Planning for the future

(Jan. 2012)

A Useful Process for a 10-15 Years Business Forecast  

It is of critical importance for any organizations, including Hotel companies, to properly plan for the future and have in place an up-dated, 10-15 years, “rolling” strategic plan-forecast.

Anticipating changes and identifying new opportunities requires hotel leaders to understand what’s drives changes and most importantly how to respond to new business trends and on what has to be done.

The following is a recommended process and guidelines to develop a useful long term strategic business plan for an Hotel group-company.

Role and responsibilities of the Chief Executive:

In order to lead, a Chief Executive must know where the organization is heading therefore the need of a plan-vision for the future is of the outmost importance.

  • Also in order to grow and prosper, an organization requires the discipline of a well prepared strategic plan-formal document stating how the organization can be improved and continuously transformed in order to be competitive, respond to the latest business trends and requirements and most important be highly profitable in the short and in the long term.
  • It is highly recommended that the Long Term Planning for any organization is researched and compiled by a professional & qualified team (task force) and it is the responsibility of the Chief Executive to appoint, guide the team and set strategic objectives, targets and deadlines.

Every Leader needs a strong & supporting team. A team that creatively assess the overall situation, a team that has the ability to anticipate changes and can plan creatively in order to prepare a realistic long term strategic business plan for the organization.

In order to be efficient, the team should be composed of 6-10 top executives covering all major functions of the organization and also it is very important that a facilitator-moderator is appointed either from inside the company or an outside consultant.

  • The facilitator will lead and motivate the team to cover all aspect of the business, will drive the team to think about how the industry will change over the coming years, stimulate discussion and ensure that a draft document is prepared to be reviewed and accepted by all members’ of the team and by the Chief Executive before it is formalized.
  • As the plan is of critical importance to the future of the company, it should be kept strictly confidential and for internal use only.
  • The Chief Executive has the responsibility that the plan is properly implemented and it is also up-dated on a yearly basis making it a “rolling” plan-forecast.

What the future will hold?

The past is known, the future is not. No one can see the future but at the same time, organizations must plan for it as business demands it, stakeholders expects it and employees wants/needs it. Planning for the future is a major challenge for every decision maker.

  • Changes will continue to happen and every organization will have to face it. A year from now the situation will already be different and have to be prepared.
  • How will we live our lives in 10-15 years and how will we run/operate business? Will technology advances so much to control our lives? Will there be robots that will clean our houses, clean our hotels and will also prepare and serve meals? All indications are that technology will continue to advance and move forward. There will be new discoveries and inventions in all fields and we will live in a mobile world.
  • From past experiences we know that good times will not last forever and there will be the “ups” and the “downs”. Looking at the hotel industry in particular, one has to assume that out of 10 business years there may be 4-5 good years, 2-3 average years and there will also be 2-3 years of decline in revenue and in profitability. Of course there will continue to be winners and there will be losers. What an organization has to do to be a winner?
  • In all probabilities, hotel business will continue to be affected by the ups and downs of the business cycles. Hotels are, and will be, at the mercy of the global financial waves. It is anticipated that travel and tourism business will remain the 2nd largest employer in the world (after the governments). It is also expected that the hotel industry will remain highly competitive with the global brands getting larger & stronger and there will be newcomers entering the markets with new and innovative products.
  • Will the small-unaffiliated hotel groups survives in the future or they will be taken-over or merge with the global groups who are in better position and have the mussels to compete and respond to any market’s situation?
  • The Western world in general, including few Asian countries like Japan, is experiencing an aging population with low fertility rates and increased longevity. How this will reflect in the business world and in particular in hotel business?
  • Competition for talent is expected to increase and what’s an organization has to do to attract and retain an efficient and motivated labor pool? Trainings, competitive compensation, providing career opportunities, social contributions, etc. will definitely increase the labor and operation costs of any organization and there is not much that one can do in order to compete at the top. Those additional costs have (must) be covered by increased revenue year after year.
  • Areas such as information management and the global economy are revolving so rapidly that many organizations find they lack the specific high-level business “Brains” needed to progress and compete in the future.
  • Overall, the costs of doing business for operating hotels will constantly increase in particular the utilities expenses that are directly related to the supply-availability and prices of oil that is expected to increase substantially. This will also increase the cost of basic products that hotels need like food items, supplies, transports, etc. Have to do more with less, and what’s the solution?
  • We have seen crises come and go and this is expected to continue in the future as well. The present financial crisis, since 2008, that is affecting most of the Western countries is making a direct negative impact on the hotel’s performance, when this situation will improve? Will the Euro currency survive and at what cost? Many key markets and wealth have decreased substantially (the Nikkei index down to 9,000 from the peak of 23,000) and how long it will take to see substantial improvements? What will be the impact of the Chinese economy in the world, of the Chinese travelers and of the Chinese currency? How to respond to the BRIC economies?
  • Will Asia, driven by China, continue to grow at a higher level than the rest of the world? Which countries will generate new markets for the hotels and which countries will have to face declining trends? Who will be “Stars”?
  • Importance of understanding traveler motivations and preferences and also how a total stay experience can and should be delivered to succeed in the future.
  • Will unemployment and spending power improves or the use of technology combined with weak economies will keep the unemployment high?
  • What would be/is the consequence to business and to society the impact of planet warming and drier weather that creates shortage of food, water and malnutrition/famine problems? Are we moving toward the age of scarcity? Will the control of basic commodities like oil, minerals, coal, gas, food, water and others be reason for political conflicts and wars during the next 10-15 years?
  • Has the organization access to capitals in order to maintain-improve its physical product and to expand-grow the network? How and where to expand in order to strengthen the brand?
  • Is there a qualified and committed team of professionals at Corporate who are capable to respond to business needs and grow the organization?

Lot of questions to be asked, lot of topics to be analyzed and lot of work to be done to develop an appropriate forecast for the organization and be prepared for the future.

Have to accept the fact that in general business real problem is “uncertainty” and the “short-term fixes”. Unfortunately many organizations have been conditioned to look more at the short term vs long term strategic needs and have been more tactical than strategically. This is not healthy at all for the survival and prosperity of the organization.

Responsibility of the team-task force

1. Analyze the past 10 years:

  • What were the changes & improvements during the previous decade? And, if available, of the decade before that?
  • Analyze the business and demand trends; the growth years and the declining years and reasons for it.
  • What were the value drivers of the customers & travelers and how did it changed during the past 10 years.
  • How did the business model changed, what it worked and what it did not?
  • Achieved Room Rates, Occupancy, REVPAR, Market Share, Distribution and Supply & Demand by year and of the average 10 year growth range.
  • Changes within the sources of business, length of stay and spending power.
  • Status and activities of the competition in particular of the direct competitors.
  • Product’s improvements over the years and comparison with direct competitors.
  • Operating cost’s trends; labor, supplies, utilities, sale & marketing, promotion-advertising methods, etc.
  • Inefficiencies, poor systems, “dead wood managers”, poor handling of labor, etc.
  • Operating profits in $ and in percentages by year and by decade and ROI’s.
  • Taxations, changes in legislations, and lifting of visas & travel restrictions.
  • Impact of the political, economic and social changes.
  • New facilities & products; airports, convention centers, parks, casinos, etc.
  • Impact of disasters (2008 financial crisis, tsunami, sars, etc…) and most important, what did the organization learned from past crisis and what has to do to better handle it in future.

2.Develop a long term strategic plan:

The main objective of the task force is to develop a comprehensive planning document for the organization to be implemented in the years to come (future planning). This is perhaps one of the most important document of any organizations therefore all topics addressed in the document have to be researched, discussed, measured in great details and approached with an “open mindset”.

Suggested list of key topics to be addressed and documented;

  • Identify the business driving forces; economic, competition, technology, innovations, markets, governments, environment, trends, etc. and take long term view on all those.
  • Review the past 10 years performance and relate it to the new identified driving forces for the future. What does past experience suggest about the future?
  • Try to assess (anticipate) the uncertainties over the next decade, which countries expected to growth and generate new potentials and which countries is expected to decline and sources of sustainable revenues.
  • Try to assess (anticipate) how the business world might change over the next few years that could affect the business demand and the costs of doing business.
  • Identify the value drivers, the general trends affecting the travel industry and expectations from customers and from stakeholders.
  • Needs to fully understand where the opportunities lie that generates revenue and profitability growth. What are the potentials and the options to the organization to be a winner over the decade, not a loser?
  • How the organization has to adapt to the fast changing business environment and industry trends. Understand & define the key trends that are happening now that in time will affect the organization.
  • Recognize the potential treats of the competition, what they are doing/where are they going and of a disruptive new product/s and innovation/s that may come into play.
  • What’s make the organization special/unique in the market and why customers should choose us over the competition, what’s our differentiation that customers appreciate and how the organization should be marketed and promoted?
  • Strengths and compliance with brand’s promises, product consistency and commitment for continuous improvements.
  • How the organization measures with the direct competitors, where the organization is vulnerable and what it needs to be done in order not to fall behind the direct competitors.
  • Assess and ensure that business is/will be well balanced and not depends too much in few markets-segments and consider how vulnerable is the organization if one or more of those markets or segments will experience difficulties (on making recommendations, apply the “Rule of Thumb”: do not exceed 1/3 of the total revenue from one market/source or one segment).
  • What would be the best gross operating revenue mix for the organization and for the individual units that can generate the highest profitability in the future; best segments, volume of individuals vs groups business, commissionable and non commissionable rates, banquet business, restaurants & bars and ancillary revenue.
  • Extremely important to clearly state in full the business & market position of the organization; strengths, weakness, product, market share, geographical reach, segmentations, strategies, effectiveness of leadership & structure and others.
  • Develop a list of important changes that need to take place for the organization to be successful during the next 10 years starting from now; products, services, innovations, technology, growth & expansion, training & people development, succession plan and leadership for tomorrow, the most efficient ways on responding to customers’ expectations, etc.
  • Why employees should choose us over the competitors and what needs to be done in this very important area? (Hotels are labor-intensive and needs lot of motivated and efficient collaborators).
  • Also what’s need to be done to respond & anticipate to the ever changing travel trends, spending power, potential sources of new business and how to entice them.
  • Involve existing and potential customers (research) to better assess what are their future expectations, changes to be made to attract them. Important to pay equal attention to existing and to potential customers as it is to be noted that normally existing customers are not demanding for many changes and this is not healthy in the long term.
  • Unforeseen events that will have major effect to the organization; political, economic, natural disasters, terrorism, wars, etc. and set guidelines on preparing a contingency plan that can be put in place as soon as those unforeseen events happen and prevent that the organization loses valuable time and revenue.
  • What is the impact made to the organization business and profitability, by the continuous changes-evolutions from 3rd party organizations like the distribution (GDS & consortia) channels, platforms, mobile and search systems, on-line (OTA’s) and off-line agents, new effective websites competing with 3rd party, aviation & transport and what to look for in the future. Also what are/would be the “necessary evils” hotels’ needs in the future in order to compete?
  • Try to anticipate changes & advancements within the technology world/industry that will have direct or indirect impact on the business (revenue), on the operation (costs) and profitability of the organization and of the individual units (hotels). Impact of new IT solutions, the growth of mobile technologies and the spread of electronic data exchange.
  • Is classification (star or others) of hotels remains a factor for customers? Would the industry go for smaller or larger properties-hotels in order to create efficiency, lower operating costs and faster response to customers? Will the revenue markets prefer lower room rates vs expense larger rooms? What products to be developed in future by the organization that can generate the best ROI?
  • What would be the incremental revenue for every dollar invested in specific markets and or segments and what would be the most effective ways to promote and advertise as compared to the previous decade?
  • Culture and consistency on setting measurable and aggressive but achievable financial objectives-targets supported by competitive incentives-rewards to executives. “Importance of numbers and people”.
  • Best ways to handle and manage cash flow and financial commitments.


  • Prepare the whole document in draft format and must ensure that it is reviewed and commented by all members of the task force and by the Chief Executive. Make all necessary changes, formalize the whole document and start implementation.
  • Very important to evaluate and adjust the plan on a yearly basis and automatically making it a “Strategic rolling plan”.

Useful guide-checklist;

  • Take extra care of your brand and avoid weakening it
  • Be a stronger entrepreneur and take calculated risks
  • Full understanding and manage the market segmentations
  • Understand who is booking us, why, source, and process
  • Pricing and inventory management, on daily/hourly if necessary
  • Historical date on demand and booking patterns
  • Demand forecast and displacement analysis
  • Pricing consistency
  • Dynamic pricing
  • Best rate (value) guarantee
  • Rate parity
  • Rate integrity
  • Lead time pricing
  • Market mix and geographical switches/changes
  • Distribution and channels management
  • Cost of distribution and commission
  • “Online” the emerging trend to stay
  • Online advertising & promotion and innovations on hotel marketing
  • Partnerships with the OTA’s and with selected airline programs
  • Always retain control of own hotel inventory
  • Sale on the way the customer wants to buy, make it easy
  • Setting-up of goals/targets and effective measurements (aggressive but achievable)
  • Continuous investment into the company website, consistency, efficiency, content, and make it easy and to book.
  • Aware of the impact of experiences posted online i.e. trip advisor and respond
  • Try as much as possible to convert bookings from the 3rd party website into own hotel website and manage 3rd party web-site.
  • Importance of YouTube, Facebook, mobile devices and others
  • Creativity with packaging and value opportunities
  • Create partnerships with objective of a win-win situation
  • Importance of benchmarking
  • Clean database
  • Recognition program & customer satisfaction survey by 3rd party
  • Innovations in revenue management
  • Handling of hotel fee’s that must “die”
  • Brand differentiation in the market
  • Be a customer centric
  • Full understand what we sell and do it well
  • No such thing as a typical guest any more
  • Understand quality, authenticity, luxury without opulence, and not flashy
  • Personalization of products & services and deliver what customer wants
  • Continuous improvements in innovations & best use of technology
  • Avoid uncomplicated facilities; switches, controls, direction, etc.
  • It’s a people business, need engaged collaborators
  • Long term vs short term approach, hotels are long term