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A Hotel Marketing Lesson in Mexico’s Rapid ADR Growth

by Pamela Espinoza, Contributing Editor, Latin America |

According to a recent report by STR, the Mexico hotel industry experienced positive year-over-year performance in 2016, beating expectations and setting a high bar for further growth in the market. The numbers are impressive and, upon a closer look, they reflect the importance of hotel marketing and of being aware of your competition’s performance and changes.

Compared with 2015, the market’s occupancy was nearly flat, growing only 0.1%. However, Mexican hotels grew their average daily rate 17.0% to 2,327.16 pesos, leading to a spike of 17.1% in RevPAR growth for 2016.

STR’s report found that the market with the highest double-digit increase in ADR was indeed the Northwest region. The main reason, one must imply, is that 2016 was the year in which the luxury resorts at Los Cabos were back and operating for a complete full year. After they were hit by the impact of Hurricane Odile in September 2014 and had to close for several months, other Mexican regions took market share from Los Cabos, both in occupancy and rate, for much of 2015.

Those resorts not only reopened but also welcomed repeat and new guests with revamped facilities, which also drove higher rates. Los Cabos represents the 14% of the room inventory in Mexico and boasts key players in the luxury market — Las Ventanas al Paraiso, One & Only, and Esperanza an Auberge Resort to name a few.

The market with the second largest growth in ADR was Mexico City, with a +22.3% increase, which can be surprising considering it is not a beach destination.

The Difference Hotel Marketing Can Make

Aside from favorable exchange rates for the peso and easy comparisons to 2015, what contributed to such a huge gain in ADR for hotels in Los Cabos and Mexico City? Those two markets have been very aggressive on their marketing and public relations campaigns.

Los Cabos had the benefit of re-opening budgets from the hotels and the Visitors and Conventions Bureau, all of whom were eager to recoup the lost business from 2014 and 2015.

Mexico City, on the other hand, invested in a repositioning campaign to change the face of the destination from a problematic, business-only city to an alluring vacation spot. Last year the city hosted the Mexico Grand Prix, its first Formula 1 race since 1992. The New York Times named the city the No. 1 Place to Go in 2016, which generated a media buzz that continues to drive an interest never seen before by foreign travelers, again driving demand and helping the supply chain.

Though revenue managers are generally well-informed, sometimes they forget the importance of how having a close relationship with the marketing team pays off in the information they gather from the competition.

Sales and marketing professionals are constantly exposed to the pulse of the industry as they gather information from hoteliers, travel agents, DMC and clients, whether at trade shows, events or through their networks. PR teams are up on trends and what is being published by the media, providing relevant data that can contribute to Revenue Strategy.

Just as importantly, the revenue management team can help hotel marketers use their budgets more effectively and run more targeted campaigns. A DORM can comb through the hotel’s performance numbers — as well as website traffic analytics and web shopping data from the online booking engine — to know which source markets are driving the most interest and booked reservations.

With that data, a hotel could know, for instance, if more people than usual from the United States or Brazil are looking and booking. As another example, if a favorable currency fluctuation in Argentina caused more travelers from that country to search online for vacations in Mexico, hotels there could send direct-marketing campaigns with competitive room rates to drive business.

In revenue meetings, does your hotel review where its marketing dollars go? What messages does the PR team put out there to help drive awareness and demand? Where is the competition spending its money, and what are they saying? Are they ahead of the game, or are we?

Answering those questions quickly, with a hotel marketing process aligned with revenue management, can make the difference and lead to impressive growth, as seen in Mexico.

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Pamela Espinoza, Contributing Editor, Latin America

Pamela Espinoza joined Duetto in 2017 as a Contributing Editor covering revenue management and the hospitality industry for the Latin America region. She is based in Mexico.