Where We Are Today – Economic and Industry Forecasts
At the start of 2023, despite rising inflation and higher interest rates, the hotel industry was cautiously optimistic. In his article, “Time to Stop Hugging the Bear?”, economic expert R. Mark Woodworth shared data suggesting a potential recession but also his reasons for the continued optimism.
Today, current data shows that his predictions have come to pass. As per the November revised 2023 STR forecast, US Occupancy is expected to end the year up + 0.6%, with ADR up + 4.2%, and RevPAR up + 4.8% from 2022 actual performance.
For 2024, STR forecasts + 1.0% Occupancy, + 3.0% ADR, and + 4.1% RevPAR year-over-year growth. Amanda Hite, President of STR, comments, “Looking ahead to the new year, we expect to see continued growth in RevPAR. The latest economic outlook calls for a stalling economy with growth well below the levels seen toward the end of the pandemic. Despite the potential dip, we see strong traveler fundamentals.”
Therefore, as economic headwinds continue to pressure the US lodging industry, certain factors continue to parry those forces.
Aran Ryan, Director of Industry Studies at Tourism Economics, reports in the STR Forecast, “Decelerating factors, including higher interest rates, more restrictive lending, tighter fiscal policy, and weakened household finances will lead consumers to rein in spending and firms to cut back on hiring and investment, likely causing the economy to skirt with recession. Travel sector improvements, including stronger group activity and returning international visitors, will help offset economic factors, supporting still-solid RevPAR gains.”
In his recent 2024 forecast and economic analysis, “The Good and the Bad of the Year Ahead”, R. Mark Woodworth summarizes, “Taking all the above into consideration, I believe that 2024 will be a good (not great) year for the average U.S. hotel.”
4 Questions to Shore Up Your Business for 2024
With the above cloudy forecasts yet strong lodging fundamentals in mind, here are 4 critical thinking questions that can help your team identify opportunities to further shore up business for 2024.
1. For each property in your portfolio, if a competitor were to steal the hotel’s core business, what would that competitor look like?
Managers in each department can brainstorm all the ways that an imaginary (or very real) competitor hotel might try to win over corporate contracts, groups, or transient business. Would their guest experience be different? How would the establishment look and feel? How would the hotel utilize technology to create a more seamless customer experience? To operate more efficiently and profitably?
The answers may be surprising, or they may be obvious and serve to clarify the importance of initiatives already in place.
2. If a competitor management company was going to go after your core business – what would that competitor do?
Think about how your company stacks up on:
- Open and transparent communication
- Insightful performance reports, beyond basic financials
- Long-term strategic planning for each property
How would the hypothetical competing management company market itself to target clientele? Would they offer more or different services? Would they embrace technology to manage properties with greater efficiency?
3. Is there anything your team is compromising on for short, rather than long term, goals?
Hotel operators are always balancing the pressure to reduce operating expenses with the need for capital investments to drive continued RevPAR gains.
To avoid sacrificing long-term profits for short-term profitability, here are some questions to consider:
- Sales & Marketing: Is there a robust sales and marketing strategy to achieve a healthy mix of direct bookings? Or heavily dependent on OTAs and/or promotions?
- Labor: What is being done to address labor shortages? Have any measures been taken to avoid employee burnout?
- Training: Are there staff training and development programs to maintain quality service and groom future leaders?
- Maintenance & Capital Improvements: How are these being tracked? What is the plan and timeline for capital improvements?
- Technology: Is the team skating by on only adequate back-office software instead of investing in newer technology with greater efficiency?
- Analysis: Does your software help you to comparatively benchmark expenses between hotels alongside revenue and labor to identify potential return on spending?
4. Is there technology your team could embrace that would make a difference?
Just as postponing renovations and capital improvements negatively affects brand image, customer satisfaction and ultimately profitability; postponing technological investments hurts productivity, strategic planning, and the bottom line.
There are a number of technologies that may not cost more than your current system, but can save significant time and labor. And while back office technology may not be sexy, saving hours of time for each team member with more automated reporting, invoicing, and payments can be a game changer and generate more productivity.
Seizing Opportunity
If these questions helped identify any room for improvement, those can be capitalized on for a stronger 2024.
If back-office software represents an opportunity for your company, do yourself a favor and take a look at the only hotel-specific platform that offers full ERP capabilities, and assimilates accounting and operating details into meaningful intelligence. Hotel Investor Apps ERP & Accounting Software has been transformative in the speed, visibility, and insight it gives to many management companies, and it can be for yours too.
Watch a 10 minute demo of HIA Accounting & ERP Here.
Get the back office productivity you need in 2024, schedule a consultation today.
Jaime Goss has over a decade of marketing experience in the hospitality industry. At Hotel Investor Apps, Jaime heads up marketing initiatives including brand strategy, website design, content, email marketing, advertising and press relations.
