Venezuelan Hotels Try Promotions and Other Strategies to Cope With Financial Crisis

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Hotel promotions only go so far.

“In Venezuela, promotions help us prevent the precipitous drop in demand and minimize losses,” says Gustavo Jarussi, vice president of the Venezuelan Association of Five Star Hotels and regional director of the Pestana chain for Venezuela, Colombia and Cuba. “Clearly, we will not get back to the higher demand levels of the past by just relying on promotions.”

Indeed, the economic crisis has affected the profitability of hotels in Venezuela. Five-star hotels ended the last fiscal year with a 40 percent of occupancy rate versus 64 percent in 2015, according to the hotel association. In addition, the increase in operating costs was ranged from 470 percent and to 700 percent in 2016, yet the rate-per-room could not be adjusted more than 250 percent.

José Alberto Núñez, vice president of the Venezuelan National Federation of Hotels, has similar data with regard to their mid-range hotel members.

“In 2016 the average occupancy rate was 40.6 percent compared to 60.8 percent in 2015, a year when there was a slight recovery of 2 percentage points compared to 2014,” says Núñez. “Until 2011 we were accustomed to an occupancy rate of 80 percent.”

The drop off in international travelers to Venezuela is one cause for the decline in hotel occupancy rates. Between 2014 and 2016, when seven foreign airlines stopped flying to Venezuela and several others reduced frequencies and aircraft size, 28,100 seats were lost weekly at the Maiquetía International Airport, according to the Venezuelan Association of Five Star Hotels.

“We are talking about more than 300,000 potential foreign clients that could be spending in Venezuela,” says Jarussi.

Domestic tourism contracted, as well. Leudo González, general director of Hoteles Cumberland Venezuela, explains that a few years ago domestic tourists average stay 5 to 7 nights. The slippage in 2016 is significant, with average stays decreasing to between 2 and 3 nights.

To mitigate the crisis, hotels, especially in the mid-range category, have been cutting back on their services, which impacts their market position. The bleak data for 2016 also forced them to devise new strategies to maintain their operations, even at a limited capacity.

While the business model has not changed substantially, hotels have sought to revitalize their sales force teams by developing a more active presence in social networks to market their products.

“The concern of hotels is that the market in Venezuela is very small, but we do not want to continue to lower our occupancy rates or prices because we could not cover operating costs and that would start to affect smaller size hotels,” says Jarussi. “We’ve had to invent products that meet the needs of people in different ways.”

Some of the offers that hotels, such as the Pestana Hotel, have launched include early bookings, which provide a 40 percent rate discount, and themed packages such as “Weekend Getaways,” “Enjoy Holidays” and “Romantic Nights.”

Another option involves hosting corporate and social events that, according to Jarussi, are selling very well. At the beginning of this year there was an upswing in planned events but there was no increase in room bookings, a situation that is new for Venezuelan hotel operators. However, for many hotels occupancy — rather than meetings and events — remains at the core of their business.

González argues that the Cumberland Hotels has an advantage in its competitive rates. To attain better market position Cumberland tried different methods of promotions and advertising.

“We’ve had to innovate in the way we get the message to our customers, who are primarily businessmen,” says González. “We’re very active in social networks and have invested in technology platforms. We can now receive reservations directly through our portal, which allows us to get the income without having to pay third-party commissions.”

In order to deal with its dropping occupancy rate, The Crowne Plaza Maruma Hotel in Maracaibo is working to improve pricing and organizing activities as a means of improving brand positioning and differentiation.

Echoing González, Indira Barón, manager of marketing and public relations, describes a similar strategy that is focused on direct sales and the use of different communications platforms.

Despite adversity, Venezuela’s hotel industry remains committed to the long game. “We have to conquer the market that exists,” says González. “We have to remain active and maintain a business infrastructure that helps us best manage the crisis.”