How to Turn Around a Distressed Hotel Asset in 6 Months.
We have encountered this challenge numerous times, and it often boils down to the same underlying issue. Surprisingly, independent hotels frequently lack the necessary insight into the inner workings of the travel industry. Moreover, there is a general dearth of understanding within the business as a whole. Consequently, hotel assets end up distressed and require immediate intervention to turn the situation around. Numerous properties are constructed without adequate planning and managed by individuals who lack the necessary qualifications. Unfortunately, many hotel businesses struggle with insufficiently skilled staff and management who fail to grasp the intricacies of their roles. hey struggle to establish a clear connection between their work and the financial outcomes of the hotel.
One of my very good friend with a 5 star hotel chain was assigned to take on a distressed property offers were being extended to distributors with discounts, rebates and override commissions that were in reality not contributing to the bottom line. Actually they were costing money. Yes they were selling rooms, but the hotel essentially had to chip in money to make the guest stay feasible.
How come a sales manager is capable of negotiating deals that end up costing money?
To me it is amazing the shortage of understanding many people in the hotel have on what their real contribution and impact is on the bottom line of their hotel.
I have just used an example of a sales manager, but unfortunately they are not the only ones in our industry unfortunately. Many General Managers and Front Office Managers as well lack a deep enough insight in how to really manage a hotel operation and business.
I am sure I am making a lot of friends with this generalization, but sadly I am speaking from real experiences.
Ok enough with the drama, and let’s get to the solution. What does a hotel turn-around strategy look like? How can I make a hotel’s revenues go up in just a few months time?
Here our check-list for Hotel Turn Around Management:
Speed to Market
A distressed hotel probably got to its current situation through a slow process of decline. Over time business and profitability eroded. To get out of the slump you need to get momentum back on your side.
Takeover management is done with speed to reenergize the organization and the employees. You need to get the team huddled up. With motivation levels up again you will be able to get a long way.
So look for some quick wins to show them your approach has a positive impact, and you will get people on your side for the long battle ahead of you.
Wake and Shake Them Up
Yes of course the downturn happened with the team you are now managing. But is it their fault? No, of course not; they were probably not shown correctly, trained or properly managed.
Motivate them by leading by example. Get your hands dirty and fix the problems. Show that you can do the job, and love doing it. Treat them with respect, and soon you will see the spark lighting back up in their eyes.
And don’t forget you can learn from them as well. They know the ins and outs of their hotel and market place. Show you care about what they know, and soon the will know you care. Little things matter, call them by their name!
From the beginning you have to set the expectations clearly. Let the sales, marketing and reservations team now what will be coming and what you expect from them. They probably have been neglected and left to their own resolve. If explained in a constructive manner they will welcome the new support and guidance you can provide them.
And remember a successful hotel is all about having satisfied and happy guests, and to have happy guest, you need happy staff. It’s a people’s industry. People are the foundation of success. So it might not be a bad idea to reenergize and train the staff in guest service and standards.
Simplify It All
When we take over hotels I generally find that rate structures, marketing and distribution strategies are over complex. And as a result they become time consuming to manage. At one point you don’t even know anymore where and at what price you are selling your hotel rooms.
I have seen many hotels having absolutely having no control over their rates and inventory, just because they jumped on every promotion distributors proposed. Just imagine, an early bird discount of 10%, combined with a stay 4 pay 3 nights offer, and free breakfast for weekdays from 2 nights, and a 5% override commission. Do the math and we are talking about a 43% discount. Now subtract 15% commission from this and we only have 49% left of the price we set out to sell.
Yes ladies and gentlemen hoteliers, please keep it simple. It makes it easier to manage, control and saves a hell of a lot of time.
Focus on your needs and build your strategy around that. Do not simply react to every request for an offer that gets send to you. Before you know it you will lose track.
Moreover, consumers need to understand your pricing. They should not need a PhD in hotel reservations and pricing strategies to book your hotel. Simplicity helps increase conversion …
Presence, Reach & Exposure
You need to be visible to your potential guests. They search multiple websites to find a hotel where they would like to stay. So you have to make sure you can be found. And just being on websites is not merely enough. You need to make sure your online profile is much more attractive than your competition with many images, video’s, great customer feedback and good review scores.
Put your profile next to your competitors and objectively judge if your look better or not. Compare yourself to some of the best hotels out there in the online game, and try to match what they are doing to promote their hotel.
Cash is King
A distressed hotel basically needs money. So it’s important to get the cash flow jumpstarted quickly. Non-essential cost should be scrapped immediately of course to assist in a quick transition towards a healthy cash surplus. But cost control is not the only method. If the hotel is faulting occupancy, you might think about launching flash sales campaigns to get more people coming through the doors.
It is key the cash-flow becomes positive within a short time frame when taking over a distressed hotel. Otherwise the turnaround might prove to be difficult.
Putting Theory into Practice
I can hear you thinking. Fantastic theories, but do they even know how to do this for real. Yep, we do. Do it on a daily basis. Let’s call me and meet over a cup of coffee and I will share share my success story of how we helped hotels in generating demands during no demand situation and made them achieve life tume high revenues in just six months of our working.
How did we do it ? here it goes …
Here a summary of the actions we took:
- Removed the underperforming chain flag. Resulting in immediate cost savings.
- Non essential operational cost eliminated.
- Repositioned the hotel as a quality 4 star hotel with a clear independent character.
- Launched a new website to emphasize the Unique Selling Points of the hotel.
- Improved online and offline public profiles of the hotel (better images and descriptions).
- Implemented dynamic pricing strategy to allow for proper yielding based on daily demand fluctuations and occupancy status.
- Developed a surrounding pricing strategy and price discrimination tactics (i.e. Non-refundable offer) to reach more price demand levels.
- Re-segmented hotel room typology with clear product differentiation in order to improve conversion and allow for up-selling.
- Expanded online presence, reach and exposure through expansion of distribution partnerships.
- Increased brand visibility through strategic SEO and SEM.
- Involved offline travel distributors provoking them to prebuy which helped in increasing cash flow.
- Market penetration through targeted flash campaigns during distressed periods.
- Targeting niche consumer travel markets through packages with dedicated website landing pages.
- Improvement of online reputation ranking by actively requesting guest feedback on review platforms like TripAdvisor and Google+
And did it work? Like a miracle!
By Piyush Bhatnagar II Director-Strategic Alliance II 3Q Progressive Alliance