will be really hard to adjust it in the future. Pricing is not all but it is one of the pillars and it communicates the value of your property and your positioning.

Having done several new openings, I think that a detailed business plan and market analysis will help to set the right strategy that will cover at least 3 phases: opening, ramp-up, and stabilised. These 3 phases impact the revenue management strategy and are the ones that make a new opening different to an established property that works only in the stabilised phase.”

“Do not do an opening “discount” sale. All you are saying to the market is: “Hey, we are brand new, we are open, but we are not worth the full price.”

Established hotels? You have to give someone a reason to stay with you. Just having a room and a bed is not cutting it anymore – and it hasn’t cut it for years.”

“For an existing property, clearly the strategy takes into account the historical data (whether pre or post-covid) for the processing of prices, and the competitive set generally has a lower weight if the hotel has consolidated its position on the market through years of revenue management, marketing, an excellent brand reputation, a progressive improvement of services and a mix of direct customers (frequent and new) with indirect.

In these cases, often the wisest comparison to make is with oneself, trying to always improve day after day, year after year.

For a new hotel, since there is no historical data available, the history must be built and recorded along the way. In this case, the analysis of the competitive set and the demand on the destination (visits, searches, etc.) takes on a much greater weight for the elaboration of the commercial and pricing strategy.

Even the analysis of destination reports, where available, can help to get an idea of some key parameters such as occupancy, ADR and RevPAR by type of property – but also other parameters such as the most sought-after and offered services, the average customer satisfaction etc. Clearly these are useful elements, especially at the beginning, but once the accommodation facility opens, you have to be very careful to monitor daily how the market perceives the property, if corrections are to be made not only on the pricing policy but also on the management of services, on staff, on operational processes etc., i.e., all those aspects that can affect the reputation and attractiveness of the hotel, and therefore on its visibility and demand.

Generally, in these cases, it is necessary to find at the beginning the right pricing balance that allows you not to be too low but at the same time remain competitive compared to other facilities that are already established in the destination, with a history and a brand reputation to benefit from. It is very important in these cases to manage the inventory at the beginning in a very cautious way, with few rooms available for sale, to monitor the market response and act accordingly.”

“Opening a new hotel is always a challenge, as you need to get to know your market. What kind of guests can you expect, do you have a room-only location, or do you need to sell meeting spaces/weddings/events as well?

Ensure you’ve built a strategy by a minimum of 6 months prior to your opening, and open booking channels on time. Often construction/building is delayed and the opening date gets pushed. But it’s better to open your systems already, for example, for 1 month after the scheduled opening date, so you can start building your online brand than only opening the system at the last minute and losing out on business for a longer period.

Established hotels already have an insight on actual market mix, lead time of guests, length of stay, booking channels, etc. And as a new hotel, you need to almost wait and find out. Ensure you don’t start off with rates that are too low, but also not too high, as even the first rooms you sell are setting an image of your brand. In the month after the hotel opens, you don’t want to increase your rates enormously, but you also don’t want to drop your rates heavily.

Your guests will focus on your review scores, so ensure they are strong from the beginning. Focus also on building a strong team that complements the aspired business mix. Do you have corporate locations? Ensure someone is selling your hotel with the right knowledge in advance, as it can be a challenge to sell a closed hotel. Ensure they have the proper material to give potential clients.”

“The strategy should build, contribute and add to your desired target audience. Traditionally in opening hotels, the first focus is on occupancy. When the occupancy is on market levels (or getting there) then the ADR comes into play. This way of working implies that opening hotels should always compromise on ADR.

However, in my opinion, this is the wrong strategy. Your eventual target audience should always be on the rates you want them to pay.

In an opening strategy, I would instead advise taking on some other target groups temporarily (that you can switch off after) to create base occupancy. Make sure that rates are closed like groups, flash sales, and opening deals.

Putting yourself in the market with a brand-new hotel gives you an advantage over all your competitors and that is something people want to pay for. A new brand, a new experience, a new product, a must-try… It’s up to you how you deliver the message and how bold your strategy can be!”

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