Determining property performance

A shift in perspective

What we’re experiencing right now is a shift in the industry cycle. Domestically in the US, we’re no longer so reliant on revenue per available room (RevPAR) growth as a success factor. We’ve seen this growth slow as supply catches up with demand. As an owner/operator, Stonebridge has become more focused on gross operating profit per available room (GOPPAR), and finding, and retaining, the most profitable customer mix. We’re starting to talk a lot more about customer acquisition cost, length of stay and lifetime value – taking a much more granular approach as opposed to three or four years ago when it was all about securing RevPAR growth.

What determines hotel performance also depends on which stakeholder you’re asking. We have a unique perspective at Stonebridge because we’re a developer, owner/operator and a franchisee. As the owner of a property, you need to look through a long-term lens – focusing not only on GOPPAR, but also on the extended value of the asset. It shouldn’t only be about operating margins, but also about building a product that’s going to gain real estate profit over time. Often, that return is realised more through average rate market penetration rather than through RevPAR. There’s stability in having a high average-rate asset that can operate efficiently, versus a high-occupancy asset that has narrower margins and more risk in an economic downturn.

Domestically in the US, we’re no longer so reliant on RevPAR growth as a success factor

From an operators perspective, there’s still a need to achieve the year’s budget. So the long-term goal of the asset and how we’re going to build up the value over time can actually have cognitive dissonance and be in conflict with what we need to do to achieve budget and growth over the year.

And then, to throw in a third perspective, franchise partners – the brands – earn their fees on top line. They earn a percentage of revenue for franchise fees and marketing fees, so a lot of what they do is designed inherently to drive revenue and RevPAR. So, when thinking about a property’s success, there are these varying perspectives that have to be managed and juggled simultaneously.

Focusing on channel mix

When it comes to optimising your distribution mix for high performance, I’m a big advocate of properties being available on all shelves at all times – which may be a controversial statement in this day and age. There are some consumers that have a preferred booking channel and will stick to it. It’s important to realise that if a guest is choosing to book through an online channel that’s not direct, that doesn’t mean they’re not loyal to your property. Someone may choose to book through an OTA 10 times a year but still chooses your property every time.

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I like to use the example of Amazon and Alpo dog food. My dog will only eat Alpo canned dog food, I only buy that specific product and I am loyal to it. I buy it through Amazon, however, because it ships straight to my door. I am loyal to the channel and I am loyal, separately, to the brand. I think customers can have parallel tracks of loyalty and the customer perspective is being somewhat lost. As a hotelier, you should deliver your value proposition and message to as many guests and listeners as possible. Then, if you start getting more business from one channel than another, that’s okay, you just need to price accordingly to get the value that you need out of it.

The move towards attribute-based selling

As for what will determine a property’s success in the future? Building a diverse product mix to be able to sell based on attribute is going to be crucial. I think the hotel industry has lagged behind other online sale industries in terms of the customer being able to build the unique experience or product that they want. Attribute-based selling is the future for hotels; instead of telling the guest what you offer, let them define what they want. Start with your standard products and then let the guest piece it together based on the parts of the experience they want with a value assigned to every one of those guest desires – whether they want a room with a view or an upgraded beverage package. Then, the guest can truly begin to visualise and build their experience; it becomes more than just booking a room.

Hero image: credit to M.B.M, Unsplash