Interactive online specials, special events, amazing and genuine customer service, leadership required to weather the storm.

Naked bootleg is a term used in football whereby the quarterback runs counter to his blockers and tries to create a run or pass opportunity with no help from his blockers. Well, we are operating our hotels naked but not by choice. We have no “wind at our backs” from a strong economy and no “compression” from other areas such as conventions or events. No, we must build our hotel businesses from scratch during these times.

Management today must include creative leadership that stresses the urgency to work as a team and find ways to entice corporate travelers and groups to our hotels. Gone are the days when we just responded to leads from our brands and convention bureaus. Also gone are the days when we posted our “vacancy” signs outside the hotel and guests would just check in…yes, I was around in the 1970s when that is all that was necessary to fill a limited service or mid-market hotel.

Today, we need to be developing revenue sources in a whole new ballgame. Consumers are vigilant at finding the absolute best value out there. They shop multiple web sites and rely on social media to get input from friends or those who think alike. That means that we as operators must know what key words to use to get potential guests to find our own web sites and we must proactively utilize social media to market our products. This medium includes but is certainly not limited to Trip Advisor, Twitter, Facebook and Linked-In.
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During periods of economic recession, there is typically a shifting of market share from traditional channels to discount channels. In 2008, brand sites had 73 percent share of the market. According to TravelClick, it is 70 percent in 2009. Another sign that we are in the economic doldrums is when corporate bookings disappear and the consumer leads the market. Weekends are up in 23 of the top 25 markets according to Smith Travel Research (STR) – considering that each of those top 25 markets is down in revenues year over year, corporate bookings have got to be lagging badly.

RRC Associates states that leisure trips are not impacted like corporate bookings. While that is heartening, those of us who are full with leisure travelers know that they are not paying for rooms without negotiating aggressively for the very best deal they can get. To date this year, REVPAR (revenue per available room) is down 21 percent in those top 25 U.S. markets. In San Diego, it is down 25 percent according to STR. The RRC Associates study indicated 32 percent feel that the business travel recovery will be in 2011, ahead of 19 percent who say it will be in Q3 of 2010, 19% Q4 2010, 13% 2012, 17% beyond 2012 and there is a major shift or “trading down” of accommodations from luxury to upscale and upscale to mid-scale.

Big negative changes in average daily rate have fueled big drops in net operating income. This has already had a massive impact on the ability or lack thereof to refinance. One of the following scenarios will actualize in 2010:
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“We must live with the consequences of our rate strategies for a long time because when the market turns, and it will, those who sold value will win... Gaining market share and differentiating yourself from your peers is paramount to winning in the long run.”

By Robert A. Rauch, CHA

Economic uncertainty, slowing travel demand, shorter length of stays, shorter booking window, increased distribution channels, shift in buying behavior, low average rates, new supply; take a deep breath…it’s not so bad. That’s right. We have hit bottom.  And while we may stay at the bottom for awhile, it will not get worse. The housing market is showing signs that it may have hit bottom and the Dow Jones Industrial average is back up to October, 2008 levels. The biggest challenge that we need to overcome is that revenues, profits and values have been “reset.”

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The Daily Transcript
Friday, March 20, 2009

By THOR KAMBAN BIBERMAN

Hotel construction in San Diego is “zero” for the next three years, said Robert Rauch, hotel consultant, developer and owner.

He doesn’t expect any full-service hotels more than 200 rooms that aren’t already under way, if there are, to even start construction in the county prior to 2012. “I’m talking zero,” Rauch said.

Not only is there no financing, Rauch said he couldn’t think of a hotel currently under construction in San Diego County.

Rauch, who owns a Hilton Garden Inn and a Homewood Suites in the Sorrento Mesa area, has been a hotel consultant for decades.

The newly completed 1,200-room Hilton next to the Convention Center is the most recent major addition, but nothing of that magnitude is planned until hotels at Lane Field and Pacific Gateway as part of the Broadway Complex come out of the ground in the North Embarcadero area.
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“2009 is expected to be a buyer’s market now that the softening economy has created far more price sensitive travelers.”

Despite a fairly strong first half of the year which included economic growth of 3.5% in the second quarter, the third quarter of 2008 “was less robust,” according to Business Week. Weak consumer confidence, a rising unemployment rate and inflationary pressures punctuated by a major rise in the price of fuel cut into demand for U.S. hotel rooms in the third quarter of 2008. Income growth from wages has slowed as businesses feel the pressure from the weak economy.

According to PKF Hospitality Research, hotel room supply in the U.S. rose 2.5% in 2008 and will climb 2.7% in 2009. While economic uncertainty, slowing travel demand, shorter length of stays and a shorter booking window make the job of a hotelier more difficult, this is not doom and gloom.

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