This year has been one of solid growth in occupancy and average rate gains for San Diego hotels. As general managers, controllers and directors of sales finalize their 2007 budgets and marketing plans, it is critical to review all key "impactors" of top-line revenues. In San Diego, group business at the San Diego Convention Center is certainly paramount to the success of the lodging industry, especially downtown. Leisure demand is particularly important to coastal San Diego properties, and corporate demand is what makes or breaks properties in the Golden Triangle of La Jolla/UTC/Sorrento Valley/Del Mar, Carmel Valley and Carlsbad/Oceanside as well as the Interstate 15 corridor.
Corporate travel buyers are still actively pursuing last-room availability (LRA) in negotiations with hoteliers, even though they are prepared to face higher premiums or limited availability in high-demand markets.
"If travel managers insist on maintaining a last-room availability status, they're going to be asking for those hotel rates at a premium," Priscilla Campbell, American Express' practice leader for hotels and advisory services, said in a conference call accompanying the American Stock Exchange's 2007 industry forecast in October. "Travel managers can expect that those rates are actually going to be costing them more this year than in past years -- and that is if they can secure them."
At our Homewood Suites by Hilton property in San Diego, we are certainly taking a hard look at how many clients we can accommodate with LRA and we will not be offering it to lower volume accounts.
On the leisure side of the equation, online marketing strategies will be required to optimize revenues going forward. Chains and independents alike are utilizing this "techno-marketing" approach, and new opportunities are emerging quickly. Traditional online strategies include utilizing third-party companies such as Expedia, Travelocity, Orbitz and Hotels.com; however there are many more areas to consider today. First, it is critical to have a Web site that has a search engine-friendly technical site structure, rich original content, appealing design and conversion techniques focused on converting lookers to bookers. Beyond that, the real key to a successful Web site involves the inbound links to your Web site, according to Keith Paulin of Hospitality E-Business Strategies. Paulin states a search engine sees a link to your Web site as though it is a vote of confidence -- hence, your site is rated higher. Naturally, we would all like our sites to be rated high when a search engine is looking for a hotel property.
Blogging has not quite hit full-stride in the hospitality sector, yet there are now numerous travel-related blogs. These include Tripadvisor.com and others that allow guests to post comments about the property. Each day seems to bring more avenues to reach the traveling public. Naturally, there is still a need to have basic Web marketing techniques (clear and compelling content, high search-engine rankings, etc.)
For blogging, visit www.technorati.com; beyond blogging, check out www.youtube.com. Perhaps developing a podcast (coined from iPod and broadcast) makes sense. Podcasts may sit on a Web site or be delivered to subscribers through syndication feeds such as RSS or Atom. While "pay-per-click" has detractors, it also is a viable way to get "lookers" to your site. The trick, however, is converting "lookers" into "bookers." These techno-marketing approaches can lead to improved revenues for each property that employs them. A combination of strong revenue growth in 2007, coupled with strong expense control, will lead to a favorable bottom line.
Operating profits (before capital reserve, rent, interest, income taxes, depreciation and amortization) are typically budgeted to grow during periods of economic strength. According to PKF Hospitality Research, almost all industry participants are forecasting continued growth in revenues and profits in 2007. However, "the paces of performance gains will most likely slow down as we approach the peak of the current upward business cycle," according to Robert Mandelbaum, director of PKF Hospitality Research.
What areas are of concern in terms of costs? Each franchise company has added "amenities" that franchisees now require. As an example, "bed wars" have really heated up. Add to that the bathroom amenities, free breakfast and free high-speed Internet, and we are giving away items that cost significant dollars. Moreover, the phone system no longer produces revenues. So the gains come from average rate growth. Resorts may add "resort fees" but guests do not particularly care for that type of "add-on." Material costs are also up markedly during the past years, as are insurance costs. So the mantra is: "Raise those rates high enough to compensate for the costs that are surely going to rise."
Rauch is the director of the Center for Hospitality and Tourism Research at San Diego State University and sits on the boards of the San Diego Hotel and Motel Association, the San Diego Convention and Visitors Bureau and the San Diego North Convention and Visitors Bureau. He can be reached at email@example.com. Comments may be published as Letters to the Editor.