Expected and Unexpected Less Demand phases
The profession of hotel and hospitality management refers to ‘low demand’ as a time when fewer people are there to book into your hotel and demand for your hotel rooms is lower than usual.
1. The expected time frame of low demand phases:
Expected low demand refers to less demand, that comes at some times and is usually fair to predict. A lot many fun orientated hotel experiences that require higher demands during holidays but lower demand during the regular week with business-orientated hotels, the opposite applies as mid-week demands are higher.
Having a beach resort in Europe, anticipating higher demand from June till August lowers the least demand risks that come from November till around March due to the weather. Beach resorts in Australia would usually expect a higher level of demand from December till the month of February which is their summer months.
As low demand is expected, demand follows the same patterns as it is quite easier to forecast and maximize revenue.
2. Unexpected demands:
“Unexpected” low demand is, by comparison, much harder to predict and occurs for a range of reasons that include economic and geo-political situations. The financial crisis in 2008 had a global impact on travel and hospitality and as individuals had less money to spend on businesses they had to contend with uncertainty.
Causes for accidental demands could be global, national, or even local. As political instability in Turkey during 2016 had a big impact on Turkish resorts as many tourists avoided visiting the country and opted to go outside the country.
The current coronavirus (COVID-19) pandemic has lead to event cancellations and closing of restaurants and bars, travel restrictions brought in by governments all around the world are resulting in lesser demands across the board.
Accidental low demand is difficult to forecast, as it needs to drop off a demand that can be impossible and can make hotel management and its efforts to optimize revenue much more difficult.
What Does a Low Demand Period Mean for Your Hotel?
Understand what low demand periods actually mean for your hotel:
Lower Occupancy Rates:
The obvious consequences of a low demand period are lesser occupancy rates. The percentage of your hotel rooms that are actually booked at any time of the season is likely to decline due to fewer people interested in visiting hotels. These result in less revenue coming in from bookings and are likely less money being generated through other services concluded under your hotels too, such as a bar or restaurant.
Strong Competition:
With tough competition, Enough people are visiting any location that a single hotel will not have enough room for them all. During the low demand periods, the same competition persists, this becomes a far bigger challenge with fewer guests to compete and rival hotels attracting guests away from yours towards theirs have a devastating impact on the financial results of your business.
Competitive Pricing:
If demand falls many within the hospitality industry will face lower-priced rooms, in order to attract the customers for themselves so if you and your rivals both adopt this strategy, you can find yourself engulfed in an on-going tough competition when the main dangers here are being beaten up on the price by a rival and lowering prices at a level that hotel stops being profitable.
12 Tips to Optimise Revenue in Low Demand Periods
When the low demand periods struck; it becomes absolutely important to optimize revenue:
1. Anticipate Through Forecasting
Forecasting is a strategy that relies on historic performance data, wider industry data, and other information to predict future levels of demand. It is a crucial tool for any hotel looking to optimize revenue during periods of low demand because it allows you to anticipate these periods in advance and plan for them.
Accurate forecasting will take into account market circumstances, bookings that have already been made, local events, performance information from rival hotels, and fluctuations in demand over previous years. With a revenue management system in place, you can even automate the forecasting process and always have up-to-date information.
Forecasting should be performed regularly, covering short-term and long-term periods. From there, you can make informed decisions about room rates, expenditure, and which demographics to target marketing efforts towards.
2. Keep a Close Eye on Your Pricing Strategy
When demand for your hotel rooms is low, the pricing strategy you adopt can be critical. Charging lower room rates could help to attract price-sensitive customers, who may then choose your hotel over a competitor, resulting in incremental revenue. However, low prices can be detrimental during certain low demand periods too.
For instance, if demand is very low, reducing the room rate may not work to attract many new customers and all it will result in is the few guests who wanted to book anyway paying a lower rate, resulting in less revenue. Moreover, if you reduce prices too much, you can damage the value perception of your hotel and its services.
3. Optimize Your Distribution Channels
During low demand periods, you must make your hotel as easy to find as possible, so you do not miss out on the customers who do want to book a room. Review your distribution mix and ensure your hotel is available on all of the relevant channels, including online travel agents (OTAs), hotel metasearch engines, and global distribution systems.
If there are gaps in your distribution mix, expand it with new, relevant channels and markets to help to compensate for lower demand. Meanwhile, you also need to think about how to convince guests to book a room in your hotel, instead of a rival. Upload great pictures, write a captivating hotel description, and make your unique selling points clear.
When it comes to working with OTAs, pay attention to any promotions they have available too. Some OTAs will allow you to pay for higher placement on their search engines, or for ad campaigns targeting key demographics.
4. Optimize Your Advertising Strategy
It is never enough to simply hope customers will find your hotel, but this is especially true in periods of low demand, which is why it is so vital that you have an advertising strategy in place. Your ads can take many forms, from Google hotel ads to social media advertising and promotional opportunities on OTA platforms.
It may also seem counter-intuitive to invest at a point when revenue is slow, but this is why you need to be tactical. The goal is to increase high-quality traffic by attracting your target demographics – those who are most likely to book in the low season. While rivals cut down their ad budgets, the strategic investment could make a huge difference.
Once your advertisements are up and running, you also need to keep a close eye on the ROI for each type of ad. If the ROI is too low, it may be because demand is too low, even with the advertisement, or that that particular advertisement type is not working. Optimize your strategy as you go and allocate your budget to the types that produce an ROI.
5. Optimize Your Marketing Strategy
Furthermore, you also need to optimize your marketing message. Be clear on why a potential guest should choose your hotel over a competitor and consider the unique selling points, whether that includes the location, style of the hotel, level of service, level of comfort, facilities, or even things to do in the local area.
You can address different target groups with a different USP or message. For instance, a business traveler may want excellent wi-fi and in-room facilities, while a leisure guest may be more interested in fine dining, spa facilities, or local tourist sites. One tip is to create different landing pages on your website for these different target groups.
6. Use your Database to Address Specific (Loyal) Guests
Another important strategy to optimize revenue in the low season is to look into the data available to you via your property management system and target specific, loyal guests who have a certain need, or who have specific characteristics. The needs and characteristics you target will depend on your hotel, its location, and the reason for low demand.
If you experience low demand in the middle of the week, for instance, you might target previous guests who are retirees, with a passion for hiking. If you struggle to fill rooms at the weekend, why not offer regular mid-week business guests a discount so they can extend their stay to cover the weekend too?
You could also reach out to guests who stayed at your hotel during the same period in the previous year or offer attractive spa deals for previous spa guests. The benefit of this is the ability to reach a key target audience, who you already have some level of a relationship with, without adding to your advertising costs.
7. Optimize Revenue With Up-Selling & Cross-Selling
When the demand for rooms is low, in order to optimize revenue, you need to maximize the amount of money you take from each guest. The best way to succeed in this task is to capitalize on any up-selling and cross-selling opportunities that come your way, and these opportunities start from the moment a guest starts to book with your hotel.
In simple terms, up-selling is the practice of encouraging a customer to spend more on their current purchase. With hotels, this could mean persuading them to pay more for a larger room, a better bed, or a room with a better view. Cross-selling, meanwhile, encourages additional purchases, which could mean tours or spa services.
The low season may make it difficult to increase the volume of bookings, but up-selling and cross-selling can help you to increase the revenue generated from existing guests, which can help to make up the shortfall.
8. Prioritize Your Hotel’s Local Proposition
As previously stated, some periods of low demand can impact upon a whole country or region, with the rest of the world becoming less likely to want to travel there. The causes may be seasonal, political, or based on other factors, but the damage can be reduced if you make your hotel not solely dependent on international travelers.
To do so, you will need to prioritize your local proposition and ensure you are offering something to people in the nearby area. For business guests, this could be excellent facilities, such as conference rooms or function rooms, while for leisure guests it might mean having an amazing restaurant, bar, gym, spa or sports facilities. Due to the COVID-19 crisis, many hotels and restaurants are closed down for a certain period but are still allowed to deliver food at home. Therefore quite a few choose to generate additional revenue by partnering up with services like Uber Eats and Deliveroo.
9. Attract More Business Guests & Meetings
While demand is low among leisure travelers, some of the shortfalls can be made up by attracting more corporate travelers and business meetings or functions. Corporate travel is a continuously growing market, and business travelers are a useful demographic to attract because they often return to the same areas multiple times.
The rise of ‘bleisure’ – where business travelers extend trips for leisure purposes – means business travelers are also becoming even more valuable. Moreover, a lot of business travel takes place regardless of factors like the weather. Loyalty programs, fast internet access, and corporate amenities can all help to attract these guests.
10. Work With Tour Operators
Tour operators often sell holiday deals and other package travel products, making it much easier for customers to make a booking, also working with tour operators provides an opportunity to optimize revenue in low demand at a personal level as these operators are able to attract specific kinds of guests.
If your hotel is located in a city; there will be tour operators out there who specialize in organizing city breaks. The key to success when working with tour operators is good forecasting and identifying the right tour operators to work with, and understanding what they can provide best for you.
Sell a package deals, including flights and accommodation with hotel rate will typically be lower than what you would usually sell for and what tour operators can provide is a high volume of guests and this can be especially beneficial at times of such pandemic when many of your rooms would otherwise stay vacant.
11. Organize Events to Boost Low Demand
During periods of low demand, some guests may still be able to be attracted to a hotel if they have a specific reason for going there. With this in mind, some hoteliers and hotel chains have successfully organized in-house events during the low season, in order to attract incremental bookings and bring in extra revenue.
Examples of this include organizing events with well-known performers, artists, or businesses. These might include stand-up comedy shows, concerts, theatrical performances, exhibitions, or club nights. In this context, the hotel room becomes a convenience for anyone attending the event, but especially those who have traveled a long way.
The big advantage of this approach is that you can advertise to and attract a target audience with a specific interest (i.e. the event). If you do not have experience in putting on events, you can also work with an event organizer.
12. Offer Packages That Fit the Needs of Your Target Group
Finally, once you have useful data explaining why you are experiencing low demand, and also have a reliable forecasting model, you can use the information available to you in order to identify a clear target group to focus your efforts on. With this target group identified, it becomes much easier to appeal to them through packages.
Package deals may consist of multiple nights stays dinners included in the room price or even the inclusion of concert or tickets to some exciting place. You could target “couples” packages that include spa treatments or the group that share a common interest, like swimming; where you can offer equipment as well.
The Corona (COVID-19) virus global pandemic is an unpredicted crisis and hotels are among the businesses experiencing these effects, as global travel restrictions are implied and the entire country is facing a major ‘lockdown’.
Low demand periods are a necessary part of running any hotel, but there are ways to offset the damage.
The referential guide took form www.revfine.com putting them one by one for precise business analysis and better understanding when needed most to refer, during this lockdown.
The quarantine can prove to be a time of activities that shall prove beneficial for a natural growth and business bounce once the lockdown is open. Make it a moment of analytical start for further endeavors to come!