Timing is everything. It’s a mantra that is repeated in boardrooms and break rooms, and is heard in stories ranging from sales pitches gone wrong to IPOs that made investors millionaires. And in the travel and tourism industry, timing has always been part of the best-pricing game. Airlines traditionally offered the best rates at least 21 days before travel and hotel reservations required cancellation notice of 24 hours before check-in to avoid cancellation fees. Until recent months, it usually paid to plan ahead.
But times have definitely changed. In 2008, Utah’s travel-related businesses were enjoying the best of times. Record numbers of visitors and dollars poured into all facets of the state. Large conventions and groups were already booking several years into the future. The Utah Office of Tourism had a large budget focused on bringing visitors to the state and a new marketing and advertising push for Utah was seen nationwide.
And then the recession arrived. “Our budget had a big hit last year at 37 percent,” says Leigh von der Esch, managing director of the Utah Office of Tourism. Utah’s hotels and resorts saw occupancy rates in 2009 dip to the lowest level recorded (57.8 percent) since the state started keeping track in 1990. And compared to 2008, hotel revenue dropped $164 million in 2009 to $836 million, according to the 2010 Economic Report to the Governor. Group bookings, conferences and conventions—long the mainstay of hotels and resorts in Utah—also fell off steeply.
Most of those in the industry agree that the last 18 months have been the worst of times.
The New Booking Reality
Perhaps most noticeable on the new travel and tourism landscape is that customers are more savvy and are wielding a bigger bargaining stick. They know that space is in abundance and lodging properties are fighting to fill their guest rooms and meeting facilities. Short-term bookings have lodging properties on edge, as visitors are delaying their reservations in hopes of scooping up discount deals at the very last minute.
Although it’s true that last-minute deals have always been on the market, this economic downturn is making visitors believe that deals will surface if they just wait long enough. Interestingly, the trend of short-term bookings was, at least partially, a problem of the industry’s own making. When bookings dropped dramatically in 2009, properties dropped their rates to attract guests. Coleen Reardon, director of marketing at Deer Valley, explains, “Lodging properties discounted their rooms to try and drive business and so if you reserved in advance, you paid the most. Hence, guests were leery of booking early and paying more than they might need to.”
In essence, the last-minute deals that properties promoted eventually led to a delay in future bookings. “We heard from our guests that they weren’t necessarily looking for a better deal by holding off but instead making sure they got the best deal possible,” Reardon says.
And while guest reservations that are made with little advance notice are better than letting rooms and facilities sit vacant, it is difficult for properties to manage staff and resources on such short-term notice. “Not having a consistent forecast of business makes staffing very difficult to accommodate large groups and puts a tremendous strain on our staff to adjust to the increase in occupancy over the group’s stay,” says Bruce Fery, executive vice president, Grand America Hotels and Resorts.
Creativity in a Tight Market
Yet because no individual travel destination has the ability to change booking trends of price-conscious visitors, lodging properties are better positioning themselves to handle last-minute arrivals.
For instance, Fery explains that his staff has new operating systems to react more quickly. “We’ve created a culture of employees with an enhanced knowledge base by implementing aggressive cross-training practices within our staff so we have an expert team that can pitch in wherever the demand may be—whether turning a banquet room from a meeting to lunch or helping to clean rooms on a busy checkout day. We’ve retained our most talented and creative employees to implement more resourceful practices.”
Witnessing the damage that last-minute reservations has on staffing and service levels, Deer Valley staff assured guests during the 2009-10 ski season that rate integrity would be one of the resort’s top priorities. From the beginning of the season, Deer Valley advertised specific rates at certain times to all potential guests and did not offer last-minute discounts to visitors.
“We decided that we would not come off of our rates so that our guests could be sure they were getting the best possible rates whenever they booked,” says Reardon. Instead, Deer Valley properties attracted additional bookings by making adjustments to minimum night stays and other offerings depending on the season.
Additionally, high-end property openings, such as the recently opened St. Regis and The Montage scheduled to open in December 2010, create “must stay” opportunities that guests are willing to pay top dollar for. Consequently, competitive rates will still be found in the Deer Valley-area of Park City.
Heightened Customer Expectations
Not only are hotel and resort customers demanding more for their money, their expectations have not fallen even if the price they pay has. Reardon and Fery are finding that customer service is often the dealmaker in terms of where guests decide to stay.
“Their stay expectations have increased as much at their willingness to spend has decreased,” Fery comments. “Luxury travelers no longer have as much expendable income, so we find ourselves competing with lower-tier hotels on price and amenities, and have to be sure that our service makes up for the price difference our guests pay.”
Reardon agrees. “Service is more important now than ever as vacationers are really looking not only for a bargain, but for an assurance that their precious vacation dollars and time are spent wisely.”
Utah’s luxury properties are using different measures to ensure the highest levels of customer service, even during the recession. For example, Reardon says, “Our owners made the determination that we would not lay off staff or cut salaries as this would affect the level of guest service we are known for providing. Instead, they chose this time to really cement our servicing brand by giving those who selected us as their vacation destination the same quality and friendly service they had come to expect.”
To balance this, Deer Valley temporarily reduced capital facility improvements. “This philosophy really proved itself this year as we are going to beat last year’s numbers, both in skier visitation and revenue,” says Reardon.
Grand America did the opposite and used the recession time to improve their properties. “We have completed preventive maintenance and upkeep during this downturn and feel that we have an advantage when demand returns, compared to businesses that have let their infrastructure get run-down,” explains Fery. And while Grand America did trim staff levels, the hotel also invested in employee training that ultimately makes those who work there more valuable.
The Future of Utah’s Hospitality
Fortunately, the State of Utah has taken steps to ensure that the travel and tourism industry will continue to produce needed revenue for the state. The Utah Office of Tourism recently kicked off a $2.3 million spring/summer advertising campaign including national cable advertising, TV spots on local stations in Denver, Las Vegas and Los Angeles, interactive (online), and print ads in targeted travel magazines. “It was very gratifying when U.S. Travel released a report of the percentage of increase in tourism spending for various states and that Utah was in the top 10,” says Von der Esch.
And traveler numbers support continued spending. In 2009, the ski industry reported its third best year with 3.9 million visitors and national parks another 5.9 million visitors. Consequently, most industry experts believe that the 2010-11 season will bring Utah’s hotels and resorts renewed interest, slightly increased dollars and hopefully, more advanced planning on the part of the traveler. Von der Esch concludes, “We are cautiously optimistic that we have hit bottom and we are starting to go back up again.”