According to a July 5, 2024 release by the American Hotel & Lodging Association (AHLA), the industry reported a hotel staff shortfall of 196,000 compared to February 2020 numbers. As we enter the 2025 hotel budget season, doing more with less has become a highlighted theme.
There’s a stark difference in consumer behavior and buying patterns post-pandemic as well. Hoteliers that weigh their time more heavily toward interpreting holistic forecasts and managing outliers rather than dropping on-the-fly decisions based on short-term, on-the-books changes are set to emerge on top when it comes to optimizing their valuable time.
Post-Pandemic Changes
Unlike prior industry recovery cycles, the post-pandemic era has seen average daily rates (ADRs) rise at a faster clip than demand. Leveraging the Kalibri Labs dataset for 2023, occupancies were trailing 2019 pre-pandemic capture by -2%, while ADRs rose +15% ahead of a 2019 baseline.
Customer segmentation is a key element driving rate capture as branded hotels — on the heels of pandemic accelerated offerings — rolled out loyalty tier statuses and surged marketing programming to retain brand-loyal guests. Want proof? Loyalty member rates were up +14% by actualized demand share across weekends in 2023 when measured against 2022 production.
A Case Study
Let’s look at the impact of lead time using a branded hotel in a major metropolitan area, the central perimeter area of Atlanta, GA. For 2023, the subject hotel displayed in blue in the image below saw 49.6% of all volume booked within 5 days of arrival. Of those bookings, 40.7% came from outside the hotel’s loyalty program and 40.8% came through indirect channels, aggregated via the Global distribution system (GDS) and online travel agency (OTA) sources. A sound commercial strategy for a hotel with extremely short lead times is to control the customer journey. This presents a strong challenge when you have such heavy production converting through indirect sources. Furthermore, according to Lodging Econometrics’ Q4 2023 U.S.
Construction Pipeline Trend Report, Atlanta ranked second nationally in the number of hotel openings in 2023. This increased supply drives competition, placing strain on a consumer's loyalty to a particular brand.
Thoughtful Analysis Is Key
This all works together to intensify short-term volatility. When the broader picture of impact by business mix and channel goes unmanaged, the result is knee-jerk reactions. Indirect channels have even greater inflated cancellation rates over direct channels, as brand.com, voice, and property direct allow for greater control of the customer journey by mitigating, to some degree, consumers' desire to shop around. Monitoring the cancellation impact requires a dynamic competitive lens with analysis parsed by each customer segment. Expanding to targeted competitor groupings and the broader sub-market view can provide a robust understanding of demand expectations and diminish the outcome of impulsive decision-making. The shrinking booking window compounds the effect of booking behavior changes for even the most data-savvy of commercial leaders. An analysis of all 2023 reservation data reveals that 47% of bookings are made within 7 days of arrival. If it’s common practice for guests to shop vast channels, book and rebook, stack reservations and commit in the week, for the week, then it makes sense to build a holistic picture of the final expected impact of this behavior.
Expanding out to Atlanta's broader central perimeter submarket, 24.2% of demand in 2023 was booked the day of arrival at a $104.94 hotel-collected average daily rate. That’s -17.3% lower than rates booked across all lead times for the year. This pattern of diminished rate capture, coupled with shorter lead times, creates a headwind that can be reverse corrected when hotels refrain from RMS overrides to maintain price positioning in the week, for the week of arrival.
As part of a regular cadence of strategy alignment across the commercial leadership team, balancing the hotel’s business mix with a particular focus on commercial versus leisure expectations will help to layer in the most profitable business. Leisure business, including primary segments such as retail and promotional, may have a much shorter aggregate lead time than volume-based segments like corporate or social group blocks.
Data Drives Decisions
Determining optimal inventory allocations for each of these segments is a science that should be rooted in data. In 2023, some 26.1% of all transient demand in the central perimeter submarket booked greater than two weeks prior to arrival and 73.9% booked within two weeks of arrival.
It’s imperative that strategies are aligned across the broader commercial team to preserve a prescriptive amount of inventory for bookings transient leisure in nature, rather than committing too heavily on volume-discounts further out. This is why the Kalibri Labs data science team provides an 18-month predictive forecast on the HummingbirdPXM commercial strategy platform. Its algorithmic based-forecasts and the ability it provides to build trust in daily decisions generated by the hotel’s revenue management system (RMS) will help simplify the tens of thousands of decisions a commercial leader faces with when analyzing pricing and inventory management. The HummingbirdPXM forecast uses a large training set of annualized historical data that considers seasonal expectations and submarket thresholds by rate category. Additionally, offers a separate model that places greater emphasis on recent pickup trends to calibrate across shifts in consumer behavior. Most important, cancellations and booking lead times are feature sets imperative to the models. Most of us rely on machine learning every day through weather applications, clicking into personalized social media advertisements or simply navigating traffic. The Kalibri Labs predictive forecast models can remove human biases and place more reliance on feature sets tuned by channel mix, sustainable value positioning, price sensitivity by rate category, and day-of-week swings. A hotel’s revenue capture and staffing needs are at risk if it relies too heavily on simple, on-the-books monitoring. The steady use of automated forecasting will greatly reduce the workload for hotel teams, allowing them to focus more on commercial strategy and increasing revenue. Macro and micro industry impacts, such as inflation, political uncertainty or rising labor costs, are sure to influence 2025 hotel budgets.
