A full house, or 100% occupancy, is the Holy Grail for most hotel owners and operators. When a hotel approaches this level of compression, it’s important for revenue managers to maximize rate and occupancy without alienating loyal customers, sources said.

　　A full house, or 100% occupancy, is the Holy Grail for most hotel owners and operators. When a hotel approaches this level of compression, it’s important for revenue managers to maximize rate and occupancy without alienating loyal customers, sources said.

　　Opinions differ on the definition of compression and what strategies hoteliers should pursue when they reach those levels. Markets with high average occupancies face this opportunity more often than do other cities.

　　"It varies from asset to asset, but typically anything above 95% (occupancy) is what I would call very compressed,” said Thomas P. Botts, executive VP and chief customer officer for Denihan Hospitality Group. “Of course, in Manhattan it seems as though there is always compression.”

　　Nolan Wrentmore, VP of revenue management and e-commerce for Aimbridge Hospitality, said the definition differs by market, city and hotel location.

　　"We define it individually. In Los Angeles, for example, you may have 15,000 attendees for a citywide event, but it won’t have an impact more than a few miles outside of the city center,” he said. “However, take that same convention and put it in a city like Tulsa (Oklahoma), and the whole city will sell out. We have to define it from a perspective of a threshold of an individual city and a hotel perspective.”

　　Strategies to deploy

　　When future bookings point to a state of compression, revenue management involves more than just raising rates, said Calvin Anderson, director of revenue at The Lexington, an Autograph Collection Hotel, in New York.

　　"From a retail perspective it’s always teetering between a rate increase and a tightening by yielding restrictions,” Anderson said, in explaining his rate strategy for compression periods. “Sometimes, I’m able to get away with both at the same time, and sometimes it’s a step by step in which I can force people to a three-night (stay) or other stay patterns.”

　　Anderson said it’s not always possible to push guests into stay patterns that will benefit the hotel. For example, it’s usually difficult to coerce customers into extending or starting their stays on a Sunday.

　　"No one wants to stay into that Sunday, and you’re not going to be able to get them to do so,” Anderson said. “If you force people to do it, you’ll completely shut off your compression.”

　　Wrentmore said when his hotels reach defined levels of compression, property revenue teams combine basic yield management with length-of-stay strategies to maximize revenues.

　　"We look at our rates and manage according to the market and demand,” he said. "While we have lower profitable channels, we try to manage and whenever possible accept the demand that’s coming through the most profitable channels.”

　　Anderson said even during compression it’s not good business to close out discount rates, such as for government travelers and AAA members. Instead of closing these channels, he will adjust the amount of discount offered with the hope of retaining the loyalty of these guests.

　　"It’s foolish to shut off the government per-diem channel,” Anderson said. “The government traveler is a great traveler. They’re good for your hotel. They’re consistent. They book far in advance and are typically loyal. My goal is to never shut that channel off, even if I can only offer 5% off or 10% off of a retail rate, because at least I’m offering something when all my neighbors are closed out.”