Mid-Month update January 2012
Beat January Blues with Rate Purity?
Comment
The first two weeks of any New Year is tough for the hotel and tourism industry but I get the impression that in 2012 it is a mix of outcomes following the festive holidays. As an example, two of our North Yorkshire Moors-based hotel clients report increased bookings over last year because they went for a whole week with NO customers at all in 2010/11 due to being cut off by snow. So this year looks far rosier for them. Another hotelier was bemoaning last week that week two of the New Year was the worst he had ever had with no obvious reason and cash flow now a major issue. There is clearly an effect due to weather but if there is any other barometer that can put the industry into perspective, it is perhaps the cash flow situation of these businesses. Despite the upturn in business in the first two mentioned above, all three cite cash flow as a problem. All see increases in their costs as the main problem area. Utilities, rates, and especially commissions to third-parties as the main three culprits. Whilst re-negotiating rates and utilities may be possible to save costs, it is perhaps the market that is driving the latter. Large booking engine sites offer customers a wide range of prices and security of booking at high commission levels; Groupon type sites create demand for heavily discounted rates at even higher commission costs to the venue or hotel, plus, customers are savvy enough to know that they can get a deal rather than pay the full price (whatever that is!). Long gone are the days of 'rack rate' and now, rate parity needs to give way to 'rate purity' where independent venues offer value offers direct to their customers that are net of the discounts and commissions paid to third party sites. Direct booking customers may be rare but if you can find them and keep them, they are surely purer, more valuable and more loyal than the infidelity of the discount surfing customer. Improving cash flow with direct business and less commission is also more satisfying and 'bank manager pleasing' because it is in your own hands....
