Managing Hotels in the Downturn - Essay Example

Managing Hotels in the Downturn: Smart Revenue Growth through Pricing Optimizations This article reflects the economic hard time that has hit the hostel industry due to global recession. This economic crisis is described as the worst crisis, to hit hotel industry. Nonetheless, it states hotels vary in levels of operation; thus, some hotels are in positions of boosting their revenue within the industry as per their available number of rooms. The hotels that can boost the revenue are expected to provide better pricing as they aim at optimization of some of the untapped opportunities, as well as maximizing bundling and customer loyalty schemes. Additionally, this article reports some outlines in the customer-oriented pricing approaches. The report also indicates some recent years’ complex shifts in the market revenue as well as the development of management schemes within non-manageable revenue. According to the article, the hotel industry experienced a sharp slowdown due to the worldwide economic hardship, financial crisis, and reduction in the consumer confidence. The economic recession experienced by almost all sectors of the economy has been described as an economic phase. The economic phase is interpreted by low rates of occupancy within corporate and leisure departments in the hotel industry. The negative impacts of this phase are expected to continue due to high elasticity of business travel and tourism spending as well as a reduction in the airline carriers (Butscher et al 404). The article also cites the investment drought to be another challenge facing the hotel industry. The economic recession has led to a drop in stocks of the hospitality industry with a greater impact; this is compared to drop in stocks in any other sector of the economy. Subsequently, the private sector attractiveness has been plummeted due to reduction in capital and the unavailability fund for new projects and renovation. Hotels are prompted to have lately carried out renovation and other new projects in the year 2008 (Butscher et al 407). Notably, it may take some time before the hotel industry regains its booking levels compared to the levels noted in the year 2008. The same long span is expected for the funding of the industry for renovation and expansion (Butscher et al 407). Therefore, the future (as per the time the article was being written) profits to be made by the hotel industries depend on the time the recession and downturn will last. According to the authors of the article, the profitability of the hotel industry can only be weighed on cost and prices offered by the market economy. It is worth noting that prices offered by different hotels vary because of either the hotels’ different infrastructures or difference in ownership. The article exemplifies that these prices are expected to have a wider or larger variation if a third party owns infrastructures. Some hotels offer high prices due to the quality of services they offer. The management in some hotels usually carries out infrastructure refurbishment within seven to ten years as a way of maintaining consistent levels of quality across the network (Butscher et al 408). The levels of economic recession are predicted to worsen if corrective actions are not taken within the hospitality sector. Some of the corrective measures that have been forwarded by this article include retaining some fixed costs. That is, maintaining the salaries of the employees and selling unprofitable assets within the sector. Such sales should lead the hotel to large-scale audits. The authors of the article are profoundly concerned with the time at hand for the hotels to execute the proposed plans. However, the time is limited the managements of the hotels should incorporate these plans as part of their strategies of eradicating the present economic crisis (Butscher et al 407). Time is regarded as a factor in pricing since it affects the rate at which stocks are exchanged with the stock market. Straightforward rates are expected to decrease the board due to the risk associated with the reversible effects on the value of the upscale hotels. It may be exceedingly difficult to recover the initial better positions or prices once better economic times are achieved within the global economy. Therefore, depreciation in rates must be targeted by all the hotels and differentiated as close as possible. Once the hotels have understood the change in rates, they can now manage their booking system effectively. The understanding of rates may facilitate early determination or expectation-booking trends, through this; timely promotions may be initiated to evade last minute promotions if expectations are not met. Finally, rate determination enables the management to work out room prices and prices of other services thus evading price war (Butscher et al 406). Just like different hotels offer different prices, so are the variation in rates among the hotels. Despite the fixed rates that may be projected by hotels, they never strictly follow their listed rates. Rates change due to the availability of customers’ demand. The high season demands calls for adherence to the rates while, at some point within the hospitality seasons, rates are expected to change or vary. Otherwise, if the hotel management sticks on its rates it may completely run at a loss. It is through flexibility of rates that hotels offer competition (Butscher et al 406). Despite, the flexibility in prices and rate, a clear pricing is very important especially for the travelling corporate and travelling customers. Therefore, according to the article, even those hotels whose managements use engineered ways of optimizing their rates should have a clear pricing; thus, such managers should stipulate clear and customer oriented pricing strategies that provide boundaries and rules for optimization within their revenue management model. Pricing regulation remains an important training factor within the commercial hotel management, but the most important thing is to monitor and develop systems and functions that ensure identification of brand pricing is correctly applied to ascertain promising price delivery (Butscher et al 408). In addition, the pricing system within the hotel management may make the customers remain loyal to the hotel. In the article, variation of price is a sure way of determining the loyalty of the customers. The loyalty programs can be used to test the efficiency of customer especially with hotels offering high prices in the market. Records show that the loyalty programs, tests weakness within the hotel industry than in the airline industry. However, the hotel industry can improve its customer loyalty by using gifts or incentive (Butscher et al 409). Conclusion The hotel managers, who want to experience relief during this downturn, should consider redefining their short term pricing towards improving the hotel rates of both goods and services. They should as well aim at adopting loyalty by incorporating proper loyalty programs within their disposal. All these actions will ease them from the already heavy burden of current economic crisis; thus, keeping their profit margin as well as attracting more customers in this economic hard time. Therefore, managers who are seeking relieve in hotel management during this economic recession should read this article. Works Cited Butscher S. A, Vidal D, & Dimier C. "Managing hotels in the downturn: smart revenue growth through pricing optimizations." Managing hotels in the downturn: smart revenue growth through pricing optimizations (6th February 2009): 405-409. Print Read More