What accommodation owners should be thinking about instead.
Consider a 35-room regional motel operating at 66% occupancy.
The business is performing reasonably well, but the owner wants to improve profitability. Looking ahead to the next year, the owner decides the strategy is to increase occupancy from 66% to 69%. The owner believes that improving customer service will strengthen the motel’s reputation, help it become the motel of choice in town and, in turn, increase occupancy.
It sounds perfectly reasonable.
There is a clear goal: increase occupancy.
There is an initiative: improve customer service.
And there is a vision: become the motel of choice in town.
All three can be valuable.
But individually, or combined together, do they constitute a strategy?
No.
The occupancy target tells us what the owner wants to achieve, but not why occupancy is currently 66% or whether increasing it is the best way to improve profitability.
Improving customer service tells us how the owner believes the motel’s reputation might be strengthened and higher occupancy ultimately achieved, but it has not been established that service is actually constraining the motel’s performance.
And becoming the motel of choice tells us where the owner would like the business to be, but not which customers the motel wants to attract, why they should choose it over its competitors, or what the business needs to do differently to earn that preference.
Strategy serves a different purpose. It requires an understanding of the challenge standing between where the business is today and where it wants to be, choices about how that challenge will be addressed, and actions and resources concentrated accordingly.
Before deciding what the strategy should be, the owner therefore needs to answer a more fundamental question:
What is actually preventing the business from performing better?
Start with what the owner actually wants
The owner’s underlying objective is not really to achieve 69% occupancy. It is to improve profitability.
Occupancy is one way the owner believes that might be achieved.
The thinking looks something like this:
| Improve service → strengthen the motel’s reputation → become the motel of choice → increase occupancy → increase profitability. |
That may prove to be entirely correct.
But before acting on it, that assumption needs to be tested.
Why is occupancy currently 66%?
Is higher occupancy achievable given the level of accommodation demand in the local market?
Is service actually influencing the motel’s ability to attract more guests?
Who, exactly, are the customers for whom the property wants to become the motel of choice?
And perhaps most importantly, would increasing occupancy actually be the best way to improve profitability?
These questions take the discussion beyond goals, vision and initiatives and into strategy.
Why higher occupancy?
There is nothing inherently wrong with targeting higher occupancy. The problem is assuming that because the owner wants to achieve it, the market will necessarily allow it.
Before asking how to increase occupancy, it is necessary to understand why occupancy is currently 66%.
Perhaps competing motels regularly achieve higher occupancy and the property is losing market share.
Perhaps the motel performs strongly on weekends but has significant unsold capacity during the week.
Perhaps corporate business in the area has declined.
Perhaps new accommodation supply has entered the market.
Perhaps demand is highly seasonal.
Or perhaps 66% is already a strong result for the market in which the property operates.
Each situation presents a different strategic challenge.
If the local market simply does not contain enough additional demand, attempting to force occupancy higher could require lower rates, greater reliance on online travel agents or accepting business that contributes relatively little additional profit.
The question, therefore, isn’t simply:
How can occupancy be increased?
It is:
Why is occupancy currently 66%, and what evidence suggests that a higher level is both achievable and desirable?
Is occupancy even the right goal?
This brings the discussion back to the owner’s original objective: greater profitability.
Increasing occupancy may well help. An additional occupied room generally contributes additional revenue and, provided the rate adequately exceeds the incremental cost of servicing that room, additional profit.
But occupancy is only one lever available to the business.
What if the motel maintained occupancy at around 66% but achieved a stronger average room rate?
What if it generated more direct bookings and reduced commissions paid to third-party booking channels?
What if it improved its mix of business?
What if there were opportunities to improve labour productivity or reduce controllable operating costs?
Or what if the strongest result came from a combination of several of these?
The point isn’t that occupancy should not be increased.
It is that strategy requires the business to identify the most important opportunity rather than automatically pursuing the most obvious metric.
A fuller motel is not necessarily a more profitable motel.
Why improve service?
Few accommodation owners would disagree with the objective of providing excellent customer service.
But there is an important strategic distinction between something being good business practice and something being the answer to a particular strategic problem.
If poor service is contributing to weak reviews, lost repeat business and customers choosing competing properties, then improving service could be central to the strategy.
But what if guests already rate the service highly?
Suppose reviews consistently praise the staff but criticise dated bathrooms, uncomfortable beds, traffic noise or unreliable Wi-Fi.
In that situation, asking staff to provide even better service may do little to address the reason guests are choosing another property.
This is why evidence matters.
Guest reviews, complaints, repeat-business patterns, competitor performance, market data, customer feedback and discussions with staff can all help identify what is actually influencing performance.
A worthwhile initiative is not automatically a strategic initiative.
For an action to be strategic, there should be a clear connection between the problem that has been diagnosed and the action proposed to address it.
“Motel of choice” — but for whom?
There is nothing wrong with wanting to become the motel of choice in town. A clear vision can provide direction and give owners and employees something worthwhile to work towards.
But a vision is not a strategy. It does not explain how that vision will be achieved.
And there is another question:
Choice for whom?
The needs of a corporate traveller can be quite different from those of a leisure couple, family, tour group or travelling work crew.
A corporate guest might particularly value reliable Wi-Fi, convenient parking, a quiet room, efficient check-in and proximity to local businesses.
A leisure traveller may place greater emphasis on room presentation, location, local experiences and nearby dining.
A travelling work crew may have another set of priorities altogether.
Trying to become the motel of choice for everyone can leave a property with little to distinguish it from its competitors.
Strategy involves choice.
That does not necessarily mean turning other customers away. It means understanding which customers represent the most attractive opportunities for the business and ensuring that product, service, pricing, distribution and marketing decisions support that position.
Only then does “motel of choice” start to become something more meaningful than a vision.
Diagnosis before prescription
Strategy scholar Richard Rumelt, in Good Strategy/Bad Strategy, describes the core of good strategy as having three elements: a diagnosis, a guiding policy and coherent actions.
The diagnosis identifies the critical challenge. The guiding policy establishes the overall approach to dealing with it. Coherent actions are the coordinated things the organisation actually does to carry out that approach.
This is particularly useful for an accommodation business because a review of a property may identify many opportunities for improvement.
There may be issues involving rooms, pricing, distribution, labour, marketing, maintenance, guest experience, technology and costs.
The temptation is to create a long action list and call it a strategy.
But strategy isn’t necessarily about fixing everything.
It is about identifying what matters most and concentrating limited resources where they can have the greatest effect.
What might a strategy actually look like?
Consider again the 35-room motel.
Suppose the analysis finds that the property performs well in the leisure market but consistently underperforms comparable competitors from Monday to Thursday.
Further investigation identifies growing corporate demand in the area, but the motel captures relatively little of it. Its service is already well regarded, but its product offering, distribution and sales activity are poorly aligned with the needs of business travellers.
Now there is something approaching a diagnosis:
The motel is underrepresented in an attractive weekday corporate market, contributing to weaker midweek occupancy.
A guiding policy might then be:
Strengthen the motel’s position among selected corporate and business travellers while protecting its established leisure business.
From that policy can come a coherent series of actions: determining which corporate segments to pursue, adapting relevant aspects of the guest offering, developing selected corporate accounts, reviewing distribution and pricing, and ensuring service standards support the needs of those customers.
Those actions reinforce one another because they address the same diagnosed challenge.
Occupancy might subsequently increase from 66% to 69%.
Or it might not.
The business may discover that 68% occupancy at a stronger average room rate and more profitable channel mix produces a better financial outcome.
Either way, 69% occupancy is not the strategy.
It remains a potential goal that the strategy may help the business achieve.
Goals, vision and strategy all have a role
The distinction is not that goals and vision are unimportant.
They serve different purposes.
A vision describes where the business ultimately wants to be.
A goal defines an outcome the business wants to achieve.
An initiative is something the business intends to do.
A strategy begins with understanding the challenge, determines the overall approach for addressing it and concentrates actions and resources accordingly.
The problem arises when one is substituted for another.
“Become the motel of choice” can be a useful vision.
“Increase occupancy to 69%” can be a useful goal.
“Improve customer service” can be a worthwhile initiative.
But none answers the strategic question:
What challenge must be overcome, and how will it be overcome?
Five questions worth asking
When thinking about strategy for an accommodation business, owners can start with five questions:
- What am I actually trying to achieve?
- What is preventing the business from achieving it now?
- What evidence supports that diagnosis?
- What choices should be made about where to compete and where to concentrate resources?
- Do the actions being taken reinforce one another and address the problem that has been identified?
The answers may lead back to the owner’s original idea.
Perhaps increasing occupancy really is the strongest opportunity. Perhaps service really is holding the property back.
If the evidence supports those conclusions, they become much stronger foundations for action.
But the analysis may also lead somewhere entirely different. Strategy starts with understanding the problem.
