Round table: How can hoteliers fulfil their rate requirements?

How can hoteliers fulfil their rate requirements while tempting guests back into holiday spending? Ben McCormack reports from The Caterer's round table in partnership with IDeaS on predicting the future of revenue for 2023

Many hotels across the UK are currently experiencing exceptional demand for rooms. As we report that average daily rate (ADR) has increased by 13% in the last 12 months, The Caterer assembled a group of hotel commercial directors and heads of revenue to discuss the challenges and opportunities facing the industry in regards to pricing and revenue.

The discussion was informed by research conducted by The Caterer and IDeaS on attitudes and expectations in the UK hotel industry to business and revenue in 2023 (see previous pages), as well as discussing longer term-business plans to ensure the guest offering is attractive in an increasingly competitive market.

Top reasons for the 13% increase in ADR were attributed to energy, staffing and purchasing. The panel agreed that the turmoil generated by the pandemic makes any kind of comparison with recent years difficult. Teresa Kingston, commercial director of Rockliffe Hall, pointed out the last full ‘normal' year to compare prices to was 2019: "But there was a completely different market in 2019."

And although recent months have been exceptional for some operators, it is perhaps too early to say what 2023 holds. "The last quarter of 2022 was crazy in terms of leisure, especially in London and on the south coast," said Geza Bocsak, head of revenue for Harbour Hotels. "We could sell any room at any price. I'm not sure we're seeing that yet. Having said that, 13% is a pretty good increase."

Costs have gone up across the board, but it is not simply a case of passing them on to guests, Kingston said. "I feel like a lot of hotels are taking the hits on the increasing costs, because the demand is not necessarily there to be able to increase the rates to where you need to be."

If the leisure market is uncertain, the corporate market is booming, said Tori Ackling, group commercial manager for Legacy Hotels. "All of our corporate segments have had rate increases," she said. "Our clients have pretty much accepted that, because they understand what's going on. One of the key things for us is that we've seen really phenomenal ADR growth in markets where asylum hotels have taken over. We have a Mercure hotel in Bridgewater in Somerset where we've raised our corporate rate by £200 because the Holiday Inn Express became an asylum hotel and there's nowhere else to go."

Resolving rates

But not all customers are as accepting of having their rates increased, said Inna Nekrassova, head of revenue at the Lanesborough. "We saw great ADR growth last year – in some months, more than 13%. No one wants to let go of that really strong summer and I feel this year the gap between the lowest and the highest rate is going to be a lot wider than it was in 2022. Some top London luxury hotels have been selling rooms at £500 in January and the same room at £2,000 for July. I don't see how they can justify that to their repeat clients.

At the Lanesborough, we are definitely seeing a softer ADR this year."

The panel also agreed that despite ongoing media speculation of a recession, no one had witnessed a downturn in terms of guest numbers. "It doesn't feel like there's a recession," said Nora Kurittu, commercial director for Michels & Taylor. "Our advisory team has been pessimistic when looking at five-year projections for newer openings and applying a recession percentage, whereas the hotel management team has a more buoyant outlook."

Nekrassova added that budgets were "pushed stupidly up" in the expectation of a continuing boom in staycations. "We're still seeing such big growth. Gauging it like that, it just doesn't feel like a recession."

No one, of course, is denying the cost of living crisis. Ackling said that until she knows how much her mortgage will increase to in August, she and her family are not booking any holidays – "that can't be just me doing that", she said. This air of uncertainty is a lingering reminder of Covid. While Kingston said she has seen a return of the sort of guest who would save up to stay at Rockliffe Hall but had hung back from booking during the energy price increases of the autumn, Kurittu said guests are cutting back on extras.

"Last year our spa revenue was so amazing that I was able to create a role for a commercial manager for the spa," said Kurittu. "The spa is still growing, because we put that resource in place, and people want to have a luxury pampering experience. But they are having one treatment instead of two. It's the same in the restaurants: they'll have one meal in the hotel and go for a cheaper alternative somewhere else.

"Friday nights are really struggling whereas Saturdays are still relatively busy. I think that's where we'll see the impact of cutting back first, rather than a drop-off in the bedroom demand."

But there are some more welcome changes in post-pandemic habits, too, the panel agreed. Staycations are still a strong travel trend, while flights remain expensive. Lead time for bookings are becoming longer, though flexibility is still very much appreciated by guests when booking. The lowest rate at Rockliffe Hall, for instance, is fully pre-paid and non-refundable, giving the property money in the bank but also allowing customers the flexibility of moving their stay up to 14 days beforehand.

Psychologically, guests who feel they have already paid for their stay are more likely to spend more in the spa and restaurant, Kingston said. "We send out a trigger email 14 days before a stay and then upsell spa treatments and incremental spend in the restaurants."

Strategising revenue

All of which underlines the point that advance planning has never been more important for revenue. The survey revealed that 37% of respondents do not have a revenue management system in their hotel. Some were even sitting on the panel. "I have hotels in my portfolio with no revenue management systems," said Kurittu.

Ackling said that in four years Legacy has moved from having no hotels with an RMS to 13 out of 18 hotels; only resistance from the owners of individual properties prevents it being the entire portfolio.

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"My tip is don't ever be alarmed by a RMS," she said. "Don't think that it's going to be detrimental. It can only ever be better for your business, because you're getting insights. It's going save you a hell of a lot of time, too, because you will have a factual database to back up your theory or your instincts." There was a feeling among the panel that many revenue managers are unjustifiably suspicious of RMS. "There's still a mindset that, ‘I'm a revenue manager, I want to control my business'," Sybille Luger, IDeaS regional vice-president, said.

Ackling agreed. "I had a meeting with a prospective client with six hotels in the UK and a huge revenue team. I could see them thinking, ‘what's going to happen to our team if we put a RMS in? Surely jobs will be lost'. You could see the sheer horror in their faces that the RMS would make their role redundant, when in fact it's there to make their roles easier." When Bocsak introduced a RMS he was asked whether his team would still have a job to do, which caused the panel to burst out laughing.

"We need automated, intelligent forecasting tools for everything," Kurittu said. "If I'm asked to teach forecasting, I can't – it's just a gut feeling based on experience."

But as Luger put it succinctly: "How do you drive commercial success if you don't focus on your commerce?"

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Creating the next generation of revenue managers

"I have been trying to recruit for a revenue manager since December, but it's such a specialised role," Kingston said. "Not even recruitment agents can find me what I'm looking for." And yet for the right person, a rewarding career awaits, with excellent long-term prospects.

"I want to bring on a junior to become the next generation of revenue manager," Kingston added. "If they were still working with me in six years' time, having taught them everything I know, I would tell them to go away and get a new job so they could nurture someone themselves."

Nekrassova said she is often asked by hospitality students how they can get a job like hers. "It's a tricky question, because not all companies have a budget for a revenue manager. So how do you get that experience in the first place?"

Before experience, some skills are required. "For me, communication is the most important personal skill," Bocsak said. "Analytical skills can be learned. I hired an IT manager from within the company and sent them on a HOSPA course. He'll be mentored for six months and I also know that he won't pick up any bad habits."

Recruiting from within also has the benefit of hiring someone who already knows what it's like to work in hotels. "We've taken a punt on a lot of people from outside and they only last a few weeks because hotels just aren't for them," Ackling said. "Now I would be more willing to give a receptionist or someone from housekeeping a chance, because they know that hotel life is not nine to five."

And yet while all of the panel agreed that visibility is an issue, it can work against recruitment. Kurittu said: "I think a lot of people who are in the in the hotel business are probably a bit too scared to put their hand up and say they're interested in becoming a revenue manager. We can be guilty of making the role seem scary and hard and a bit like a secret. So we're building a bit of a barrier for recruitment."

Investment is another barrier, Kingston believes. "If you're a small brand, a management company or an independent, you either have to persuade your company to pay for your training or you have to invest in yourself. A lot of people have left hospitality since Covid. We've lost revenue managers who can pass on their knowledge."

Ultimately, hotels must communicate how important the value of the revenue manager is. "Do revenue managers have a place at the executive table?" Luger asked. "Or are they still seen as data-driven rather than those who drive strategy? The younger workforce need to be offered opportunities to learn and grow and establish themselves in the business. Hotels must ask themselves what they are doing to attract talent and make roles interesting."

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