It’s “go time” for hotel industry

If the weather we had in early June is any indication, we're in for a beautiful few months here in Traverse City. Area hotels will start running at or near capacity on most nights in July until about the third week in August.

My prediction of an 8-10 percent increase in May fell a little short at 7.3 percent. May was its usual mix of good and bad weather but what seemed to be different this year was a short Memorial Day weekend. Business was strong Friday and Saturday nights but fell off more than normal on Sunday, despite the Monday holiday. I can't say what caused the shorter-than-usual weekend, but I am fearful that some travelers are cutting back on the duration of their vacations to offset the rising gas prices. I will be informally surveying our summer guests to see how, if at all, the price of gas has impacted their travel plans. June should continue the trend of recovery for area tourism so I'm looking for a 7 percent improvement over 2005.

The demand for rooms when the Blue Angels are in town is incredible! Everyone wants a room for Saturday, July 1 to watch the air show. We have been sold out for that date for months and have probably turned down 1,000 requests for rooms since then.

If only the hotel business was like manufacturing-when demand picks up, they can increase production and add shifts to meet and take advantage of the demand. Room sales at the Bayshore are limited to the 120 rooms we have to sell each night regardless of the demand.

Add to that the perishability of our product-once a room goes unsold for the night, that sales opportunity is lost forever-and you get a picture of the difficulty hoteliers face when trying to rebound from factors that negatively impact revenue like a poor economy or rising gas prices. So the challenge comes in matching the price of the rooms with the demand for them, a concept called yield management.

The airlines have been using yield management for decades, seemingly changing the prices of tickets hour-by-hour as flights start to fill up. Of course, pricing decisions also need to take into account what the competition is charging, what rate of return the investors expect and what price the market will bear even under the best of conditions. The best operators get as much as they can for room rates while at the same time making sure that the guests feel they are getting good value for their money and are not being gouged by over-aggressive pricing.

Well, it's time to get back to work and greet the many returning guests that I see every summer. Whenever it gets really hectic dealing with the crowds and I'm trying my best to keep them happy, I remind myself how fortunate that I am to live year-round in this vacationer's paradise.

Next month, in my last installment, I'll report on the impact of Michigan public schools starting after Labor Day for the first time in many years. BN

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