22nd June 2020 By Contributor
Hotel revenue management consultant Joe Ellingham from Revenue Team on the opportunity available to operators in a region-led recovery.
Joe Ellingham
In any crisis, opportunities can exist. The Covid-19 pandemic has certainly impacted everyone the world over, however, travel, tourism, and hospitality have been some of the worst affected sectors. These new challenges present us with opportunities to rethink how we run our businesses and set our pricing strategies.
With the complete change in circumstances, prior year data is difficult to rely upon, but it should not be ignored. In the past two years, the winter months of June through September have seen more kiwis leave the country for a holiday abroad than international visitors arriving for the same reason.
Source: Stats NZ
The need to pivot to domestic tourists is widely understood. As it is currently the only option there should be a focus placed on the opportunity that this surplus of travellers stuck here in New Zealand can provide.
In New Zealand, a region-led recovery is already evident. Paymark’s national consumer spending data shows that for the week ending Sunday 14 June, consumer spending is now in positive territory, up 1% year-on-year, reversing declines of up to -56% in April.
The Paymark data also shows a redistribution of spend towards regions located within driving distance of the major centres. The hugely popular Tourism Holdings $29 per day campervan campaign certainly indicates that the intent to holiday is strong for drivable locations. It also confirmed that Kiwis love a bargain.
In the last four weeks across the regions, Northland leads the way in turnaround, up 9.6%; followed by Manawatu-Wanganui, up 7.8%; and Bay of Plenty, Gisborne and West Coast all up 6.5%.
Regions currently down year-on-year, although slowly improving, are Otago, down 5.5%; Auckland, down 3.6%; and Wellington, down 2.9%.
What does this mean, and what can you do?
In a previous role I had with Marriott as market director of revenue management in Fiji, winter months are peak demand and Kiwi travellers would spend upwards of NZ$450 a night at 5-star hotels. This was on their rooms alone, before opening their wallets to pay for food, beverage and activities. This year, those same travellers are stuck here in New Zealand.
Admittedly, there will be a negative impact on consumer discretionary spending due to job losses, as will be the willingness to substitute overseas holiday for a similar length one in New Zealand. That said, Paymark consumer spending does point to a recovery with some non-traditional winter destinations faring better than more traditional markets.
As the July school holidays approach, it is important to keep a close eye out for demand that may be coming your way.
Forward demand can be monitored in a number of ways. A common approach is using competitor rate shop tools. Some have free trial periods, so try before you buy. For predominantly fly-to destinations, forward demand can be tracked using platforms that track flight bookings and load factors.
If you have already filled to 100% of your capacity, the opportunity to capitalize on school holiday demand has been lost for new bookings. If this is the case an incentivized upsell or cross-sell program can be an effective way to add incremental revenue and improve the guest’s experience.
For those with remaining inventory consider the following tactics over the busy travel periods:
With all these points in mind you should progress in building greater profit and more successful post lockdown results.
