Last month a hotel company in America reported its best second quarter on record. Revenue per available room touched an all-time high. And here is the line that should make every owner sit up: they did it while selling slightly fewer rooms.
Chatham Lodging, which owns extended-stay and select-service hotels across the US, put up a RevPAR of 158 dollars, its highest ever for the quarter. Occupancy actually slipped half a point to 81 percent. The average rate climbed nearly 4 percent to 195 dollars, and funds from operations per share jumped 22 percent in a year. Read that again. The profit did not come from fuller hotels. It came from the price of the room.
In the same week, half a world away, Blackstone decided to take its hotel company public. Hotel Investment Partners - 61 resorts around the Mediterranean - is headed for the Madrid stock exchange at a valuation of about 6.9 billion dollars. Blackstone spent two years thinking about selling it quietly. It chose the public market instead, because investors will now pay real money for hotel cash flows.
Two different stories, one lesson. This year, the money in hotels is in the rate.
Now let me bring this home, to the owner of a 40-room independent hotel in India.
1. Rate is a decision. Occupancy is a result. The big owners decided what their room was worth and let the last few rooms stay unsold. Most independents do the opposite - shave the rate to fill the house, and call it strategy. One of these is a business. The other is a habit.
2. The cheap room is the most expensive room you sell. Every discounted booking teaches the market your real price, and the market has a long memory. A guest who buys you at 4,000 will wait for 4,000 again. The rate you drop today is the rate you defend all next year.
3. Know your three numbers cold. Average daily rate. RevPAR. Gross operating profit margin. The listed companies quote them to the decimal every quarter. If you cannot state yours for last month without calling your accountant, that is the first fix, and it costs nothing.
4. Your P&L is your valuation. A 6.9 billion dollar price tag is just a profit story wearing a suit. Whether you ever sell, refinance, or bring in a partner, your hotel is worth a multiple of the earnings you can prove. Pricing power is the strongest proof there is - stronger than occupancy charts, stronger than a full parking lot.
Now the caution, because rate is a sharp tool and I have watched it cut both ways.
Pricing power is earned, not declared. Chatham held its rate because the product, the service and the reviews held first. Raise the price on a tired property and you will quickly learn the difference between pricing power and wishful thinking. And remember the scale difference: the giants have treasuries and hedges, you have one balance sheet. Grow the rate one season at a time, fix the product as you go, and let the guest experience carry the number.
For years our industry celebrated the full house, and owners bragged about occupancy at parties. The times have changed. The owners who will look smartest this decade are the ones who can quietly say: my hotel was a little emptier, and a lot richer.
HPRD
No comments:
Post a Comment