Revenue drives business. Demand drives revenue. Therefore, demand drives business.
Seems pretty simple, but we get so caught up in our day-to-day that we forget this basic principle.
Demand for hotel rooms in any given market is determined by factors way outside our control. Consequently, we must position our hotel to attract the segment of that demand that fits our offering best.
For example, there’s X demand for upscale full service hotels. You get your fair share (x1) by pricing competitively, but you can also influence those potential guests with proactive measures, like great TripAdvisor reviews, advertising in the right places, and building strategic partnerships, among other strategies.
Investors should push the operator or deal sponsor to explain how they intend to get their fair share or better. It’s more than a supply and demand analysis. It’s all part of a comprehensive business plan.