As we approach 2023, Hoteliers surveyed for our October 2022 edition of The Hotelier PULSE Report show increased optimism for business performance over the coming year. Our market data also shows that group bookings are making a strong comeback, and despite rising costs and looming inflation concerns, the industry expects ADR to continue increasing over the next 12 months.
We sat down with Rajesh Vohra, Owner of the Sarova Hotels group in London, to get his perspectives on why hoteliers expect ADR to hold and the impact of MICE business on hotels that have historically catered to the business travel segment.
We’re seeing increased consumer confidence reflected in the rates booked. Over this period in 2021, non-refundable bookings represented just 10 to 15%, when compared to fully-flexible bookings. In 2022, it increased to 50%.
Hoteliers show increased optimism around business performance over the next 12 months. Why do you think that is?
Following the uncertainty of 2020 to 2021, travelers are no longer as concerned about health and safety precautions. We’ve also passed the worst of the travel disruptions over the summer of 2022. Thus, consumers are more confident about traveling.
We’re seeing increased consumer confidence reflected in the rates booked. Over this period in 2021, non-refundable bookings represented just 10 to 15%, when compared to fully-flexible bookings. In 2022, it increased to 50%. Taking all this into consideration, it’s unsurprising that hotels feel more confident about business performance in the coming year.
We’ve seen ADR reach record-breaking levels in 2022. Do you expect this to hold or increase?
As prices increase and we are faced with impending inflation, the marginal cost of sale has become significantly more important. Prior to the economic downturn, Hoteliers worried about reaching a baseline revenue to cover fixed costs and then considered all rooms revenue above that baseline to be mostly profit
In today’s world, that is no longer possible. More than ever, Hoteliers are concerned about reducing costs - for example, through leaving parts of their properties empty for extended periods of time or reducing utilities expenses through giving guests the choice to opt out of turndown service to promote sustainability. The marginal cost of selling a room is now a material amount and thus the view now seems to be that if a hotel cannot profitably sell inventory against rising costs, then there is no point in selling it at all.
Another factor that plays into this is hotel staff, who now have to work harder than ever before to meet increased demand. We would rather look after their wellbeing and not risk overworking them unprofitably. It’s also a challenge to hire in today’s talent-short market, and those who do want employment in hospitality tend to demand higher salaries, which feeds into increasing overall costs. Thus, I do believe that ADR will hold, not because of the market demand but due to cost-based pricing strategies.