GLOBAL REPORT—As the fallout continues from the United Kingdom’s decision to leave the European Union—the pound has fallen to its lowest level in more than 30 years, ratings agency Standard & Poor’s stripped Britain of its top credit rating, the country’s political parties are in chaos and talk of Scottish referendums to leave the U.K. have restarted—Ravneet Bhandari, CEO of LodgIQ, a revenue management platform, gave Hotel Business some insight on how this will affect the hospitality industry.
“Our hypothesis is that there will be an impact on overall corporate business, and meetings and corporate groups. Through our various data sources and patented algorithms for market forecasting, we estimate a downward trend of somewhere between 3-5% slowdown in overall corporate business over the next six months or so,” said Bhandari.
He noted that the devaluation of the pound will affect the demographics of hotel guests. “The devaluation of the pound and favorable exchange rates will make London, in particular, much more attractive to U.S. and European leisure business,” he said. “Overall demand levels should stabilize, although the composition is likely to change. We also believe that alternative accommodations like Airbnb will see increased activity. All of this is likely to result in a reduction in prices and overall ADR.”
Despite the current turmoil, Bhandari noted that it’s important for hoteliers to stay calm. “It’s imperative that hoteliers not overreact and really understand the demand and pricing dynamics, not just at their property, but at an overall market level,” he said. “There are likely to be changes in the overall mix of business and demographics in the short to medium term, but an analysis of forward booking activity and an accurate forecasting methodology should be able to provide an early warning system. Technology should be able to assist with this, and it’s important to evaluate and invest objectively in a platform that best serves these requirements.
“It’s also critical that hotels not be drawn into deep discounting,” he continued. “As far as direct channels are concerned, hotels should explore value adds and dynamic packaging, and try to personalize offers to their evolving demographics. Finally, this is a time for hotels to explore every possibility to leverage relationships with the major OTAs: not through price, but placement and promotional bundling.”
—Nicole Carlino