‘Tis The Season . . . (Business Plan Season, That Is)

It’s late September, so those of us in the hospitality industry are now well into the development of budgets, marketing plans, & business plans for 2016.  Generally speaking, the state of our industry is very (very!) good, but this does not mean that everyone expects this trend to continue open-ended.  Obviously there are variations by region, but many markets believe that they have maxed out in occupancy, and may therefore be projecting 2016 as being slightly above flat relative to 2015, with any minimal RevPAR growth being found in the form of slight rate growth.  So, how will YOUR assets perform in 2016?

Sometimes in the hotel industry when things are good, we tend to inadvertently relax, spending less time focusing on continued growth, and more time on trying to squeeze what we can out of the current cycle.  While understandable, this is not only counter-intuitive, but potentially downright dangerous. 

Here’s what I mean; growth, whether in markets or in specific properties, doesn’t happen by accident. 

There are always tangible and measurable reasons for such growth, just as there are always reasons for downturns.  Today, as many of you are well into your 2016 planning and RFP submissions,  how much time can you honestly say you’ve devoted to seeking out new sources of business, new sources of revenue,  and growth in market share, rather than simply raising rates by a few percent on January 1st?

It should never be said that we are “lazy,” but we do tend to become creatures of habit, or at least creatures of our own success.  Perhaps 30-60 days ago, certain major hotel brands and management companies went out to their hotels and told them what type of RevPAR improvement was expected of them for 2016.  And please don’t misunderstand, this was not done arbitrarily.  Rather, it was done as a result of a thorough review and analysis of available data, both market and industry-specific. 

Nonetheless, if the experts told us  that a particular market was expected to grow 3% in RevPAR for 2016, it is unlikely that these  brands and management companies would direct their properties to do significantly better than that 3%.  Rather, the directive from “corporate” would be to project something in the neighborhood of that 3% growth, subject to any specific variations either positive or negative. 

In other words, growth is being directed by a corporate office, and the property (which should be best-qualified to develop and execute its business plan for 2016) is being mandated to develop a plan to achieve a number that has been pre-determined by others. 

While this is a tried & true method in our industry, it does not generally speak to what is most important for ownership, which is achieving true potential in performance.   Ownership’s strategy (and therefore management’s strategy) should NOT be focused solely on maximizing performance vs. the competitive set, but on maximizing performance vs. true potential.  The difference here can be enormous. 

My challenge to you is to ask yourself if you are confident that your management team fully recognizes the difference between the two: maximizing performance against a comp set vs. maximizing the true potential of your asset. 


NEXT TIME:  What are some steps that I can take as an owner to impact my property’s potential performance?