Hotel managers do much more than ensure their operations run smoothly and their lobbies shine. In addition to monitoring day-to-day operational details, they must react quickly to predicted bookings and set room prices in advance. If they do it right, they see high occupancy rates and reap a strong profit.
“An empty room is a lost commodity, that’s the name of the game,” says Chris Davison, general manager of the Island Inn on Sanibel Island.
The revenue managers have various tools—including hotel room pricing software—to help them find the right room rate. If reservations are lagging in a given week, for instance, hotel managers can lower prices and push the empty rooms out over Expedia, Orbitz, Hotels.com and a dozen other online travel agencies, or OTAs. It’s known as flex booking.
“We flex using third-party OTA websites that allow consumers to search for, book and buy (rooms) online,” Davison says. “We can flex inventory to them when we need to fill a room.”
Successful Southwest Florida revenue managers are seeing good occupancy rates this summer. Bill Waichulis, managing director of Pink Shell Beach Resort & Marina and Sandpiper Gulf Resort on Fort Myers Beach, focuses on future reservations like a stockbroker follows the market. When demand rises, visitors are willing to pay more, he said.
“We capitalize, we watch pace,” Waichulis says. “Reservations for February, March, April—we see the calls coming in, the bookings, and we push the rates up.”
Filling those summer months
This year’s brutal winter sent tourists to Florida, as usual, during the peak season. The Collier County Convention & Visitors Bureau said local hotels achieved average occupancy rates of 67%, 78% and 78% in January, February and March of 2022, respectively. Beach hotels saw even higher occupancies.
Hoteliers also are filling rooms during the slow, languid summer season. Waichulis said his June and July 2022 occupancy rates were up 11% over 2021, but his August 2022 bookings are the same as his August 2021 bookings—a strong 2022 summer.
That aligns with a June 2022 Collier County tourism report that says international visitors to Collier County are at the highest point since before the pandemic shut the show down in 2019.
“International travelers are finally making their post-pandemic comeback to Collier County, with 21,000 out-of-country visitors last month alone,” the Downs & St. Germain Research report says. “International visitors comprised only 17,000 in June 2019.”
Davison, at the Island Inn on Sanibel, is seeing the same kind of occupancy rates. “August and September are pacing well, with rates slightly higher than last year,” he says.
Nevertheless, hotels must compete for those domestic visitors. Almost half of visitors in June 2022 were considering other destinations before picking Collier County. Compared to June 2021, lodging was down more than 15%, with rates averaging about 10% more than last year, according to the Downs & St. Germain report.
Marwan Haddad oversees sales and marketing for the 263-room Westin Cape Coral Resort at Marina Village. “Restaurant and spa sales on property have been consistently strong, with our regular bookings having returned to a more normal amount this summer season,” Haddad says. “We continue to see strong demand from both leisure and group customers. Demand level is even exceeding 2019 levels.”
This summer, Westin’s June-July occupancy rates returned to traditionally softer off-season bookings. “Our occupancy rates [varied] from 30% all the way to 100% on some weekends or when we have groups in house,” Haddad says.
Pricing the room correctly
To offset slow bookings, the room rate must be competitive, but not so low as to lose money for the hotel.
The base cost of a room (see sidebar, “What’s on a hotel bill?”) is based on demand and projected reservations. Hotel revenue managers calculate Revenue per Available Room, or RevPAR, by multiplying a hotel’s average daily room rate by its occupancy rate. For example: If your hotel is occupied at 70% with an ADR of $100, your RevPAR will be $70.
Managers must weigh internal expenses—electricity and other utilities, property tax, employee wages, food, alcohol, everyday cleaning supplies—when setting the minimum price for a room. External factors, such as season, competing hotel room rates and upcoming festivals, fishing tournaments or other tourist events, leave managers constantly adjusting their rates.
The Island Inn opened in 1895 when Sanibel Island was home to a handful of families. The 54-room inn has a mixture of rooms, suites, studios and cottages. Davison calls it “quaint old Florida, low-density environment.”
“We use an active yield management system that fluctuates room prices based on demand and pricing to maximize revenue,” Davison says. “But I have other input costs: utilities, water, electricity—we have over 100 air conditioners on property.”
Drawing customers from around Florida
In the summer, Southwest Florida hotels market to residents in other parts of Florida, including large cities.
“We get a lot of ‘tank of gas’ customers, anywhere from Ocala to Daytona, south to Miami,” Davison says. “That customer really comes out in the summertime. We also get regional customers, from Georgia and other states in the region.”
The Westin, at the mouth of the Caloosahatchee River, relies on locals to fill the summer slow season.
“We offer a Florida resident rate and summer packages that guests can take advantage of when booking rooms, and we also incorporate geographical targeting via our social media channels to help attract locals in the area,” Haddad says. “We see a large number of bookings from guests in other parts of Florida, especially in the summertime when travelers are looking to experience road trips and explore different areas without having to leave the state.”
Next year’s outlook
There are hints that hotels will see fewer bookings next year. The Lee County Convention & Visitors Bureau predicts the occupancy rate will drop to 70.7% in 2023, versus 71.2% this year. The average cost per room will drop from $182 to $178 next year, and revenue per available room will likewise drop from $130 to $126.
Waichulis agrees with predictions that hotel and motel bookings could weaken with increased competition.
“Our projections for 2022 and 2023, we’re starting to see the pullback a little bit. I can’t see us charging as much,” says Waichulis, whose properties enjoyed 85% occupancy year-round.
But hotel managers have learned not to reduce room rates excessively—in the 2008 crash, hoteliers raced to the bottom in prices to steal share from each other, but all that caused was multiple years to regain the rate that was discounted, Waichulis said. “If you charge 30% less … you can’t get that (lost revenue) back in less than a year,” he says.
So, after weighing the internal and external costs, hotel managers will use all their tools—third-party OTAs, hotel pricing software and common sense—to find the right room price. Like other managers, Davison will use his skills to keep the 127-year-old Island Inn operating at a profit by concentrating on the details. “If you know the cost of one air conditioner, multiply that times 100,” he says. “Though we’re a small place, those things add up.”