For hotel owners, low season and other periods of low demand represent a major challenge, as fewer rooms being booked means less money coming in and that can have serious cash flow repercussions. This is why it is so important to optimise revenue and ensure you are able to bring in as much money as possible from the guests you are able to attract. Here, you will find 12 tips that will help you to achieve this aim and maintain a healthy financial situation.
- Seasonal and Accidental Low Demand
- What Does a Low Demand Period Mean for Your Hotel?
- 12 Tips to Optimise Revenue in Low Demand Periods
- 1. Anticipate Through Forecasting
- 2. Keep a Close Eye on Your Pricing Strategy
- 3. Optimise Your Distribution Channels
- 4. Optimise Your Advertising Strategy
- 5. Optimise Your Marketing strategy
- 6. Use your Database to Address Specific (Loyal) Guests
- 7. Optimise Revenue With Up-Selling & Cross-Selling
- 8. Prioritise Your Hotel’s Local Proposition
- 9. Attract More Business Guests & Meetings
- 10. Work With Tour Operators
- 11. Organise Events to Boost Low Demand
- 12. Offer Packages That Fit the Needs of Your Target Group
- Tips for Hotels During the Corona (COVID-19) Crisis
- More Corona Tips to Prepare for Better Times
Seasonal and Accidental Low Demand
Within the fields of hotel and hospitality management, ‘low demand’ refers to a period of time during which fewer people want to book rooms in your hotel. In other words, demand for your hotel rooms is lower than normal. In general, periods of low demand can be separated into two main categories, which are as follows:
Seasonal low demand refers to low demand that occurs at particular times and is usually fairly predictable. For example, many leisure-orientated hotels experience higher demand during weekends and holiday periods, but lower demand during the working week. With business-orientated hotels, the opposite applies, as mid-week demand is higher.
If you have a beach resort in Europe, you would anticipate high demand from June until August, but low demand from November until around March, due to the weather, whereas ski resorts experience low season in the summer. Beach resorts in Australia would expect a high level of demand from December to February, which are their summer months.
As seasonal low demand tends to be logical and follow the same patterns, it is easier to forecast and optimise revenue.
“Accidental” low demand is, by comparison, much harder to predict and occurs for a range of reasons, including economic and geo-political events and at times of crisis. For example, the financial crisis in 2008 had a global impact on travel and hospitality, as private individuals had less money to spend and businesses had to contend with uncertainty.
The causes of accidental low demand can be global, national or local. For instance, political instability in Turkey in 2016 had a large impact on Turkish resorts, as many tourists avoided visiting the country and opted to go elsewhere.
Currently, the coronavirus (COVID-19) pandemic leads to event cancellations and local businesses, like restaurants and bars, closing. And travel restrictions brought in by world governments are resulting in lower demand across the board.
Accidental low demand is extremely difficult to forecast, and the duration of the drop off in demand can be impossible to know, which can make hotel management and efforts to optimise revenue much more challenging.
What Does a Low Demand Period Mean for Your Hotel?
Lower Occupancy Rates
The most obvious consequence of a low demand period is lower occupancy rates for your hotel. In other words, the percentage of your hotel rooms that are actually booked at any given time is likely to decline, because fewer people are interested in visiting your hotel. This then results in less revenue coming in from room bookings and will likely mean less money being generated by other services within your hotel too, such as your bar or restaurant.
At times of high demand, hotels can thrive even with tough competition. After all, if enough people are visiting a location, a single hotel will not have enough room for them all. However, in low demand periods, where the same competition exists, this becomes a far greater challenge. With fewer guests to compete for, rival hotels attracting guests away from your hotel and towards theirs can have a devastating impact on your financial results.
When demand falls, many within the hospitality industry will simply lower the price of their rooms, in order to attract the customers that do exist and to lure customers away from rivals. Of course, if you and your rivals both adopt this strategy, you can find yourself engulfed in an on-going pricing competition. The main dangers here are being beaten on price by a rival, or lowering your prices to a level at which your hotel stops being profitable.
12 Tips to Optimise Revenue in Low Demand Periods
During your low demand periods, it is absolutely imperative to optimise revenue and the following 12 tips can help:
1. Anticipate Through Forecasting
Forecasting is a strategy which relies on historic performance data, wider industry data and other information to predict future levels of demand. It is a crucial tool for any hotel looking to optimise revenue during periods of low demand, because it allows you to anticipate these periods in advance and plan for them.
Accurate forecasting will take into account market circumstances, bookings that have already been made, local events, performance information from rival hotels and fluctuations in demand over previous years. With a revenue management system in place, you can even automate the forecasting process and always have up-to-date information.
Forecasting should be performed regularly, covering short-term and long-term periods. From there, you can make informed decisions about room rates, expenditure and which demographics to target marketing efforts towards.
Find more detailed information about forecasting in the article “Forecasting Tips to Improve Your Revenue Management Strategy”.
When demand for your hotel rooms is low, the pricing strategy you adopt can be critical. Charging lower room rates could help to attract price-sensitive customers, who may then choose your hotel over a competitor, resulting in incremental revenue. However, low prices can be detrimental during certain low demand periods too.
For instance, if demand is very low, reducing the room rate may not work to attract any new customers and all it will result in is the few guests who wanted to book anyway paying a lower rate, resulting in less revenue. Moreover, if you reduce prices too much, you can damage the value perception of your hotel and its services.
Therefore, you need to use the right pricing strategy for the right moment. You can learn more about pricing strategies within the hotel industry from our “Pricing Strategies to Increase Your Hotel Revenue” article.
During low demand periods, you must make your hotel as easy to find as possible, so you do not miss out on the customers who do want to book a room. Review your distribution mix and ensure your hotel is available on all of the relevant channels, including online travel agents (OTAs), hotel metasearch engines and global distribution systems.
If there are gaps in your distribution mix, expand it with new, relevant channels and markets to help to compensate for lower demand. Meanwhile, you also need to think about how to convince guests to book a room in your hotel, instead of a rival. Upload great pictures, write a captivating hotel description and make your unique selling points clear.
When it comes to working with OTAs, pay attention to any promotions they have available too. Some OTAs will allow you to pay for higher placement on their search engines, or for ad campaigns targeting key demographics.
Find more detailed information about distribution management in the article “Tips To Increase Your Hotel Bookings Through OTAs“.
It is never enough to simply hope customers will find your hotel, but this is especially true in periods of low demand, which is why it is so vital that you have an advertising strategy in place. Your ads can take many forms, from Google hotel ads, to social media advertising and promotional opportunities on OTA platforms.
It may also seem counter-intuitive to invest at a point when revenue is slow, but this is why you need to be tactical. The goal is to increase high-quality traffic by attracting your target demographics – those who are most likely to book in low season. While rivals cut down their ad budgets, strategic investment could make a huge difference.
Once your advertisements are up and running, you also need to keep a close eye on the ROI for each type of ad. If the ROI is too low, it may be because demand is too low, even with the advertisement, or that that particular advertisement type is not working. Optimise your strategy as you go and allocate your budget to the types that produce a ROI.
Find more detailed information about advertising strategies in the article “Effective Hotel Advertising Strategies”.
Furthermore, you also need to optimise your marketing message. Be clear on why a potential guest should choose your hotel over a competitor and consider the unique selling points, whether that includes the location, style of hotel, level of service, level of comfort, facilities, or even things to do in the local area.
You can address different target groups with a different USP or message. For instance, a business traveller may want excellent wi-fi and in-room facilities, while a leisure guest may be more interested in fine dining, spa facilities or local tourist sites. One tip is to create different landing pages on your website for these different target groups.
Find more detailed information about marketing strategies in the article “Essential Hotel Marketing Strategies“.
Another important strategy to optimise revenue in low season is to look into the data available to you via your property management system and target specific, loyal guests who have a certain need, or who have specific characteristics. The needs and characteristics you target will depend on your hotel, its location and the reason for low demand.
If you experience low demand in the middle of the week, for instance, you might target previous guests who are retirees, with a passion for hiking. If you struggle to fill rooms at the weekend, why not offer regular mid-week business guests a discount so they can extend their stay to cover the weekend too?
You could also reach out to guests who stayed at your hotel during the same period in a previous year, or offer attractive spa deals for previous spa guests. The benefit of this is the ability to reach a key target audience, who you already have some level of a relationship with, without adding to your advertising costs.
When demand for rooms is low, in order to optimise revenue, you need to maximise the amount of money you take from each guest. The best way to succeed in this task is to capitalise on any up-selling and cross-selling opportunities that come your way, and these opportunities start from the moment a guest starts to book with your hotel.
In simple terms, up-selling is the practice of encouraging a customer to spend more on their current purchase. With hotels, this could mean persuading them to pay more for a larger room, a better bed, or a room with a better view. Cross-selling, meanwhile, encourages additional purchases, which could mean tours or spa services.
Low season may make it difficult to increase the volume of bookings, but up-selling and cross-selling can help you to increase the revenue generated from existing guests, which can help to make up the shortfall.
Find more detailed information about upselling strategies in the article “How Much Revenue Could Your Hotel Make From Upselling?”.
As previously stated, some periods of low demand can impact upon a whole country or region, with the rest of the world becoming less likely to want to travel there. The causes may be seasonal, political or based on other factors, but the damage can be reduced if you make your hotel is not solely dependent on international travellers.
To do so, you will need to prioritise your local proposition and ensure you are offering something to people in the nearby area. For business guests, this could be excellent facilities, such as conference rooms or function rooms, while for leisure guests it might mean having an amazing restaurant, bar, gym, spa or sports facilities. Due to COVID-19 crisis many hotels and restaurants are closed down for a certain period, but are still allowed to deliver food at home. Therefore quit a few choose to generate additional revenue by partnering up with services like Uber Eats and Deliveroo.
Promote these facilities to customers in your area and you may also benefit from repeat visits from locals.
When demand is low among leisure travellers, some of the shortfall may be able to be made up by attracting more corporate travellers and business meetings or functions. Corporate travel is a continuously growing market, and business travellers are a useful demographic to attract, because they often return to the same areas multiple times.
The rise of ‘bleisure’ – where business travellers extend trips for leisure purposes – means business travellers are also becoming even more valuable. Moreover, a lot of business travel takes place regardless of factors like the weather. Loyalty programmes, fast internet access and corporate amenities can all help to attract these guests.
In our article “Tips to Attract More Corporate Travellers to Your Hotel”, you will be able to learn more about the importance of generating bookings from corporate travellers, along with some of the best tactics for doing so.
Tour operators sell package holidays and other package travel products, making it much easier for customers to make a booking. For hotels, working with tour operators provides a unique opportunity to optimise revenue in low demand periods, as these operators tend to be able to attract specific kinds of guests.
For instance, if your hotel is located in a city, there will be tour operators out there who specialise in organising city breaks. The key to success when working with tour operators is good forecasting, identifying the right tour operators to work with, and understanding what they can provide for your hotel.
Tour operators sell a package deal, including flights and accommodation, but the hotel rate will typically be lower than what you would usually sell for. However, what tour operators can provide is volume of guests, and this can be especially beneficial at times when many of your rooms would otherwise be left vacant.
During periods of low demand, some guests may still be able to be attracted to a hotel if they have a specific reason for going there. With this in mind, some hoteliers and hotel chains have successfully organised in-house events during the low season, in order to attract incremental bookings and bring in extra revenue.
Examples of this include organising events with well-known performers, artists or businesses. These might include stand-up comedy shows, concerts, theatrical performances, exhibitions or club nights. In this context, the hotel room becomes a convenience for anyone attending the event, but especially those who have travelled a long way.
The big advantage of this approach is that you can advertise to and attract a target audience with a specific interest (i.e. the event). If you do not have experience in putting on events, you can also work with an event organiser.
Finally, once you have useful data explaining why you are experiencing low demand, and also have a reliable forecasting model, you can use the information available to you in order to identify a clear target group to focus your efforts on. With this target group identified, it becomes much easier to appeal to them through packages.
These package deals may consist of multiple night stays, dinners being included in the room price, or even the inclusion of concert tickets, local tours, or entrance to a local museum. You could create a “couples” package, which includes spa treatments, or your target group may share a common interest, like cycling, where you can offer equipment.
Be clear on the target group, design a special package for them and aim your promotional efforts towards them.
Tips for Hotels During the Corona (COVID-19) Crisis
The Corona (COVID-19) virus global pandemic is an unprecedented crisis and hotels are among the many businesses feeling the effects, as global travel restrictions come into force and entire countries face ‘lock down’ procedures. In the article “Tips for Hotels During the Corona (COVID-19) Crisis” you will find tips to optimise revenue and limit the damage during the Corona crisis.
More Tips to Prepare for Better Times
The coronavirus pandemic (COVID-19) crisis has hit the hospitality and travel industry hard. Due to (partial) lockdowns, travel restrictions and social distancing, business events and holiday trips are postponed or cancelled, resulting in a decline in business.
In the category “Corona” you find a selection of tips which help businesses operating in the hospitality and travel industry to recover and prepare for better times.
Low demand periods are an inevitable part of running a hotel, but there are ways to offset the damage. Using the 12 tips provided to optimise your revenue, you can make sure your hotel remains successful all year round.