1. The Numbers Don’t Lie? Once again we are faced with an incredible array of numbers coming out of respected professionals who are trying to figure out the impact of the National recession. The problem is that the numbers can be made to say anything, but a careful review will show that no matter whose numbers are used, the picture is not rosy. Take for example the Gross Domestic Product (“GDP”). The Government released figures in January showing a decline in GDP for 2008 of 3.1 %, the worst in over a decade, clearly signaling the fact that the recession was worse than most economists had predicted. On February 27th, after the markets closed, the Government revised the GDP loss to a whopping 6.2 %. Stocks world-wide are tumbling on that piece of bad news, in fear of a longer recovery period. The downward spiral seems to continue with the report that even revered investor Warren Buffet lost $11.5 billion in the net worth of his Berkshire-Hathaway Corporation.
2. What is the impact on the Inn Business. First, it is hard to get numbers for the Bed and Breakfast Inn business separately. Smith Travel Research (“STR”) is the most respected source of historical numbers for the Hospitality Business, but does not collect data from small properties (under 50 rooms). One data release from STR shows that New England seemed to be holding its own relative to the US National data. For example, December, 2008 results for New England included a drop in occupancy rate of -2.1%, while Average Daily Rate (“ADR”) decreased by -3.6%. This resulted in a huge decrease in Revenue Per Available Room (“REVPAR”) of -5.7%. The National figures during the same December period showed larger decreases in Occupancy of -6.8%, in ADR of -3.2%, and a REVPAR decrease of -6.6%.
For the Year 2008 as a whole the figures are also instructive. New England showed a decrease in occupancy of -2.8%, but an increase in ADR of 1.9%, resulting in a miniscule decrease in REVPAR of -0.9%. The National figures for 2008 were far worse, with a decrease in occupancy of -4.2%, but an increase in ADR of +2.4%, resulting in a decrease of -1.9% in REVPAR.
The numbers from STR show that, until about September, 2008 was a growth year with higher occupancies that dropped precipitously in the 4th Quarter. Rates were still climbing in December, as the Hospitality Business seemed to lag in discounting. Overall, 2008 would be a down year, but only in comparison to the strong growth in the prior three years.
3. New England is not the same. One interesting thing that jumps out of the results shown by STR is that the New England States are not homogeneous. In fact, it was clear in both the December and National results for 2008 that Northern New England (Maine, New Hampshire, and Vermont) fared much better individually than the Nation or their Southern New England counterparts. For example, for 2008 as a whole, Vermont showed an increase in occupancy of +1.9%, an increase in ADR of 4.8% along with a REVPAR increase of +6.8%. While the results in Maine and New Hampshire were more consistent, they were slightly worse than New England as a whole. The bottom line was that overall, 2008 was a non-growth year, with a really cloudy picture for 2009.
4. The Real Data comes from Sales Tax Revenues. Another well respected source of industry research comes from Atlanta-based PKF Hospitality Research (“PKF”). Utilizing results of sales tax collections in Maine, PKF reported that September lodging sales in that state dropped by -12% from 2007, and continued to drop by -2.6% in October on a year-to-year basis. While Maine finished the year 2008 slightly ahead of 2007 (+0.7% growth in revenue), this came after 6% annual growth in the preceding three year period. PKF is projecting as a whole a -7.8% decline in REVPAR for Maine in 2009, which would make it one of the steepest declines in recorded history since the 1930’s. PKF also predicts that Maine will not fare as worse as others, because of its relative low cost and its rural location which fosters escape from the big cities. Presumably this would apply to all of Northern New England with similar characteristics prevalent throughout the region.
5. Summary: Batten Down the Hatches! No one likes to consistently hear bad news, but there is little about the economy that seems to be saying that things are going to get better soon. Predictions for a recovery in late 2009 and early 2010 are all that we have to go on, but most economists are hedging on those dates. Similar to the broad-based declines in 4th Quarter, 2008, retail spending, the American consumer seems to have switched to a survival mode, and this does not bode well for discretionary spending at least until there is some better news on the horizon. We have advised our consulting clients of the following:
a. Budget for a decrease in revenue of about 10% for 2009, adjusting expenses as much as possible to that revenue;
b. Increase spending in Marketing, particularly electronic marketing to capture market share;
c. Neither increase or decrease overall rack room rates. Develop packages with adventure travel features which show good overall value. Up-sell rooms whenever possible, and include value-added options with all room rates. Partner with local businesses and cross-market as much as you can.
d. Hold discretionary spending to a minimum and build cash wherever possible in the event that this recession lasts longer than expected. Do not defer necessary repairs and maintenance, but this is not the year to spend money on capital improvements.
e. Remember why you came into the Hospitality Business. It is all about the guests and not the Innkeepers!
f. This too shall pass. Look to the future, because the past is gone forever.
Showing posts with label Inn Financials. Show all posts
Showing posts with label Inn Financials. Show all posts
Monday, March 02, 2009
Tuesday, November 04, 2008
Running a Bed & Breakfast Inn: Discounting Room Rates Does Not Work!
In troubled times like today, Bed and Breakfast Innkeepers have an overwhelming feeling that the best way through this downturn (say recession!) is to put their room rates on sale. Isn’t that just what the retailers do at Christmas time to survive a bad season? The answer is that discounting in the travel business not only does not work, it creates a pattern of customer behavior that will last for years, even when times are better. Let’s look at the specifics.
Following 9/11, the Hotel Industry reacted to the basic loss of corporate business by deeply discounting their rates and putting large blocks of unused inventory on third-party web sites. The result was $50 a night rooms on sites like hotels.com which set up a huge expectation with consumers that this was the right price to pay for hotel rooms, no matter what the differences were in quality between each hotel. Many subsequent studies showed that the hotels basically killed their business for several years after the original reason for the discounting had gone away. The PAII Industry Study for 2002 and 2004 shows clearly that while occupancy at bed and breakfast and country inns decreased somewhat over the same period, rates did not go down significantly. Innkeepers knew the value of their product and held their rates. The result was that the Inn Industry basically avoided the meltdown that the Hotels suffered during that time.
By the end of 2007, rates for both Hotels and Inns were higher than in 2001, and occupancy rates had climbed back for the most part to 2000 levels (the best year to date in the Inn business). It is hard to tell where we will end up in 2008, but it clearly will not be a growth year. More important, where will we be in 2009?
Let’s put this into perspective. What would be the impact of your Inn business if revenues declined by say 10%? For an Inn grossing $400,000, that would mean a decrease in sales of $40,000. If the Gross Margin for that Inn (net cash flow/gross revenue) was an efficient 46%, then the net cash flow will also go down by 10%. In this example, the net cash flow would decrease by $18,400 from $184,000 to $165,600. The expenses also have to decrease, and there clearly can be cost reductions since many of the Inn’s expenses are variable and related to occupancy. In other words, as occupancy decreases, certain expenses like housekeeping, amenities and other costs related to occupancy levels will decrease as well. Added to this are the discretionary spending that can be reduced or deferred, all of which leads to the conclusion that even a 10% decrease in revenue will not result in a calamity for a well-run Inn business. It is more like something that needs to be weathered.
Most Innkeepers have a good sense of what the true expenses of operating the Inn are, and can find the ways to reduce costs. More important, most of your personal expenses seem to be interwoven in the Inn’s finances as well, providing a really sound way of reducing expenses. Knowing what is the real cost of the Inn gives you a better way of knowing how much you have to charge in rates to make an adequate return on investment (i.e. to pay the mortgage and have some for yourself) at any level of occupancy. Once you do this, you do not have to discount, you need only charge a fair price to achieve a fair rate of return on investment.
The real concern then remains this nagging feeling among Innkeepers that the only way out of a downturn is to discount. This should be avoided at any cost, because, as described above, once it is done, your guests will never again feel like paying your full rates. It will take many years to climb out of that hole. A better approach is to sell well priced packages and have value-added specials to supplement your rates. This has always worked well for our Industry, and will work again.
Finally, a word about cutting costs. Marketing and maintenance are the two areas that are easy to cut, but have the longest negative affect on your Inn business. This is the time to do what you can to increase marketing, because while the overall travel business may be decreasing, by great marketing you can stabilize or even increase your market share of the business that exists. Deferring maintenance is also something that comes back to bite you, since the cost of making repairs will always be more in the future if something is deferred.
The long and short is that you can favorably impact your results, even in bad economic times. Have faith that this too will pass, but in the interim, cut costs and market, market, market!
Following 9/11, the Hotel Industry reacted to the basic loss of corporate business by deeply discounting their rates and putting large blocks of unused inventory on third-party web sites. The result was $50 a night rooms on sites like hotels.com which set up a huge expectation with consumers that this was the right price to pay for hotel rooms, no matter what the differences were in quality between each hotel. Many subsequent studies showed that the hotels basically killed their business for several years after the original reason for the discounting had gone away. The PAII Industry Study for 2002 and 2004 shows clearly that while occupancy at bed and breakfast and country inns decreased somewhat over the same period, rates did not go down significantly. Innkeepers knew the value of their product and held their rates. The result was that the Inn Industry basically avoided the meltdown that the Hotels suffered during that time.
By the end of 2007, rates for both Hotels and Inns were higher than in 2001, and occupancy rates had climbed back for the most part to 2000 levels (the best year to date in the Inn business). It is hard to tell where we will end up in 2008, but it clearly will not be a growth year. More important, where will we be in 2009?
Let’s put this into perspective. What would be the impact of your Inn business if revenues declined by say 10%? For an Inn grossing $400,000, that would mean a decrease in sales of $40,000. If the Gross Margin for that Inn (net cash flow/gross revenue) was an efficient 46%, then the net cash flow will also go down by 10%. In this example, the net cash flow would decrease by $18,400 from $184,000 to $165,600. The expenses also have to decrease, and there clearly can be cost reductions since many of the Inn’s expenses are variable and related to occupancy. In other words, as occupancy decreases, certain expenses like housekeeping, amenities and other costs related to occupancy levels will decrease as well. Added to this are the discretionary spending that can be reduced or deferred, all of which leads to the conclusion that even a 10% decrease in revenue will not result in a calamity for a well-run Inn business. It is more like something that needs to be weathered.
Most Innkeepers have a good sense of what the true expenses of operating the Inn are, and can find the ways to reduce costs. More important, most of your personal expenses seem to be interwoven in the Inn’s finances as well, providing a really sound way of reducing expenses. Knowing what is the real cost of the Inn gives you a better way of knowing how much you have to charge in rates to make an adequate return on investment (i.e. to pay the mortgage and have some for yourself) at any level of occupancy. Once you do this, you do not have to discount, you need only charge a fair price to achieve a fair rate of return on investment.
The real concern then remains this nagging feeling among Innkeepers that the only way out of a downturn is to discount. This should be avoided at any cost, because, as described above, once it is done, your guests will never again feel like paying your full rates. It will take many years to climb out of that hole. A better approach is to sell well priced packages and have value-added specials to supplement your rates. This has always worked well for our Industry, and will work again.
Finally, a word about cutting costs. Marketing and maintenance are the two areas that are easy to cut, but have the longest negative affect on your Inn business. This is the time to do what you can to increase marketing, because while the overall travel business may be decreasing, by great marketing you can stabilize or even increase your market share of the business that exists. Deferring maintenance is also something that comes back to bite you, since the cost of making repairs will always be more in the future if something is deferred.
The long and short is that you can favorably impact your results, even in bad economic times. Have faith that this too will pass, but in the interim, cut costs and market, market, market!
Monday, January 28, 2008
ARE YOU READY TO MAXIMIZE YOUR PROFITABILITY?
Arden Dale writes in a compelling article published in the Wall Street Journal on January 8, 2008 that “Want to Sell a Business? You May Not Be Ready.” Ms. Dale goes on to state quite cogently that many small business owners are relying on the ultimate sale of their business for their own personal retirement funds. The author’s thesis is that many small business owners do not have proper financial records, detailed operational documentation, and may not have a very realistic idea about the price for their businesses. She goes on to point out that buyers are much more sophisticated than in the past and are insisting on receiving extensive due diligence materials before agreeing to any purchase. The author’s solution is to start getting the business ready to sell several years in advance, to keep proper books and records, and to improve the operating profitability as much as possible.
Sound familiar? This is what we have been talking about this for years now with our program to Achieve Maximum Profitability at your Inn well before it goes to the market. Looking at the financial condition of an Inn as compared to Inns across the Country is achieved by looking at results compared to other similar Inns. In this regard, one source of information for the smaller Inns would be the PAII Industry Study (2007-2008 utilizing 2006 financial results is the most recent version). Other sources includes our own Quantum Hospitality/Oates & Bredfeldt, LLC Standard Cost Analysis Study. In either case, the concept is to conform your own Inn’s financial performance to the Chart of Accounts set forth in the appropriate study, and to determine on an account-by-account basis whether or not your income and expenses are in line with the average Inns in each such study. I can state, without any doubt, that each time we do such analysis for an Inn, we are able to come up with potential cost savings well in excess of our charges for doing this work. We do in depth reviews of the operations of 30-50 Inns across the Country each year, and there are very few that stand up to this type of rigorous, detailed study. The result is that we are then in a position to suggest operational and expense cost savings which will improve the financial results prior to selling the Inn, irrespective of the process used to market the Inn. This is especially true about the “personal” costs and expenses that seem to always be present in the Profit and Loss Statement of the Inn. A good couple of years before any contemplated sale is a really good time to eliminate these additional costs and show some real profitability and net cash flow in the Inn.
Dale’s point about researching the price for the Inn is also well taken. Most Innkeepers look at what they think another Inn has sold for without first hand knowledge of the financial condition of that Inn. They think that if that Inn down the street sold for $X then their Inn has got to be worth more since it is “better” or “more popular,” etc. Another practice is simply to utilize the various rules of thumb like Gross Revenue Multiplier (see previous Article dated May 17, 2007 called “Best Methods for Finding the Ideal Inn”). Often Innkeepers are told to price their Bed and Breakfast Inns at 5-6 times gross sales, even though the business results do not justify such lofty pricing. The solution is to obtain professional advice as to what your Inn Business is really worth compared to other similar Inns before going to the market.
The point about written operational policies and procedures is another really important one. Two or three weeks training from the prior keepers of the Inn can not teach new Innkeepers what they really need to know in order to maintain the value of their new Inn Business in the first year. Those Inns which have written checklists and policies, training manuals, job descriptions, recipes, and stated practices for all of their operational tasks are simply worth more than Inns that do not have this documentation. Buyers will quickly figure this out in the due diligence process, and may walk or run away from a poorly managed Inn notwithstanding the price.
Finally, a word about where we seem to be on the National economic front, as it may impact the ability of Innkeepers to achieve their goals of selling the Inn. Some commentators have downplayed the impact of the Sub-Prime Mortgage Crisis on business. This, of course, is pure foolishness, and a disservice to those whose dreams can be destroyed by buying Inns at the wrong time or at the wrong price. It is now clear from the daily economic news, the plummeting real estate markets, and the rapidly falling stock market that the Country is at grave risk of a real recession, if we are not already there. This will clearly be felt in the tourism market, and all forms of accommodations across the Nation will be feeling this pinch. The Inn business survived the fall off after 911 by not falling prey to the discounting that the hotel business jumped on. We hope that the greater hospitality business has learned its lesson, but for Innkeepers, this year will clearly be a real challenge.
For Sellers, this is not good news. It will clearly have an impact on the prices that will be achievable for their Inns, especially if results take a down turn for them. It already has impacted time on the market for Inns, especially full service Inns with restaurants. Most Inns are staying on the market for 1-2 years before they are sold, even if they are at the right price. For buyers, this does created somewhat of an opportunity, with the Federal Reserve pushing interest rates back to the really low levels of the past several years, however the real key is to make certain that there is sufficient cushion in the net cash flow of the Inn to weather the likely fall off in the hospitality business caused by an economic recession. So buyers need to be very careful that they look at the reality of the financial performance of an Inn opportunity, that they make absolutely certain that there is sufficient cash flow to get by if things go bad, and that they have good working capital at the outset. Making an emotional “lifestyle” decision is not a very good idea in the immediate future (or perhaps ever!). The best performing and operating Inns will likely still be very attractive at the right price with such low interest rates, but marginal operations simply will not sell at any price. In any event, we will be there to offer help when and where needed.
Sound familiar? This is what we have been talking about this for years now with our program to Achieve Maximum Profitability at your Inn well before it goes to the market. Looking at the financial condition of an Inn as compared to Inns across the Country is achieved by looking at results compared to other similar Inns. In this regard, one source of information for the smaller Inns would be the PAII Industry Study (2007-2008 utilizing 2006 financial results is the most recent version). Other sources includes our own Quantum Hospitality/Oates & Bredfeldt, LLC Standard Cost Analysis Study. In either case, the concept is to conform your own Inn’s financial performance to the Chart of Accounts set forth in the appropriate study, and to determine on an account-by-account basis whether or not your income and expenses are in line with the average Inns in each such study. I can state, without any doubt, that each time we do such analysis for an Inn, we are able to come up with potential cost savings well in excess of our charges for doing this work. We do in depth reviews of the operations of 30-50 Inns across the Country each year, and there are very few that stand up to this type of rigorous, detailed study. The result is that we are then in a position to suggest operational and expense cost savings which will improve the financial results prior to selling the Inn, irrespective of the process used to market the Inn. This is especially true about the “personal” costs and expenses that seem to always be present in the Profit and Loss Statement of the Inn. A good couple of years before any contemplated sale is a really good time to eliminate these additional costs and show some real profitability and net cash flow in the Inn.
Dale’s point about researching the price for the Inn is also well taken. Most Innkeepers look at what they think another Inn has sold for without first hand knowledge of the financial condition of that Inn. They think that if that Inn down the street sold for $X then their Inn has got to be worth more since it is “better” or “more popular,” etc. Another practice is simply to utilize the various rules of thumb like Gross Revenue Multiplier (see previous Article dated May 17, 2007 called “Best Methods for Finding the Ideal Inn”). Often Innkeepers are told to price their Bed and Breakfast Inns at 5-6 times gross sales, even though the business results do not justify such lofty pricing. The solution is to obtain professional advice as to what your Inn Business is really worth compared to other similar Inns before going to the market.
The point about written operational policies and procedures is another really important one. Two or three weeks training from the prior keepers of the Inn can not teach new Innkeepers what they really need to know in order to maintain the value of their new Inn Business in the first year. Those Inns which have written checklists and policies, training manuals, job descriptions, recipes, and stated practices for all of their operational tasks are simply worth more than Inns that do not have this documentation. Buyers will quickly figure this out in the due diligence process, and may walk or run away from a poorly managed Inn notwithstanding the price.
Finally, a word about where we seem to be on the National economic front, as it may impact the ability of Innkeepers to achieve their goals of selling the Inn. Some commentators have downplayed the impact of the Sub-Prime Mortgage Crisis on business. This, of course, is pure foolishness, and a disservice to those whose dreams can be destroyed by buying Inns at the wrong time or at the wrong price. It is now clear from the daily economic news, the plummeting real estate markets, and the rapidly falling stock market that the Country is at grave risk of a real recession, if we are not already there. This will clearly be felt in the tourism market, and all forms of accommodations across the Nation will be feeling this pinch. The Inn business survived the fall off after 911 by not falling prey to the discounting that the hotel business jumped on. We hope that the greater hospitality business has learned its lesson, but for Innkeepers, this year will clearly be a real challenge.
For Sellers, this is not good news. It will clearly have an impact on the prices that will be achievable for their Inns, especially if results take a down turn for them. It already has impacted time on the market for Inns, especially full service Inns with restaurants. Most Inns are staying on the market for 1-2 years before they are sold, even if they are at the right price. For buyers, this does created somewhat of an opportunity, with the Federal Reserve pushing interest rates back to the really low levels of the past several years, however the real key is to make certain that there is sufficient cushion in the net cash flow of the Inn to weather the likely fall off in the hospitality business caused by an economic recession. So buyers need to be very careful that they look at the reality of the financial performance of an Inn opportunity, that they make absolutely certain that there is sufficient cash flow to get by if things go bad, and that they have good working capital at the outset. Making an emotional “lifestyle” decision is not a very good idea in the immediate future (or perhaps ever!). The best performing and operating Inns will likely still be very attractive at the right price with such low interest rates, but marginal operations simply will not sell at any price. In any event, we will be there to offer help when and where needed.
Wednesday, January 23, 2008
Time to Refinance?
I think that everyone is aware of what is happening in the mortgage industry. The reporters are delivering the news everyday of how home sales are falling and that lenders are tightening their belts on providing loans. Interest rates are falling and their looms the possibility of a recession. What should we do with this news and what is next?
We take this news and it gets everyone a little nervous. However, this is still the time for Innkeepers which are running a good, clean business to step up to the plate and take advantage of interest rates. Let me give you an example. We are in the process of assisting a buyer purchase a property in Maine. When we started this process back in November, we were hoping that we could find an interest rate around 7 ½%. So, we developed the business plan and in December we submitted it to four banks, two being national lenders. The results were interesting. The two national banks didn’t want to get involved, even though there was about 1.5 debt ratio. However, the two local banks reacted very differently. They are competing strongly against each other for the opportunity to finance this purchase. We now have an offer for a loan for twenty-five years, fixed for five years, at 3.28% above the treasury rate. As of January 22nd, this will provide us with a rate of 5.82%! This is astonishing!
So, if you have your financial house in order, it may be time to shop for a new interest rate. If you don’t have your finances in good shape, take steps to get them in line and use this time of interest rates being lowered to the best of your advantage!
We take this news and it gets everyone a little nervous. However, this is still the time for Innkeepers which are running a good, clean business to step up to the plate and take advantage of interest rates. Let me give you an example. We are in the process of assisting a buyer purchase a property in Maine. When we started this process back in November, we were hoping that we could find an interest rate around 7 ½%. So, we developed the business plan and in December we submitted it to four banks, two being national lenders. The results were interesting. The two national banks didn’t want to get involved, even though there was about 1.5 debt ratio. However, the two local banks reacted very differently. They are competing strongly against each other for the opportunity to finance this purchase. We now have an offer for a loan for twenty-five years, fixed for five years, at 3.28% above the treasury rate. As of January 22nd, this will provide us with a rate of 5.82%! This is astonishing!
So, if you have your financial house in order, it may be time to shop for a new interest rate. If you don’t have your finances in good shape, take steps to get them in line and use this time of interest rates being lowered to the best of your advantage!
Monday, February 12, 2007
The Art of Obtaining Financial Information
It always amazes me when dealing with people looking to purchase an inn. The other day I received an e-mail inquiring on a property valued at $1.8M. The e-mail was simple. It said “This is the type of inn we are interested in. So, if you can pass on to me 3-5 years of financials, I can look them over”. So here is the dilemma. I don’t know who this person is. We have only communicated for a brief time via e-mails and I don’t even know his last name. In addition, I can’t contact him via telephone because he hasn’t shared it with me. I’m not sure of his family status and if he has children, there isn’t room within the current owner’s quarters. I’m not sure if he wants to be in a city, country, or mountains. Most importantly, I don’t have a clue as to his finances! Yet, he totally expects me to quickly disclose very personal information when I know nothing about him.
So here is the real question…If you owned an inn worth $1.8M would you want me to send your financial overview to everyone that inquires? The answer should be no!! When you are at the point of being a “serious buyer”, you should act accordingly. My motto is simple: “Show me yours, and I’ll show you mine!” A buyer that is serious should be ready to share their financial overview. If a buyer isn’t capable of doing this, they are not serious. So my message to all of the future buyers is to prepare a financial statement and be ready to share it on any inn in which you are seeking their financial data. You will now be treated as a serious buyer!
So here is the real question…If you owned an inn worth $1.8M would you want me to send your financial overview to everyone that inquires? The answer should be no!! When you are at the point of being a “serious buyer”, you should act accordingly. My motto is simple: “Show me yours, and I’ll show you mine!” A buyer that is serious should be ready to share their financial overview. If a buyer isn’t capable of doing this, they are not serious. So my message to all of the future buyers is to prepare a financial statement and be ready to share it on any inn in which you are seeking their financial data. You will now be treated as a serious buyer!
Wednesday, December 06, 2006
Yield Management? Not!!
I was looking at the December edition of PAII's Innkeeping this morning, and had a thought that I wanted to pass on. Clearly this falls in the range of “for what it is worth.”
I have heard Bill Carroll talk several times on Yield Management, including at last year’s PAII Conference. He is clearly a bright and thoughtful professor. However, this discussion turns me off every time I hear it. It seems to be all about the money and not about the guest. It seems to be the antithesis of the kind of hospitality that we strive for as Innkeepers. Even mentioning the possibility of overbooking rooms and having different rates for the same type of rooms on the same days, makes me cringe. Working hard to have a strong Inn business is something we have taught for many years, but the means of achieving this goal also matters. I think, bottom line, that Yield Management is perhaps the opposite of what we should be teaching Innkeepers or Aspiring Innkeepers. Our segment of the Hospitality Industry has always, always differentiated ourselves based on the high level of individual hospitality we provide to the guests. This has helped us considerably in the tough times following 9/11 when the larger hotel industry was killing itself with discounting and hotels.com type distribution channels. In my opinion, the future of our way of Innkeeping seems to depend upon increasing the level of hospitality to the guests, not becoming more institutionalized and impersonal. We need to continue to think about what is the next amenity that we can provide to the guests, not how much money we can get.
Now, Bill Carroll is writing about Demand Management. Once I got past the Yield Management stuff in the article, however, I actually thought that some of it made some sense to me. Analyzing marketing expenses, sources of contacts, and tracking web results (i.e. spending time trying to figure out who the guest is, and why and how he finds the Inn) is all something that most good Innkeepers have been doing for years. Asking the question “How did you hear about us?” is such a standard question that every Innkeeper must ask a prospective guest. Treating “loyal guests” (i.e. repeat guests) as special is one of the essentials of good Innkeeping. I recall an article in Innkeeping many years ago by Maureen McGee from Rabbit Hill Inn in Vermont, on how to answer telephone calls for reservations. This was done before anyone ever heard about the Internet. Some of this article is clearly still relevant. Asking about why the guest was coming and how they heard about the Inn were such basics even at that pre-web time. Tracking sources of contacts has been present from the earliest days of bed and breakfast reservation software.
In sum, let’s get back to basics. If we treat all the guests as very special, they may want to come back. If we treat repeat guests even better, they might clearly refer more business to us. No matter how much the Internet and computers become a part of our lives as Innkeepers, the best, least expensive, and most lasting form of marketing, is and always will be treating the guests to superb hospitality. Modern electronic marketing has become very important, and will succeed if we remember that is all about serving the guest and their needs. If Yield Management is the way of the future, then I have sincere doubts about how we can continue to differentiate ourselves from every chain hotel off the highway.
I have heard Bill Carroll talk several times on Yield Management, including at last year’s PAII Conference. He is clearly a bright and thoughtful professor. However, this discussion turns me off every time I hear it. It seems to be all about the money and not about the guest. It seems to be the antithesis of the kind of hospitality that we strive for as Innkeepers. Even mentioning the possibility of overbooking rooms and having different rates for the same type of rooms on the same days, makes me cringe. Working hard to have a strong Inn business is something we have taught for many years, but the means of achieving this goal also matters. I think, bottom line, that Yield Management is perhaps the opposite of what we should be teaching Innkeepers or Aspiring Innkeepers. Our segment of the Hospitality Industry has always, always differentiated ourselves based on the high level of individual hospitality we provide to the guests. This has helped us considerably in the tough times following 9/11 when the larger hotel industry was killing itself with discounting and hotels.com type distribution channels. In my opinion, the future of our way of Innkeeping seems to depend upon increasing the level of hospitality to the guests, not becoming more institutionalized and impersonal. We need to continue to think about what is the next amenity that we can provide to the guests, not how much money we can get.
Now, Bill Carroll is writing about Demand Management. Once I got past the Yield Management stuff in the article, however, I actually thought that some of it made some sense to me. Analyzing marketing expenses, sources of contacts, and tracking web results (i.e. spending time trying to figure out who the guest is, and why and how he finds the Inn) is all something that most good Innkeepers have been doing for years. Asking the question “How did you hear about us?” is such a standard question that every Innkeeper must ask a prospective guest. Treating “loyal guests” (i.e. repeat guests) as special is one of the essentials of good Innkeeping. I recall an article in Innkeeping many years ago by Maureen McGee from Rabbit Hill Inn in Vermont, on how to answer telephone calls for reservations. This was done before anyone ever heard about the Internet. Some of this article is clearly still relevant. Asking about why the guest was coming and how they heard about the Inn were such basics even at that pre-web time. Tracking sources of contacts has been present from the earliest days of bed and breakfast reservation software.
In sum, let’s get back to basics. If we treat all the guests as very special, they may want to come back. If we treat repeat guests even better, they might clearly refer more business to us. No matter how much the Internet and computers become a part of our lives as Innkeepers, the best, least expensive, and most lasting form of marketing, is and always will be treating the guests to superb hospitality. Modern electronic marketing has become very important, and will succeed if we remember that is all about serving the guest and their needs. If Yield Management is the way of the future, then I have sincere doubts about how we can continue to differentiate ourselves from every chain hotel off the highway.
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