Summer 2016 appears to be one for the books. Hotel experts are predicting that room demand, which has been increasing steadily, will jump by 2.1% from that in summer 2015. With both business and personal travel on the rise, this seems to represent a tremendous opportunity in the hotel industry. Still, the bottom line effect may be somewhat less than the exploding number would indicate. Understanding how best to capitalize on your property requires a more nuanced look at the numbers.
The news on room demand is encouraging. Summer tends to represent peak occupancy time for many properties, with family vacations and warm weather providing incentives for people to head out of town. Still, the supply of rooms is almost meeting demand; the hotel experts’ news on raw occupancy is balanced by a room supply increase of 1.7%, so the occupancy rate for properties is only increasing by 0.4%.
This combination of news suggests hotel owners are expanding operations efficiently. Demand increases are outpacing supply increases slightly, so as long as expansion occurs with economics in mind, owners may be, on average, building purposefully and effectively to generate improved revenues.
Room Rates Increasing Moderately
Because the supply is rising almost as fast as the demand, average room rates have not exploded as much as hotel experts initially expected. Still, estimates of revenue per available room sit at 4.4% from last summer to this summer. Hotel owners who have eschewed expansion to maximize current room potential may find their revenue per room building much higher, so long as their available space left room to accommodate this growth.
Of course, the overall statistics also leave out the inevitable variation that will occur among properties in terms of quality and value. Your hotel still must work to attract its share of the available growth. Investments in both quality improvement and marketing can help make your hotel build revenue for the season ahead.
Navigating the Summer Madness
In an era of unprecedented hotel occupancy, hotel owners usually need to find a balance between capitalizing on the present and preparing for the future. The economics of the industry still point toward seasonal variations in occupancy, and toward annual movement in the numbers that will eventually decrease. Your property investments should thus come from careful study and a sense of your overall goals for the property.
Working with hotel experts can help you navigate the boom periods as well as the slower times that may come later. If you think of your hotel as an investment that you hope to eventually sell, maximizing short-term revenue — while also enhancing your stability for the long term — can help you drive toward a peak price. Your spending in this case should often be focused on the greatest overall profitability for your balance sheets now.
On the other hand, if you are working toward long-term profitability, an approach that capitalizes on revenue now to improve the property over a longer period may make more sense. Hotel experts can help you focus your spending and your planning to move toward your set of goals for your property. Taking the time to analyze and develop your plans now can do a great deal to carry you toward the future you envision for your hotel properties.