As Dubai gears up for its postponed Expo 2020—and other major event planning starts to resume worldwide—what should hoteliers expecting a massive surge in demand do to proactively prepare?
Packed stadiums…a sea of people filling the streets…and not a single vacant hotel for miles around…
Seems almost surreal to imagine it, but before COVID, major events invaded cities around the world multiple times a year. Now as we hope for swift pandemic recovery and brace for a return to some sort of normalcy, these mega occasions will look to make a glorious—albeit cautious—comeback.
With millions of visitors expected, the forthcoming Dubai World Expo may be just the ticket to herald the post-pandemic return of major events. The postponed “Expo 2020,” set to officially begin in October 2021, offers area hoteliers a unique opportunity to capitalize on increased demand and maximize short- and long-term revenue. And with the UAE easing restrictions to allow Dubai hotels to now book to full capacity, prospects for a revenue boom are looking good. However, if the expo timeframe is not planned and executed well, hotels could risk displacing current loyal guests, and flawed pricing strategies could lead to a half-empty hotel and high rates of no-shows due to cancellations.
Whether it’s a World Expo or the next U.S. Super Bowl, to properly prepare for the return of major events, hoteliers need to consider a variety of factors, including effective marketing and sales strategies, pricing, and forecasting as well as booking policies and restrictions. The following tips and tactics will help hoteliers in Dubai and worldwide feel confident that before, during, and after a major event comes to town, they can achieve their overall revenue potential.
Major Event Forecasting & Pricing
A hotel cannot properly prepare for a major event without an accurate forecast. Advanced revenue management software can illustrate what will happen to occupancy levels and booking paces accumulated 365 days prior to arrival day across different segments, and the impact this will have on revenue optimization. Given all the uncertainty caused by the pandemic, historical data will be largely unreliable in producing a precise forecast. Agile forecasting practices are essential now and should take into account key data insights like booking pace and average length of stay.
Although event duration and other factors—including the pandemic’s lingering impact on international travel—will differentiate Expo 2020 Dubai from past major events, we can still glean some key learnings from hotel data out of previous mass gatherings like the Olympic games. At the 2012 London Olympics, IDeaS observed that premium hotels had higher RevPAR growth over the Olympic period compared to economy hotels. Overall, the demand for lower-starred hotels was not as strong as expected, meaning the ability to forecast likely business by segment and identify the most valuable customers is critically important to economy properties.
The pricing strategies in the lead-up to Dubai’s expo will have to be carefully managed by all hoteliers, and the focus should be placed on maximizing RevPAR in line with the forecast. While an expected increase in demand on significant event days throughout the expo will allow rates to be driven up accordingly, this will not be the case on less significant days.
During busier days around major happenings, a hotel can look to close out or heavily fence all lower-rated segments if required, as well as sell room types as premiums, limit free upgrades and make the most of any upselling opportunities. Additional opportunities exist to leverage these peak nights to drive length of stay and increase occupancy and revenue contributions for the softer shoulder days. However, on lower-demand days, these restrictions should be relaxed so as not to discourage potential customers from booking. The key is finding the right balance between price and inventory optimization.
Understand Booking Patterns
Our extensive research and analysis of the hotel market for London 2012 showed there was no clear business mix strategy to guarantee success; however, most London hotels, especially hotels with large inventory, had a balanced transient versus group (50:50) mix. Groups secured with decent ADR at nine months before the event period built the base business at hotels, so hotels were confident in increasing rates for transient pickups and last-minute bookings.
To gain further insight into demand for guest rooms in the lead-up to a major event, area hoteliers should closely monitor leading indicators of inbound visitors, such as ticket inventory and ticket sales pace for events nearest to their property. Additionally, senior management within Dubai-based hotels should also create strong partnerships with the Expo 2020 organizing committee to monitor the incoming attendance for key events, which can act as an indicator of likely demand.
Cancellation & Overbooking Considerations
Major events will deliver a flood of new guests, including last-minute bookings, so it is critical area hoteliers have the appropriate overbooking strategies in place. While hoteliers in other markets traditionally use overbooking strategies to counteract last-minute cancellations, major events deliver substantial numbers of potential new hotel guests and generally fewer cancellations from tighter booking terms and conditions.
Historical hotel booking data from the London 2012 Olympics indicates that before and during the event, premium hotels’ cancellation ratio was two to three percent lower than the same time period the previous year due to restricted cancellation and no-show policies. Encouragingly for premium hotels in London at the time of the 2012 Olympics, last-minute pickup was also strong, meaning even if cancellations occur, properties are likely to pick up new business from high-value, last-minute bookers. Unfortunately, this strength in last-minute pickup did not extend to all hotel segments, with economy hotels’ occupancy dropping during the event period compared to the same time the previous year.
To minimize the impact of costly, last-minute cancellations in the lead-up to major events, hoteliers can implement a system of phased pre-payment restrictions, and cancellation period policies should be tightened. For instance, if the current cancellation period is 24 hours, it could be changed to seven days, or even as much as 28 days prior to the event. These terms and conditions should be clearly stated at the time of booking. If large numbers of cancellations are expected in the lead-up to the event, pre-payment plans will allow hoteliers to recoup a large slice of their potentially lost profits, which will then be complemented by last-minute fill-ins in the weeks before the event.
Remain Agile & Adjust Regularly
Despite pandemic-era setbacks and ongoing travel disruption, Dubai-based hoteliers should already have a solid, multi-scenario-based plan in place for Expo 2020. Management teams should review the strategy at frequent intervals in the lead-up to the event, so any necessary tweaks can be made as required.
By understanding the implications of a number of “what-if” scenarios, through forecasting undertaken at the planning stage, hoteliers can make changes to pricing, restrictions and segmentation strategies accordingly as the event approaches. These thorough planning and review processes will put hoteliers in the best possible position to make an effective strategy for driving revenues over the course of the major event.