Home' Australian Hotelier : AH MAY 2015 Contents AUSTRALIAN HOTELIER MAY 2015 | 9
ithout a growing customer market, and with added
regulatory and legislative pressures, the need for
hoteliers to reinvest and remain relevant is more pressing
than ever before.
The need to innovate and the ability to adapt to changing market
conditions is what separates progressive operators with growth
prospects from traditional operators whose only route to improved
financial performance is through cost reduction.
We often refer to a two-tier pub market, and the divide between
A-grade and B-grade operators. This split regularly comes down to the
level of planning for reinvestment, and the resultant growth or decline
in market share, revenue, and profitability.
Although we are seeing an increase in activity in the hospitality
sector driving confidence in asset values, there are still a large number
of venues and operators, so the sector remains highly competitive.
Against this backdrop of intense competition, we are seeing a boom
in innovation in the sector as A-grade operators seek to distance
themselves from the competition.
According to Ferrier Hodgson’s Morgan Kelly, in order to retain and
grow market share, operators must entice customers to their venues
over other offerings in a saturated market.
“Customers now have higher expectations than ever before,” he said.
“Small bar atmospheres, point of difference themed venues, quality
food and beverages, design decor – even all this is sometimes not enough.”
Kelly urges operators to keep agile in a rapidly evolving market by
constantly reinvesting in their venue. He told Australian Hotelier operators
who can’t afford to compete are caught in a downward spiral of reduced
relevance, customers, revenue and prospects for longevity.
“General operating expenditure, including repairs and maintenance,
facilitates the ongoing operations of a hotel,” he says.
“Capital expenditure represents an investment with returns forecast
beyond the current financial year. A long term view must be kept in
mind, otherwise operators risk becoming obsolete and losing their
PLEASING AND APPEASING
Pat Connolly of Colliers International suggests hoteliers should consider
two markets when planning to make improvements to their properties.
“First they must consider their own day to day customers – the
eaters, drinkers and punters – or in other words, their income,” he told
“The second is the hotel property and business market – the person
who will eventually purchase the hotel – or in other words, the value.”
Connolly explains the positive effects of renovations and
improvements will typically become apparent within the first market –
income – well before it is noticeable in the value.
“This comes down to the simple fact that a hotel’s value is directly
linked to its income,” he says.
“The ability to demonstrate improved income for a period of time
(at least 12 months) is the key to improving value.”
Kelly agrees with this sentiment explaining that progressive hoteliers
need to understand the core competencies of their operations and focus
on being a market leader in one or two of these offerings.
“When we look at revenue streams available to the traditional
publican, specialist players have a significant advantage,” he says.
“In this environment of intense competition, it is important for
operators to understand their customer base and focus on one or
two revenue streams – diversity in income should only be sought as a
complement to unquestioned leadership in a chosen offering.
“We have seen operators of strong gaming venues have their gaming
revenue decline when food is emphasised and the venue isolates its
core gaming clientele.”
According to Tony Owen of Owen Property Valuations, when
considering a redevelopment, there are a number of key areas to consider:
WAYS TO REINVEST
• Re-alignment of service areas to facilitate a revised product offering to
better meet customer expectations or reduce operating costs.
• Enhancing customer experience with a focus on integrated technology,
including interactive menus, frictionless payment systems and gaming
ticket-in-ticket-out (TITO) systems (hardware); or interactive (social
media) marketing across multiple platforms and real-time POS, stock
control and time and attendance systems (software).
• Training of personnel/ security staff in customer relations.
• Improvements to venue (painting, carpet etc), or furniture, fixtures and
equipment (FFE) which adds to the useful life or value of the hotel.
• Complete refurbishment.
Coppersmith Hotel, South Melbourne
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