How to measure success in the attractions sector as we enter 2018?
In any sector, not least the attractions sector, when starting to assess prospects for the year ahead it’s always useful to look at the wider picture to see what might be learnt from other industries. Over the years, the hotel sector, like the retail sector, has often given us useful indications of the issues that will confront attractions, museums and the heritage sector, often offering us some useful ideas and strategies that we might adapt and adopt.
PwC recently published its ‘UK hotels forecast 2018’, provocatively titled ‘As good as it gets?’. It notes that UK hotels have enjoyed record trading recently, this being primarily due to demand from incoming leisure visitors, stimulated in turn by the weakness of Sterling post-Brexit referendum, making the UK (and London in particular) a good value destination. However, PwC forecasts a slower pace of growth in 2018 as the stimulus of the weak pound starts to weaken, and a supply of new accommodation is introduced to the market. Growth, which the sector has traditionally measured as revenue per available room (revpar) is forecast to decline from 6% in London this year down to 2.4% in 2018. A less severe fall is expected in the UK’s regions, from 2.5% to 2.3% (perhaps underlining that they are less reliant on the inbound tourist than the capital).
PwC report that these levels of growth are still considered to be reasonably good (although clearly similar only to the rate of inflation in the UK). However, as the positive impact of currency devaluation wears off, a range of other challenging factors such as global political volatility, an expected deceleration in UK economic growth and continued Brexit policy uncertainty will together challenge the hotel sector, and managers are right to be cautious about prospects for 2018.
It’s interesting too that, as pointed out recently by Peter Ducker, Chief Executive of the Institute of Hospitality, the hotel sector’s focus on occupancy rates and revpar as measures of success are not necessarily helping them to monitor what is really going on in their businesses, and his comments certainly will resonate with those working in the visitor attraction and the museums and heritage sector. A focus on revenue and numbers alone is a short cut to failure.
Just as he notes that higher occupancy levels in hotels, whilst valued as a KPI by the industry, lead inevitably to higher operating costs, we know that higher footfall in visitor venues has the same effect, driving up a range of variable costs from maintenance to staff costs. With the primary focus of many attractions historically having been on driving attendance up, the challenges that success can pose to operators are not always taken into adequate account.
Hitting the sweet spot where the venue is performing at its optimum and where visit quality is maintained at periods of peak demand is just as much of a challenge for management as doing so when attendance is more modest. It’s the profitability per visitor that is important, in combination with a relentless focus on the quality of each visit, whether that visit takes place in peak season or on a quiet day in late autumn.
I do think that in many cases, the attractions sector is ahead of the hotel sector in this regard. We have always measured revenue per visitor, but managing so that the focus is on variable costs and profitability (or on the economic sustainability of a museum or heritage attraction) has become more and more the norm in our sector, and rightly so.
Hoteliers are now being urged to focus on gross profit per available room and on customer acquisition costs. Other measures that they will be expected to monitor and manage include average daily rate, demand, cost per occupied room and ancillary revenue potential. Many of these have their direct counterpart in our sector and I’d urge managers who are not measuring and monitoring their business in this way to ensure that they choose the KPIs that are right for them and acquire the tools, systems and discipline to do so.
Good luck to all of you in 2018!