Without question, 2020 will go down as one of the most challenging years for the hospitality sector. According to Smith Travel Research (STR), hotels in Maine were down 34% in occupancy, 11.5% in average daily rate, and 41.6% in Revenues Per Available Room (RevPAR) compared to 2019. Portland hotels were hit even harder with a 53.6% reduction in RevPAR vs. 2019. Hotels of all shapes and sizes have been managing through mandated travel and occupancy restrictions, implementing new measures to address health safety, and working to generate new revenues in order to survive.
Here at Camden National Bank, we’re working hard to support our business customers in the hospitality industry. In December we hosted a webinar in partnership with leading hospitality consulting firm, Pinnacle Advisory Group, to address these challenges, generate new ideas, and discuss strategic solutions.
Pinnacle recommends focusing on building (or rebuilding) your:
- Budget – This is an important discipline that takes on even greater significance in an uncertain and difficult market environment. While an annual budget is a standard practice, this year it may make more sense to focus your energies on the first six months, where the likely level of activity is easier to predict. You may consider waiting until the second quarter when the status of vaccinations, the levels of positivity, and the State’s regulatory response are clearer before budgeting the second-half. Alternatively, it may help you to prepare two second-half budget scenarios now, so you’re able to assess the implications of both. If your initial budget proves to be off the mark, rebuild it to the new market realities.
- Capital expense budget – Most hoteliers suspended all capital projects that they could in 2020 to preserve working capital. Now is the time to plan for 2021 capital needs that may not be able to be pushed back another year. Priority should be given to those items that most impact the guest experience.
- 2021 business plan – Completing your business plan demands thoughtful consideration of how you have historically managed your hotel and brainstorming how you might adjust and improve your approach.
- Review your revenue management practices. Consider strategies such as advance purchase discounts and minimum length of stay controls.
- Re-evaluate your food and beverage approach. Can you modify your rooms to accommodate in-room dining? With fewer guests, it is easy to slip into a F&B loss.
- Consider the use of a qualified outside marketing company. Engage in outreach strategies like creating a newsletter to stay connected with guests.
- Research hotels like yours in other markets. What are they doing that might work for you as well?
- Should you consider being open fewer days?
- Consider surveying loyal repeat guests and ask them what matters most to them at this time.
- Review and maintain well defined procedures and controls.
Let’s work together
Lastly, it’s critical to stay in close contact with your banking team and loan officer. We’re here to provide support and to act as a sounding board for your ideas. We’d be happy to review your budgets and business plans as well, so we can offer feedback on the financial plans that you have made. If you have questions, never hesitate to reach out–an informed loan officer is best prepared to assist if an unexpected need should arise.
Written by Steve Lawrence, Director of Commercial Real Estate at Camden National Bank