The Hidden Cost of Pursuing Higher Occupancy
July 5th, 2011Understanding how to gain and maintain consistent occupancy throughout the year is always a hot topic. It doesn’t really matter if I am speaking with the director of revenue for a 5 diamond hotel or the owner of a vacation rental management company – occupancy always comes up.
On a recent new client visit I observed something that has occurred at many different locations and property types:
Agent: Hello Mr. Smith how may I help you?
Mr. Smith: I’d like to make a reservation for a one bedroom unit.
Agent: Perfect, well I do have several available and I’m running a special so I can give you a 15% discount on that reservation.
Wait wait wait, do I need to have my hearing checked? Are agents leading with a discount? You bet, and not just every once in a while but on almost every call. Why? Their manager has placed all the focus on occupancy. They were even incented on occupancy.
So, why would it be scary to incent your agent on occupancy and give them the power to offer discounts? Anyone? Occupancy incentives can work but only in correlation with revenue and conversion goals for your team. It’s putting the cart before the horse by asking them to focus on occupancy instead of asking them to focus on the skills and behaviors that will help them convert more calls and raise occupancy. Focusing on occupancy is not inherently bad. However, what I find is that it almost always leads to fading on rate.
My advice: be smart about how you get to an acceptable level of occupancy. When tempted to fade on rate just remember, the choice to discount your rate today affects perceived value for 5 years on average. Basically, you’re going to have a difficult time ever convincing them to pay more. You’ve effectively reduced your product to a price-based commodity.
So, instead of fading on rate try value-add or packaging. In other words, give them something with a high perceived value that doesn’t reduce perceived value of your product. They get a free fishing trip or Swedish massage or round of golf. Use the relationships you have with other businesses. If I’m sending you a client Mr. Fishing Charter, will you sell me the trip at half price? Even giving something like the 6th night free is better than fading on rate because the perception is different. It’s a special and can actually add value since the consumer knows how much rack rate is and it hasn’t been diluted.
Let me know how this works for you.
Brise Carpenter
Client Advocate
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