I totally understand the impulse many hoteliers have right now to find wins where you can. While there have been many positive stories and things to hold on to during the past year, it's still been remarkably trying as the industry, and the broader world, deal with the effects of a global pandemic we all wish would just go away.
That's why when I say this, I don't mean to condemn anyone or anything, but I also feel like, at this point, it really needs to be pointed out. Rates haven't been as strong as people like to act over the course of the pandemic.
It's a regular refrain I've heard around the industry, often cast as a victory for modern revenue management and strategy: While in previous recessions, rates have gone off a cliff along with demand; this time, rates held strong.
That's great, and in many ways it is a victory, but the fact remains that rates have not held pace with growing expenses, and have not even held pace with broader inflation, indicating that prices in other industries are beating out hotel rates.
As my colleague Kelsey Fenerty — a research analyst at STR, CoStar's hospitality analytics firm — helpfully pointed out, when you adjust for the massive inflation in recent times, the rate growth story kind of falls apart under its own weight.
Just take October as an example. In that month, average daily rates beat 2019 figures by 1.2%, which is not a bad figure when you consider the fact the leisure season had already wound down by that month and the general populace was still in the relatively early days of the delta variant spread.
So good on the collective revenue management and strategy community within the hotel industry for not hitting the panic button and sending rates on a deep plunge.
But when you adjust that figure to the consumer price index for a metric the STR folks like to refer to as real ADR, you get a much less rosy picture. Inflation for that month hit 6.2%, pushing real ADR 5.8% below the same figure for 2019.
The reality is hoteliers are losing ground on rates at the same exact time we're celebrating their ability to not lose ground on rates. It's just obscured by the incredibly complex environment for running a business in late 2021.
Now all of this is probably coming across as extremely negative, and that's not necessarily my intention. I totally see the value in finding wins where you can in a difficult environment, and in fact, that was a big part of the conversation at our recent roundtable with revenue-strategy experts. But at the same time, revenue managers, general managers, owners and asset managers all need to take a pretty sober and honest view of how their hotels are performing and realize the performance on rate needs to improve just as much as demand to get back to a winning formula for the hotel industry in 2022 and beyond.
I hope that can happen sooner rather than later.
Let me know what you think on Twitter, LinkedIn or via email.
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