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Hotels, Don't Outsource Your Strategic Thinking

Mike M.
Posted by Mike M. on January 29, 2020

I heard recently about a group of 30 hotels in a particular geography that had RevPAR performance from negative 7% to negative 45% this January vs. last January.  Even in the best of times there is always a big variation in performance between hotels, but this is a massive range.

It is occurring to me that in conditions such as these, it is up to hoteliers to take their destiny into their own hands.

Typically a hotelier gets most of his or her returns from the up-front asset management decisions made in particular:

1.  Location of hotel

2.  Cost per room

3.  Financing strategy

4.  Brand Affiliation

Because these decisions are up-front and drive so much of the ultimate returns, frequently there is not a lot of variation or creativity in the operational strategic plans of hotels.

In most other industries, there is a lot more focus on the classic Michael Porter type of strategic planning where the key is having a differentiated strategy so you can stand out from the crowd and avoid being a commodity.  In hotels, I find that owners overwhelmingly focus on the asset management decisions.  Many times, they largely outsource their ongoing strategic planning on how they will compete in the marketplace to their franchisor.

They may claim to have a strategy but it often sounds very similar to many other hotels around them.  The only differentiation they have comes from their franchise company.

In normal times that might be an okay way to get your fair share since most hotels can win enough business when times are good.  These are not normal times though.  The franchise companies I have worked with all seem to be well intentioned.  In this environment though, they are cutting their budgets for hotel support.  Additionally none of them have ever faced a downturn like this, and none of them is really known for its speed.

That all adds up to it being extremely important for a hotel's management to take the hotel's destiny into their own hands.  If you are expecting your franchise company to give you the answer or the tools to make it through this time, you are taking a real gamble.

The solution is Strategic Planning 101?  You need to define a unique strategy for your hotel that is probably not the same one that every other hotel in your market is following.  This could be in the markets you are targeting, in your sales or marketing, in your pricing strategy, or any of a number of other areas.  A good starting point is by focusing on the built in competitive advantages your hotel has in its location, amenities, relationship with the community, management etc.

Now is the time to stand out from the herd.  Everyone will still feel the impact of this downturn, but you need to take as much control of your own destiny as you possibly can.

Start with a fresh SWOT analysis of your hotel today.  This is hard work but you'll be better positioned vs. your competitors who spend their time complaining about the market.