Navigating new hotel supply

Four strategies for hotels to stay In the game among new market entrants.

April 29, 2024

When new luxury and upper-upscale hotels enter a market, it can serve as a call to action for other hotels to up their game. For these legacy hotels, the challenge is not just to maintain market share but also to reinforce their foothold among new entrants.

Case in point - Kuala Lumpur. With the iconic Petronas Twin Towers dominating its skyline, Kuala Lumpur has long been a magnet for both leisure and business travellers worldwide. But as demand for upscale and luxury accommodations rises, the city is experiencing an influx of new hotels.

Learning from the experiences of hotels in other cities in South-east Asia, longstanding hotels in Kuala Lumpur can gain valuable guidance on remaining relevant in the face of fresh competition.

Hotels in other cities – such as Singapore, Jakarta and Bangkok - have successfully mastered four key strategies to remain attractive: renovation initiatives, market segmentation, unique marketing approaches, and through service excellence.

Renovation and refurbishment Initiatives

In an ever-evolving tourism marketplace, it's becoming increasingly apparent that established and older hotels should take proactive measures to stay competitive. This goes beyond striving for yield accretive-ness and delves into the realm of defensive enhancement – a crucial strategy for survival and growth.

The hospitality landscape continues to change at an accelerated pace and new hotels often setting robust benchmarks for Average Daily Rates (ADR). By integrating upgrades in design and technology, existing hotels can significantly enhance the guest experience and justify any potential rate increases to sustain or even improves their competitive edge.

Singapore, for example, saw a surge in new hotel supply between 2010 and 2013, which created a more saturated market. Unfazed by the growing competition, hotels embarked on a strategic renovation journey with comprehensive redesigns of their Club Lounge and remodelling suites and rooms to add a contemporary touch, while retaining their existing brand identity. The renovation preserved the hotels prestigious position within Singapore's competitive tourism market and marked their commitment to providing an elevated guest experience.

Balancing innovative modernisation and brand preservation is a valuable lesson for other players in the luxury tourism sector.

Market segmentation and positioning

Analysing customer data to identify niches within the market is crucial for hotels in Kuala Lumpur. By focusing on specific segments, such as luxury business travellers or wellness tourists, hotels can differentiate themselves and tailor their offerings.

This is something hotels in Jakarta and Bangkok do well. While Jakarta may not traditionally be seen as a prominent destination for travellers compared to the magnetic pull of places like Bangkok, its strategic approach to the hospitality sector is multifaceted and nuanced.

Unlike Bangkok, which often leans towards a narrower, targeted value proposition to attract its widespread tourism activity, Jakarta has had to diversify its approach, offering varied attractions and facilities to appeal to a broader range of visitors.

For instance, Raffles Jakarta integrates arts and culture to appeal to discerning travellers seeking exclusivity and immersion. In Bangkok, hotels differentiate themselves through personalised luxury, cultural heritage and modern elegance. Examples include Capella Bangkok's personalised luxury, Rosewood Bangkok's architecture, which reflects Thai tradition, and Moxy Bangkok Sukhumvit 11's more playful concept. Overall, the evolution in Bangkok's hotel scene is about fostering a connection with Thai culture and globally appealing community-focused and experiential travel.

Twin city marketing and partnerships

Collaborations with neighbouring destinations can significantly enhance the appeal of Kuala Lumpur as a tourist destination. By integrating nearby attractions such as historical Malacca or the beaches of Penang into twin-city or multi-destination packages, hotels can offer guests experiences beyond the boundaries of their city property.

Promotions and collaborations are staple strategies that have benefited Bangkok's hotel market, even in downturns. For example, the Tourism Authority of Thailand (TAT) often partners with local hotels to promote festivals and events throughout the city.

Partnerships with experiential travel platforms such as Klook or Viator can further extend reach and accessibility. These platforms create and distribute unique travel packages with local experiences and can be listed on the hotels' brand websites as well as these high-traffic marketplaces.

While tourism strategies formulated by local authorities or government are largely beyond hoteliers’ control, hotels can adopt proactive measures to align with larger tourism trends.

Training and technology to boost service

Service excellence remains a crucial factor in guest choice and hotels can raise the bar by investing in training programs and technology.

Technology needs to 'take the robots out of humans', and by automating routine tasks to enhance service quality - mobile check-in/out platforms, for example - hotels can streamline guest experiences and free up staff time. Similarly, AI can offer personalized services, like tailored room conditions or local recommendations. Technology will allow Hotel staff to focus on meaningful guest interactions, boosting customer loyalty and standing out in a competitive market.

Synergy and innovation

As new upscale competitors vie for their slice of the market, seasoned properties are far from obsolete. This does not just apply to Kuala Lumpur but to several markets in APAC may experience additional supply of hotels. The key is to use the competition as a catalyst to set a course for renewed market dominance.