We are well into that time when financial projections and business plans for the coming year are being developed. By now, many of you have spent hours (and hours !) in meetings, discussions, and planning sessions all aimed at coming up with those plans that will make 2018 the best that it can be, and hopefully a major improvement for you over your anticipated 2017 results. As you analyze data, review market trends, and update your competitive analyses, have you been asking yourself the single most important question of all for the new year? How and why will 2018 be different from 2017?
First, let’s be clear. The key issue here is to define the specific reasons, strategies, and tactics necessary to bring about far superior results in the coming year. If all market indicators suggest that 2018 will be a negative RevPAR year, what are you doing to be “less negative” than your competition? If all market indicators suggest that your market will experience some measure of RevPAR growth in the coming year, what are you doing to be “more positive?” As we all understand, these questions point to the all-important issue of market share. Growth is good, loss is bad, but if we are losing market share, we are not only performing at less than our potential, we are also allowing our competition to defeat us by stealing our business.
For 2018 (as you’ve experienced year in and year out for your entire careers), you will go about establishing a budget that is based at least in part on a target that is provided to you, and at least in part (we hope !) based on your thorough understanding of your market, of your product, and (drumroll please) of your customer. This is all good; targets that are developed through this process should be reasonably accurate, barring any major changes in local or global economy, natural disasters, etc., etc.
However, targets that are developed through this process often leave out the crucially important element of stealing market share. Growth does not happen on an annual basis on its own. It is the result of numerous factors, none the least of which is the diligent and tireless effort of you and your teams to maximize results. With this said, growth that basically reflects the growth taking place around us, while it represents improvement in a literal sense, does not necessarily reflect what our growth truly ought to be.
Let’s be clear, the point here is simply that true growth must include a measurement of how we are performing not only against the target/budget that we all signed off on, but against the potential that we should be performing at. How do we measure potential? In our world, one of the best ways to do so is to measure market share performance. Please consider the following example:
Hotel “A” is budgeted to increase RevPAR by 5% in the new year vs. its projected current year performance. When that new year comes to a close, Hotel “A” has actually increased RevPAR by 6% vs. prior year. Clearly a success story, yes? Hotel “A” beat last year and beat its budget, what else do we need to know?
Here’s the catch, in the same scenario, the market and the competitive set that Hotel “A” is a part of increased RevPAR vs. prior year by 7.5%. In other words, while Hotel “A” achieved its stated goals, it managed to lose market share in the process. Is this success? Of course the answer should be an emphatic “no.”
This example takes us back to how this post began. “How and why will 2018 be different from 2017?” The answer lies in your ability to create a strategic plan for the coming year that not only establishes specific methods to achieve your financial goal, but that simultaneously focuses on stealing the business of your competitors (a.k.a. market share). . If financial goals are created based on market share growth in conjunction with year-over-year growth, those financial goals and the performance that they result in are likely to push the property to new levels of achievement for your asset(s). Think of it this way, year-over-year growth can often be achieved through a variety of means. Rather than simply targeting this type of organic growth, go further in your strategic planning process to ensure not only annual growth, but market share growth as well.
It all comes back to a commitment to a comprehensive planning process, a thorough knowledge of the competitive landscape in which we exist, and an understanding that our businesses have the potential to grow beyond historical levels. However, in order to achieve this type of growth, we must commit to a strategic plan that is precise in its efforts to identify specific business within our markets that we intend to outright steal from our competition. Such a plan, followed by the precise execution of this plan, will take your asset(s) far further towards achieving their true potential.