The final numbers came in and we did well. Occupancy and average rates were up and finished 2022 way up from 2021 and even 2019 in many markets. Our home market of San Diego finished at 72.6% occupancy and $203.50 average daily rate for a revenue per available room of $147.75! Recession? If it happens, we will not notice it. Sure, technology companies prospered while we suffered during the pandemic. But now, they are laying off tens of thousands of employees and we can’t find enough employees. We are not going to experience any pullback in business—it is our turn to have success while others retrench.
Yes, inflation and staffing challenges remain but the inflation grows our average rates and the staffing challenges are an opportunity to be lean and mean. There is less new construction due to rising interest rates and construction costs, which means less new supply. If supply growth stays low for a couple of years, that is not all bad.
Most economists expect gross domestic product growth to be flat in 2023. Forecasts for our hotel industry are for occupancy to grow by about 2% and average rates up maybe 3% for RevPAR growth of 5%. Naturally, results will vary by geographic market and property type but all should see positive growth.
Key Trends
“Mullet travel," or combined business and leisure travel, means more travel by remote workers than we have seen. This is not bad for our hotel industry; it just blurs the number of business versus leisure travelers and allows hotels to sell more food and beverage in public spaces.
Once we have these guest reservations, we can communicate with guests before, during and after arrival and create more loyalty. The big advantage we have now is that we can deploy technology to make this much easier than just a few years ago.
Training is an area that is under disruption and this can really create great results quickly. “It is clear that employees who stepped up during the pandemic are now supervisors or even managers and many of them have received limited to no training,” as quoted from our "Top 10 Hospitality Trends To Watch For in 2023" blog published in December on HNN.
Group Business
Event planners have seen a huge increase in demand over the past year. The industry already saw a big increase in events booked and held in 2022, and are seeing an even better 2023. According to a June 2022 survey by Northstar Travel Group, 40% of event planners see themselves planning even more events than they are now in 2023. That survey also found that 48% of planners are more optimistic about the future of the industry than they were just six weeks prior to the survey.
According to our own research as well as research by Cvent, sustainability and diversity are top causes for socially conscious planners and attendees. Further, mental health looks to be a huge focus and the Global Wellness Institute expects to see 21% percent annual growth in the wellness tourism industry—that means more events focused on holistic health, including meditation, physical activity, farm-to-table food and even art classes. A venue able to provide these kinds of activities will outperform its competition, according to Cvent.
On the Sales Ground
At the ground level, sales execution has changed. According to a January column by hotel sales expert Doug Kennedy, “hotels with larger sales teams should establish a centralized role of ‘sales lead catcher’ who can sort and prioritize leads, keeping salespeople focused more on the hottest leads, while responding to even the seemingly ‘weakest’ leads.” Kennedy reinforces the importance of training hotel salespeople on the formulations, data points and RM systems that revenue managers use, and by training revenue managers to better understand the group and business travel markets, parties on both sides will make better decisions together.
Kennedy also suggests rather than setting a “quantity” of outbound sales efforts, train your team to research before they reach out, therefore enabling “warm calling” vs. “cold calling.” This recommendation by Kennedy, one of the master sales trainers in the industry, is paramount to sales success.
In the Trenches
Lastly, the day-to-day operations must include leaders who have a real feel for customer service and accounting personnel who understand budgeting, forecasting and control systems. Without those, nothing works. It’s time to double-check our business plans. Are we forecasting growth and if so, is it real? Are we up-to-date on trends and do we have a team that is ready to lead in the 2020s? To a great 2023!
Robert A. Rauch is founder of R.A. Rauch & Associates, a hospitality management and consulting firm based in San Diego.
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