While there are plenty of industry folks forecasting the imminent end of the current lodging cycle, the street-corner nature of this business means that the particular dynamics driving this cycle feel very different from one area to the next. In other words, “Just because we’ve been in one of the longest growth spans this industry has seen in a while, we shouldn’t talk ourselves into an ending that hasn’t arrived yet,” says Michael Tall, president and COO of Charlestowne Hotels, a management firm based in Charleston, S.C. “Supply and demand will play a major role over the next few years, and we’ll see things play out differently market by market.”
Charlestowne operates 34 lifestyle and independent hotels as well as seven branded ones in 12 states across three time zones, and the firm tends to focus on matching the best systems and processes with each individual property.
Over the past five years, Tall says the lodging industry has gotten comfortable with pricing for what the actual product is worth instead of some illusive sale price. “Historically, when new supply would come in, the other hotels in that market would lower their rates to try to steal or just solidify their business,” he says. “Now, managers and ownership groups have established the position they should hold in a market and are sticking to it.” Gone are the days of the fire sales. Now hotels tend to focus more on value-adds like upgraded room types. “While there are plenty of opportunities to drive occupancy, the trick is to do it while still capturing a hotel’s fair share of revenue from the market.”
In an industry that’s increasingly data-obsessed, revenue management will continue to become even more vital post-peak in this cycle, as operators are required to be much more strategic in their distribution and room rate decisions. “We have so much more data and analytical information at our fingertips now,” Tall says. “We have models that can see the changes in a booking pattern and how it impacts rate pick up seven days on and that sort of thing.” With tools like these, revenue strategists can now focus on creating pricing strategies and campaigns for every channel guests use to book their rooms and draw upon a lot more data to support their decisions.
“If the next five years are anything like the previous five, we should see a convergence of technologies that should enable even more sophisticated decision-making by operators,” Tall says. “Currently, when someone books a hotel room and you only have two left, the system will automatically raise the room rate because you’re almost booked up. Imagine if the software knew that 75 people who visited your website in the last 24 hours had searched for a particular date and could automatically adjust the rate accordingly.”
He’s quick to add that there has to be a human component at all levels of revenue management decision-making, but he’s eager to see systems capable of measuring the unconstrained demand for room nights instead of relying on actual bookings, which is how most revenue management tools do it now.
“Our booking pace for the rest of the year remains strong,” Tall says. “For us, the growth will continue to be in rate for almost all of our properties.” By effectively using data to maintain a smart and efficient pricing and distribution strategy, he sees his firm being able to weather whatever the near future holds.
