HOTEL REVENUE: How low can you go?

Doha hotels may be maintaining a brave front in the face of growing competition,  but the revenue managers reveal what a pickle they’re really in as room rates slide

Away from the glamour of Doha’s burgeoning hotel scene, around 30 gloomy-looking revenue managers are gathered in crisis talks.

The year 2012 hasn’t been fun for these frugal-minded managers who — by the year end — will have seen the city’s rooms supply increase a record 20% on 2011’s 10,000 rooms.
With every new hotel launch, their number one goal of improving market share and boosting the bottom line slips further away.

Occupancy levels — and thus rates — are slumping before their eyes, and the general feeling is one of “fear”, according to workshop leader Anita Markiewicz, vice president revenue management — Middle East and Asia for Mövenpick Hotels & Resorts, speaking at the Hotelier Middle East Qatar GM Debate.

“We’re all scared of what’s going to happen as more hotels come online in Qatar,” Markiewicz admits.

“The first thing the general manager says when they present the budget is ‘how will the increasing number of hotels affect us’? They’re thinking about the forecasting and pricing, and we’re thinking ‘how low can we go’?”

“Every year the senior management team gathers to create the annual business plan and budgets.

“But we all know the truth of what happens with the budgeting. The owner doesn’t like it, there are nine versions and we all say we’re going to stick to it, but we don’t,” says Markiewicz; her audience nodding along.

“We know we’re working in a difficult world. When the forecast isn’t coming in or the bookings are behind, panic can set in,” she says.

“This is where we have to have a strategy and stick to it. We can hide, cut costs, staff and quality. You can be scared and have undercutting tactics to break even. Or you can go into protection mode. You change or die.”

Markiewicz says the first step to survival is accepting planned performance factors are going to change.

The next step is to deal with underperformance, without resorting to “dirty tactics”.

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Managing rates
In April, TRI Hospitality consultant Christopher Hewlett warned Qatar hoteliers: “ADR will be the first casualty as more hotels come online”.

It’s crucial that — even when under pressure — the price is right, Markiewicz agrees, adding that there is more to it than undercutting.

“Rooms pricing has to be logical. Making it complicated isn’t making it clever. If your staff don’t understand it, then they can’t explain it to guests, and they then think that you’re trying to cheat them. You should make sure it’s seasonal and supplement executive suites, but don’t make the supplements huge, or you will probably only sell them twice a year.

“Some people mix up parity and integrity. Integrity is very important. If an online tour operator doesn’t stick to the contract they can undercut you. Clients won’t book through your site. Integrity is about having a rate barrier in every segment you sell in. Tour operators can’t sell at naked rate,” she continues.

Markiewicz says that in her opinion, a dynamic pricing structure is the way forward.
“Most people now are using dynamic rates; it can be difficult on fixed rates. Dynamic really means being able to adjust ‘best available rate’ (BAR) based on occupancy of the day and demand in the market. Dynamic rates are most certainly the way to go and everywhere online has to be sold at the same price and move at the same pace.

“If we cannot sell a rate in parity with a third party, they don’t sell it. If they cannot accommodate a promotion, we don’t sell it. It has to be compatible,” adds Markiewicz.

Paying the price
While the flurry of hotel openings in Doha has led to oversupply of rooms, the availability of employees is quite a different story.

“We’re already talking about occupancy and rates going down but costs are going up because potential employees are demanding more money and they’re getting paid it,” explains Markiewicz.

Good revenue managers — ones that have the right personality and skills to do the job — are few and far between, she says.

“How do we train and retain staff? People are important for distribution and sales. Every new hotel is looking for new teams but the resources are not available in the market. The price goes up to get the people you want to operate the hotel how you want to.

“Revenue managers have to have a balance of skills — we have to be a bit nerdy, but be able to explain and sell something the executive team doesn’t agree with. If you can’t confidently explain through numbers or facts it’s not going to work.

“I interview revenue managers every week and there aren’t many good ones around,” continues Markiewicz. “We have to develop them. There is a lack of academies — Marriott and Starwood have them, but there aren’t enough.”

While high turnovers are often associated with growing expatriate markets such as Doha, she says that ensuring open communication between departments and, as always, valuing employees can minimise loss of staff to competitors.

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National outlook
It’s not all doom and gloom. Over the next three years, TRI Hospitality Consulting expects supply and demand will level, and then there is the FIFA World Cup planned for 2022. In the interim, Qatar Tourism Authority (QTA) has various developments planned to entice travellers.

QTA director of tourism Al-Bader outlines a number of initiatives under way, from infrastructure and finance deals to the development of theme parks. He affirms that the new Doha airport will open before the end of 2012, with Doha port to open in 2015 to foster cruise business.

He reveals that 47 exhibitions are scheduled to be held in 2012 at Qatar National Convention Centre, despite it having only opened in December.

“We also have the Qatar Foundation Exhibition Centre,” Al-Bader adds. “Imagine, at the end of this year we will have our new exhibition centre belonging to us by Doha City Centre. So that one is 40,000m², and our exhibition centre is 15,000m², and QNCC is 40,000m², so imagine we will have almost 100,000m² [available] if we have a big exhibition.

“So with our new exhibition centre it will be much more than this number of 47 [exhibitions booked] because a lot are waiting,”says Al-Bader.

Markiewicz tells the revenue managers: “We have to think that the destination is going to move forward and we can change the facilities and services to match the people coming”.

But at the same time, revenue managers must be prepared for Qatar failing to increase demand to meet the growing capacity in the near future, says Markiewicz. Afterall it’s the revenue manager’s job to worry.