Simple Math for Hotels...I Think...

Let’s do some simple math comparing a weekend of potential Food, Beverage and Entertainment revenues at a hotel with “desirable” restaurant, lounge and spa properties --- VERSUS the number of rooms needed to be filled to acquire the same amount of money.

Admittedly these are under-estimated dollars, and represent gross revenues only, but you never know these days. A little swine flu, rain or a Cubs game might slow things down a bit…

Hotel Restaurant on a Friday:
250 covers X $30 check average = $7,500
Repeat on Saturday = $15,000 for the weekend

Hotel Bar/Lounge/Rooftop on a Friday:
250 covers X $30 check average = $7,500
Repeat on Saturday = $15,000 for the weekend

Hotel Spa on a Friday AND Saturday:
100 covers X $50, 30 minute massage (only) = $5,000

Subtotal for FBE gross revenues from one weekend only: $35,000

If the rest of the week in total only generates half of the projected weekend revenues: $17,500

Annualized: About $2.5 million (again --- likely under-estimated…)

COMPARE TO:

Average downtown Chicago weekend rate for 5/15/2009-5/17/2009: $300 (presuming this is AFTER fees due to marketing sites like Hotels.com, Expedia, Orbitz, etc.)

Hotels would have to sell about 175 rooms per week to equal the same $52,500 - revenues from some customers that (inevitably) won’t be back anytime soon to spend that same money again.

Maybe 175 rooms per week are easy to fill these days. Maybe they’re not.

Maybe getting $300 per room is realistic in a recession. Maybe it’s not.

Maybe the economy will magically turn around and, in celebration; thousands of consumers will all book leisure travel and reschedule previously cancelled meetings and conventions. Maybe not…

Bottom line: choosing not to market and position dining, bar and leisure/lifestyle offerings as effectively as possible to locals --- who are spending money on these offerings in the same market every single day --- is simply walking away from revenues and publicity essential to growth and prosperity, and revenues that are equally viable in various economic settings.

At least by my math…

Marc-Portugal

"Stay-Cations" for Businesses

Hospitality Net published an article by David M. Brudney of ISHC citing staggering statistics in regards to the cancellations of hotel-based meetings and loss of associated RFB revenues. He also reminds us of the ensuing, "big picture" decline of overall lodging occupancy and revenues.

While I agree with the basic premise of the "solution" Brudney suggests - "don't give up trying to book corporate meetings" - I do not agree that conventional strategies and tactics (no pun intended) will result in the desired outcome.

Talking points (cited in the article) such as "meetings and events drive business growth" and even "revenues generated...help establish travel as part of the (economic) recovery" do not compellingly outweigh contrasting RISKS such as the negative PR and potential government scrutiny that may result if businesses spend money on travel that may not be crucial to their survival.

So what's the middle ground? How can businesses continue with off-site meetings and events and how can hotels and meeting planners profitably accommodate them (pun intended) in spite of reduced business travel?

Solution: The Business "Stay-Cation."

Most major markets (let's say the top 50 in the US) have hotel and resort properties with perfectly capable meeting, event, dining, lifestyle, entertainment, etc. facilities within their own locales, or at "worst" within a 1-3 hour driving distance.

Further, there are wonderful meeting and event planners within businesses' own markets or regions who can prosper from "local" contracts to help produce hotel-based meetings and events.

If I were hotels, I would show some "local love" --- and start contacting prospects based within 150-200 miles of their properties.

What are the some of the initial selling points of this strategy?

• No cost of air travel (sorry airlines)
• Significantly smaller carbon footprint than air travel (and even smaller with carpooling)
• Donation of % of meeting/event revenues to local preferred charit(ies) of businesses
• Room deals
• Amenity deals (use of fitness, spa, golf, etc. offerings)
• Preferred access, seating, etc. to on-property restaurant/bar/lounge offerings
• Preferred access, seating, etc. to local, off-property restaurant/bar/lounge offerings
• Gifts from the hotel itself - certificates, products, etc.

Furthermore, and as I've asserted on many occasions, the presence, consistency and relevance of ongoing "experiential" offerings by hotels will help INCREASE REVENUES before, during and after said local meetings. Hotels may not be able to bounce "locals" back to stay in the rooms, but they can bounce locals back for dinner, drinks, a haircut, massage, work out, etc.

Brudney says hotel executive, management and sales leadership cannot choose to "sit it out" and wait for the market to turn. Agreed. I also agree that traveling is fun and I imagine many businesses would prefer off-site meetings in a more exotic location than their own community.

Having said that, the world is what it is - at least for now. Recession. Swine Flu. Etc. It's time to embrace change. A better game plan is needed - one that better positions hotels and meeting planners for long-term "victory." That plan may just be based under their own roofs and in their own backyards.

Marc-Portugal

More ideas:
Contact
ISHC

Solution for Luxury Hotels

Attention Hospitality Executives:

When you have a free moment, take a gander at this article posted today on CNN.com:

http://www.cnn.com/2009/TRAVEL/04/24/luxury.hotels.bad.economy/index.html

In short, it accounts the overwhelming financial challenges facing luxury hotels. It’s not good. Here's an excerpt:


From December to February, occupancy in luxury hotels, a category that includes names such as the Four Seasons Hotels and Resorts and Ritz-Carlton Hotel Co. sunk more than 15 percent...the revenue generated from the available luxury rooms fell 23 percent in that same three-month period...there are 551,610 rooms opening this year amid sluggish consumer demand...


Meanwhile, there are over 1100 sales jobs open in the US (according to today's posting count on Hcareers.com) - the majority of whose expectations are to fill the aforementioned 550,000+ rooms. Hmmm...

Perhaps instead of trying to figure our how to fill rooms, luxury hotels should consider revenue-generating programs for consumers in their own markets. Specifically, luxury hotels must look to their restaurants, bars, salons, spas, workout facilities, WiFi offerings, smaller meeting spaces, video conferencing technology, and local charities - and program live experiences (events and promotions) that utilize these resources to make money for the property - and essentially work their way back to selling rooms.

The outcome of these efforts will simultaneously maintain if not enhance the “buzz” of the properties – which sales managers, management, culinary and service personnel can all use as a resource in their efforts to secure more traffic and revenues within their own networks.

Without intending to come off as self-serving (I mean it), there are several entries on my other blog (http://marcportugal-expmarketing.typepad.com/) that address solutions to this very challenge in more detail. Please feel free to contact me at marcportugal@yahoo.com with any follow-up questions.

There is a solution, and one that can start sooner than later.

Marc-Portugal