For UK residents, those who were quick to make their holiday requests will get an 11-day break between Easter and 1st May by taking just three days off work. In the following article, Institute of Hospitality Business Partner and Revenue Management experts IDeaS provide advice on the best ways to optimise bookings in the lead up to the big event.
The world’s eyes will be on London come April 2011 as the first grand scale Royal Wedding in thirty years will take place. Ever since the date was set for Prince William and Kate Middleton to walk down the aisle at Westminster Abbey, hotels in the capital, room-booking sites and travel agents have been inundated with requests for rooms.
The royal wedding is seen as the kick-off for a two-year boost to UK tourism, with the Queen’s Jubilee and 2012 Olympic Games occurring soon after. It presents a unique opportunity to hotels in London and, indeed, around the country, to increase their revenue potential and improve their ongoing financial stability.
Without a proper level of planning prior to the event, however, hoteliers may find that they do not reach the full patronage potential that they had initially hoped for. The Royal Wedding will undoubtedly positively impact hotels in London, but the extent of this impact will depend on that hotel’s revenue management experience and technology. These two factors will be crucial for creating and implementing effective pricing, marketing and sales strategies leading up to the event.
For many London hoteliers there is a sense of excitement and expectation surrounding the royal wedding, but there is also an element of uncertainty around what pricing and distribution strategies will be most effective. Questions range from what optimal rate should be charged, what minimum length of stay requirements should be set, and if there will be any significant impact on other streams of revenue.
This uncertainty is compounded by a lack of historical data. In 1981, when Prince Charles married Lady Diana Spencer, there was a similar surge of national and international tourist attention on London, the practice of revenue management by hotels was in its fledgling stages and was being done on a manual basis, producing no statistical data and trends. Hotels do not have historical records of booking pace, market segmentation, RevPAR and occupancy levels from the last royal wedding to help them decide what strategies to pursue for this royal wedding. Furthermore, a variety of other factors combine to make the impact of 2011’s royal wedding markedly different from what London hoteliers experienced in 1981 – the preponderance of international air travel and internet booking sites, to name just two.
IDeaS Hospitality Consulting has drawn upon and analysed their comprehensive knowledge database of booking and occupancy trends during other major events, in order to give hoteliers an indication on how to plan strategically. Although the royal wedding is a unique occurrence, some recommendations can be extrapolated by comparison to other major events that draw in worldwide attention and increased booking demand. The major events IDeaS Hospitality Consulting analysed include the 2006 FIFA World Cup in Germany, the 2008 UEFA Championship in Austria & Germany, and Grand Prix events in Shanghai, Kuala Lumpur and Melbourne.
The results of the research highlighted what strategies worked, and what did not, and produced some comprehensive recommendations for local hoteliers to follow in order to ensure they maximise revenue throughout the wedding celebration period.
Minimum Stay Requirements – To fully capitalise on a one-day-event, hoteliers are advised to enforce a minimum length of stay requirement. This will encourage longer booking periods and have a positive impact on occupancy levels throughout the period. In addition, it is also recommended to put together extended length of stay packages, as transient leisure travellers in town for the wedding will be looking to combine the trip with other tourist activities in order to recuperate some of their flight costs. These packages should be made available during the booking process or as an ongoing marketing process to confirmed guests.
Balancing – In order to improve long-term occupancy levels hoteliers are advised to pay careful attention to finding the appropriate balance between normal base business and wedding-generated business. Research undertaken has shown there is a potential for many known customers to be hesitant about visiting a destination during a major event due to pricing and logistical concerns, and a strategy carefully planned and aimed at this segment of the market will need to be developed by the hotel manager and any relevant sales and marketing staff involved.
IDeaS Hospitality Consulting advises a balance should also be kept between group and transient bookings. Our research indicates that there is no real merit in pursuing a solely group or transient focused strategy. It is recommended to keep group contributions between 45-55% - this will ensure you have a solid base of guaranteed bookings but still have the opportunity to optimise revenue by picking-up a good share of transient booking.
In terms of generating revenue from ancillary services, hoteliers across London should not put too much focus on their food and beverage efforts on the day of the royal wedding. Food and beverage revenue has shown to come in below expectations on major event days during the event period. It is therefore important to focus both meeting and event sales and food and beverage marketing efforts on the days leading up to and after the royal wedding, as there will be a greater need to drive revenue during this period. Occupancy levels should also allow hoteliers to create attractively priced rooms plus food and beverage/meeting packages throughout the royal wedding event period.
Optimal Pricing Strategies – A careful and direct marketing strategy should be put in place to entice visitors to arrive earlier than the wedding day itself. The pricing strategies in the lead up to the day will have to be carefully managed by individual hotels.
Hotels in the capital have already started to charge their top rack rate, representing a close to 200% increase on April room rates in 2010. With VAT rising to 20% and with imposed minimum stay requirements, a hotel stay is going to be a financially daunting prospect to most visitors. With this in mind, many potential visitors will utilise online price comparison tools to evaluate and compare a wide range of hotel room prices, making it essential that hoteliers price their rooms within the dynamics of their competitive market set. Additionally, the Easter Holiday and long Bank Holiday Weekend might impact demand as many British residents will take advantage of the many promotional sales activities in Southern European Countries. Research is essential to ensure you do not overprice your hotel room, driving away demand, or under price, losing out on potential revenue gains. This can be done manually, or by using automated technology such as the IDeaS Rate Shopping tool.
Pre-payment Plans and Cancellation Policies – To minimise the impact of costly last-minute cancellations, it is recommended that hotels implement a system of phased pre-payment restrictions. For every major event there is a large amount of expected cancellations, however, if your hotel has a watertight, clear and concise cancellation policy you will be able to dramatically minimise any negative impact on revenue from last-minute cancellations. IDeaS Hospitality Consulting also suggests you make sure the hotels cancellation policies are communicated clearly to the sales and reservations teams, in order to avert any nasty discussions or legal battles.
Overbooking – Appropriate overbooking levels need to be set in order to counteract an expected rise in cancellations, and achieve 100% occupancy. IDeaS Hospitality Consulting’s research has shown that hotels, while expecting the demand to reach unprecedented levels, actually tend to only reach 95% occupancy during major events. Depending on your business mix and the number of guaranteed bookings you have, it is generally recommended to overbook your hotel by at least 5%. This should be gradually reduced as transient pace increases and groups are being washed to more accurate numbers.
Hotels form a major part of the British tourism industry and will play an important role in shaping how guests view London, rather than the royal wedding itself. This is significant when we consider that the Royal Wedding is the first in a line of major events to be held in London, and thus stands as an important benchmark which will have long-term positive or negative impact on the financial stability of the entire market.
If the above recommendations are followed, and a balance successfully achieved, hoteliers will be able to maximise their revenue potential throughout these periods of increased patronage. For more information on how your hotel can adequately prepare its revenue management systems effectively for an increase in demand, please contact IDeaS Revenue Solutions at www.ideas.com
