Inflation is here and it is impacting us all! Inflation rates have grown faster than anyone would have predicted and there is no sign of significant abatement. With bottlenecked supply chains, record demand, and plummeting asset prices, prices for goods and services are steadily rising, and that includes the cost of running your accommodation.
But how should this affect your pricing? Where do we go from here?
Many accommodation owners are hesitant to raise their prices, fearing that it will deter guests from booking rooms. But if you don’t adjust your prices to keep up with inflation, you could end up losing money in the long run.
There are a few things you should keep in mind when deciding whether or not to raise your prices in response to inflation and by how much… To take a closer look at this supply, demand, and inflation equation, we have on the hot seat Glen Boultwood, CEO & Co-Founder of Serene Capital. Glen and I take a deep dive into how inflation is impacting travel demand and how accommodation owners can keep up.
With over 20 years of experience in the Australian investment management and property industries, Glen has held a variety of senior management positions encompassing investment fund establishment, capital raising, unit holder liaison, debt and capital management, tax and corporate structuring, developing and delivering fund strategies, acquisition and divestments, risk management, insurance claim management and team development.
Glen Boultwood, through his company, Serene Capital, developed and continues to investment manage a tailored hotel investment strategy on behalf of a family office. Serene Capital, under this mandate, has developed and recommended an appropriate corporate structure, acquired 10 hotel and serviced apartment complexes, negotiated debt facilities, and managed risk and asset manages the portfolio. As of 30 June 2022, the portfolio is currently achieving a 12.7% per annum return since inception.
Prior to establishing Serene Capital, Glen was the fund manager of Eureka’s Core Property Fund 3, the best-performing unlisted wholesale property fund for 5 years to 30 June 2014, returning 18.5% per annum. Holding a mixture of office, retail and hotel investments.
This episode is timely and it was great to get Glen’s perspective on what to do next. This episode, once again, is a must-watch!
What we cover in this episode:
How to adjust your room price for inflation?
Why room rates are only going up?
What have been the primary drivers of higher inflation over the past year?
How to determine when higher prices will impact stays and your bottom line?
How to develop a pricing strategy that takes inflation into account?
Hello and welcome back to The Accommodation Show. We help accommodation owners like you get the knowledge and skills you need to grow your business, improve your guest’s experience and increase profitability.
Ok everybody, welcome back t another episode of the Accommodation Show, I’m very glad to have a fantastic guest on the show and we will be talking about all things room rates inflation and what you need to do. Welcome to the show. Glen Boutlwood.
Glen: Thank you very much, Bart. Glad to be on the show. And thanks for the invitation.
Bart: Yeah, look, I’ve been looking forward to having you on and I’m going to let everyone in on a secret that it is 6:30 in the morning where you are. So thank you so much for getting up to join us.
Glen: No worries, the sun’s out now so it’ll be more awake.
Bart: Look. Simple. Thanks. I mean, I thank you for taking that time and for getting up early in the morning, and for coming to share your knowledge and your skill set with everybody I would be remiss for you not to introduce yourself. Let everybody know who you are, where you’re from, and what your background is. And maybe just a little hint as to where we’re gonna go with our episode today.
Glen: Yes, certainly, but I’m the CEO and co-founder of serene capital, which is a boutique real estate investment management firm that I set up just over eight years ago now. My background is actually in marketing and hospitality management. So I’ve got a bit of flavor of both worlds. But I love the investment world, so been in real estate investment management now for over 20 years. And not just in hotels, but also in office, retail and industrial as well.
Bart: So tell me about today’s episode, because we had a chat beforehand about what we were going to kind of talk about. Give me a bit of a flavor of what you were thinking and what we talked about.
Glen: Yeah, look, one of the things that always fascinated me is around how you actually optimize your average room rate pricing in different environments. So today, I wanted to talk about a lot of work that we’ve been doing from a pricing optimization basis, and then focus more on one of the topical issues of today, which is what is going to be the impact of inflation on pricing moving forward. Is it a good thing? Or is it going to cause us issues moving forward?
Bart: I think I mean, super topical because inflation is going up interest rates are going up. There are countless conversations about how everything’s going to be impacted around us. And it’s actually a topic fit. I talked with Liz Morgan he is one of the chaps that does Sudima hotels and we started talking about inflation a fair while ago and how we need to optimize things almost on a daily basis all the way from room rates down to food pricing and menus and that sort of thing. So this is a very important topic for everybody. Because you need to understand the principles around what some of your blockers are around inflation, and some of the misconceptions around inflation, and then have a really solid strategy to be able to work in ever-changing times and they got more or less right.
Glen: Absolutely. At the best of times, hotels are evolving on a daily or hourly basis, and even more so in this environment. You need to be on top of things and be monitoring things and with so much data out there at the moment. It’s how you get your hands on that data in a very easy-to-understand and quick format so you can make informed decisions, rather than just sticking your finger up in the air and hoping for the best.
Bart: Yeah. And just to give a little bit of context for everyone. So this conversation that we’re having and then we’re going to have, it’s all based around work that you’re doing with your clients and data that you’re providing for people that you work with. Is that right?
Glen: Yes, it’s data that we can obtain and everyone can obtain. We’ve set up our own data analytics tool that allows us to quickly assess the current situation more. But the whole thought process and the philosophy behind it has been something that’s probably been dwelling in our subconscious for some time. It’s been a problem that has been a forever problem for us. And we’re now actually with the disruption COVID Come up with a solution that will really help us and has helped us through that period to really look at things very differently to hotel operators has looked at it in the past.
Bart: We’re upgrading our knowledge. So if, if your hotel operator, if you’re a revenue manager, then this kind of data and this sort of information will be relevant because what we’re doing is we’re discussing new ways of tackling the problem.
Glen: Absolutely. And we’re also talking about some of those artificial barriers to optimizing pricing, a lot of which are more mental barriers than anything else rather than actual challenges themselves. It’s more about the way to conceive or perceive things as opposed to what everyone else is doing.
Bart: Okay. So if we kind of, if we start off at the start, basically so when we’re talking about this journey, and when we go broad stroke, we’re gonna look at our room rates. And then we’ll talk to Glenn and you’ll see what’s the first step that you take people down.
Glen: think the first thing which is always the issue, whether you’re on a board or whether you’re in a business or whether you’re in a hotel, for that matter, is really understanding some of the biases that we have, and how they influence our decision making. And in this case, I’m terming them what are some of these, as I mentioned before, artificial barriers that are impacting the way we actually price our hotel room rates. And there’s a number I put down four different items that I consider those barriers that we need to be aware of. And the first is around how we perceive or what we perceive is the biggest driver of hotel room right pricing. And at the end of the day, that’s supply and demand.
That’s the starting point where you need to be that will control circa 80% of your pricing analysis of where you should price, but I’ve lost count of the number of times that I’ve heard from operators, how do you expect us to increase our average room rates when we haven’t invested back in the property? Yeah. And so I think, generally, in hotels, we’re taught especially in the operation environment, how important the brand is and how important the physical product is and might be service as well. But supply and demand we pay too little attention to and a good example of that which is again topical today. Is just looking at somebody like petrol. Petrol the product doesn’t actually change. You don’t improve the product, it stays the same. Yet pricing is fluctuating you know, that has gone up and almost doubled in the past sort of six months. That is supply and demand-driven. It’s got nothing to do with reinvesting and so I’d say to hotel operators, understanding that supply and demand equation is one of the most important because you might have a really poor product but your competitors’ full competitors fall you can push price.
Bart: I have to jump in with another example which is very similar to the airlines as well. There are so many airlines that I have seen the prices double and the quality of service actually diminished from what it used to be and not say all our costs have gone up and they haven’t gone up that much. They really haven’t doubled since pre-pandemic. But I think that it’s the supply and demand where the demand is so high and they can’t meet that demand because obviously, they’ve got staffing issues and all those different issues. So Airlines is another example where I guess they’re conscious of this, but I guess where I mean, if we look at industry-wide, we’ll assume that you know, that’s the supply-demand equation that pricing equation will balance itself out but individual operator, what we’re seeing is that we can do a lot more to sort of really understand the supply-demand side is that right?
Glen: I understand Hilton have a daily dashboard that they produce. I haven’t seen it yet. But looking at how much demand and what searches are coming into a specific market and then really using that to say well on these dates, the demand is so hot, I don’t care. Let’s find out where it’s coming from but let’s put our prices up. So Hilton is doing a good job on that and understands they’ve had a lot of success in various markets like Sydney and Cairns recently, on the back of that. I’m not sure how many other operators are going down into that granularity. We certainly don’t hear it from the hotels that we own. And so more focus needs to be on that.
Bart: The demand side and we’re going to come back to this particular topic or do you want me to go a little bit further because I’m super curious about a couple of things? One is where we get that where we can find that data. And the other one is on the supply side. You said also, you know we want to understand supply, and are we looking at just competitors in the same sort of offering the same product, or is it industry-wide supply? How are we kind of figuring out what data to choose and what’s gonna be relevant to us?
Glen: It’s really locational driven to a large part and we’re going to cover it a little bit later in terms of competitive advantages, but supply it’s about what’s in your market. So if you’re in say, a suburban market say Penrith, which we have a number of hotels in. It’s really focused on not what’s happening in black town or Olympic Park. It’s what’s happening in that locality.
Bart: Got it. Okay, great. So he says yet for things there’s three more to go, is that right? There are three more to go.
Glen: The next preconception that I think is a little bit misconstrued is that I genuinely feel that hotels and hoteliers believe they are demand creators. I have a very different view on that and I view that most hotels are demand takers. They can’t actually build there are very few hotels in Australia or indeed the world that actually create their own demand that demands either created by locational last bigs created by airline capacity and flight pricing, or it’s created by businesses or infrastructure projects being located in the locality around where your hotel is. So when you look at it as a demand take your point of view. discounting your rate significantly, for instance, won’t actually create new demand. It might shift demand from a competitor to yourself, but the size of the pie doesn’t grow. It stays the same. It just shifts. And when we think of it that way, then it changes our focus on how we actually price. If the demand is what the demand is, it’s coming there or it’s not coming there.
That makes a difference as to whether you discount or whether you push your rate up. And a prime example of that string is COVID. Okay. A number of hotels actually were trying to drop pricing to increase demand. Now demand wasn’t the issue during COVID. The demand was actually strong. And we’ve seen in recent times how strong that demand was. The issue really was around the fact that that demand wasn’t allowed to get to where it wanted to go. Because of border closures or lockdowns or other matters. So we made a decision during COVID to actually put a floor on our public pricing and actually increase it because if anyone actually got to your hotel, the number of hoops they had to go through just to get there was phenomenal. They were going to pay whatever they were going to pay because they were going anyway. And so it’s really understanding that hotels take demand, the demand is either going to be there or it’s not. And your pricing is not going to grow that pie.
Bart: I completely understand that. What would you say to someone who said but my competitors are discounting I know that might be a different part of the puzzle. But I can imagine that being a really natural one where you’re going well okay, great. Well, the demands there but everyone’s discounting their prices next door, so I have to as well.
Glen: That’s a great segue into my next point or my second point, which is really a failure to lead yet and this is not a hotel-specific thing superannuation funds have the same issue. We have got so much data and rich data now with STR, that we can see what our competitors are doing as a group on a daily basis. So we’re always looking over our shoulder to see what our competitors are doing, rather than charting our own course and actually leading in terms of driving this position.
There are so many times and I’ve heard it recently as well, especially when you’re looking at lower products, either three-star or four-star and they sit there and go Well, I can’t shift my pricing until the five stars move. So everyone’s sitting there and waiting for someone else to take the initiative to lead when, as you say competitors drop their prices. It’s a quick run down to the bottom everyone follows. But interestingly, we’ve had a situation in Perth recently where we’ve got the worst product in the market, three stars at best and we sat there and said, Look, we need to drive the pricing equation. And so we actually continue to push that pricing. And it’s continuing to go up well above where we ever expected it to be. But because we were pushing up from the bottom, we’ve actually seen our competitive set react, and they’ve started to live rates now.
So you don’t have to be at a five-star hotel to drive that. You just need someone to have conviction and take ownership. Now, we could do that. Why? Because prior to COVID, we were looking at our demand elasticity, and the pricing so on all our hotels, and we ran a correlation analysis. And what we saw was that our demand was very inelastic over a fairly wide band of pricing compared to our competitors, and occupancy rates weren’t affected. And we found that out when our pricing was higher. Our occupancy rates were a lot higher. When the hotel tried to drop their rates. We didn’t see occupancy grow at all, or very little.
Bart: Yeah, wow. Fascinating. Absolutely fascinating. And how does time affect any of that as well? Like, is it I mean, could you have flipped it in a way or I mean, how? What I’m saying is, you know, COVID was a different time to what we might have right now and I think that what you’re seeing sounds fantastic. By the way, don’t get me wrong when I want to do it. Of course, I want to increase my prices, the prices, but we’re risk-averse, right? We don’t want to take that risk. And so Glenn said that, hey, you’ll be alright. Because then we’re okay. But how do we kind of take away some of that risk and how can we have conviction in what we’re doing?
Glen: It really comes down to data analytics. Now hotels have a treasure trove of data in their systems. Unfortunately, it’s not as good as it used to be. I think we’ve lost some of that data quality. But it’s about having that data and actually making informed decisions based on data. Too many of our decisions around revenue management are based on I guess rules of thumb so it could be you hear that conversation. Well, I need to be $50 below the hilt, and that’s where I should be positioned. Now, where has that number come from? Eventually, or what’s really happened as someone’s come up with this at some point in time without that data analysis largely, or maybe they did have it at that point in time. But who’s to say that gap between you and Hilton is $50? Who’s to say it’s not $20 or $15? Yep.
So it starts with data doing correlation analysis based on history. And we did this pre-COVID. All this correlation analysis. So we proved on a pre-COVID basis, that this was a drive so COVID didn’t actually give us the impetus to do this. We were doing it pre-COVID But COVID gave us the disruption to really test it and actually take a leap of faith, even bigger than we had before. But going back to your point, it comes down to testing. No one knows what that point is. Yeah. So I put the analogy it’s like the frog boiling. Water. Yeah. It’s if you go and you say let’s say our average room rate is 100 And let’s call it $200. Yeah. Do we get it from $200 to $300 in one go? Yep. The boiling water. You put the frog in. It’s in boiling water, it jumps out. Yep. Whereas if you turn the heat up gradually, so the frogs in the pot when it’s lukewarm, and it gets warmer gradually. Then firstly, from consumer behavior, perspective, people don’t notice those differences so much. And then more importantly, if you’re monitoring it, eventually as you push up and measure the relativity between your pricing to the concert and your occupancy to the comp set, you’ll eventually get to the stage where you’ll hit that point of inflection and go okay, that’s where we should be.
Bart: As you’re pushing your price up, especially if you’re dearer than some of your competitors, you don’t need your occupancy to be like, like for life, right as well. You’ve got a little bit more room to play with there and you can have lower occupancy, but hey, who cares? We’re 20% More expensive or whatever it is.
Glen: Absolutely. And you flow through to the bottom line and your profit margins are much higher.
Bart: Okay, I feel like I’m kind of pushing toward the end. If I feel like there was a fourth one, or do we get through the fourth one in that?
Glen: We got through the fourth one in that which was the data analytics so you managed to build them well together.
Bart: Okay, so if we go back to the data analytics side of things, you said that there’s data that we can see we’ve got str to grab data from. We’ve got lots of different PMS platforms that will also provide concepts if you’re in short-term rentals, you’ve got air DNA and Transparent as well, which you’ve got massive amounts of data that you can start to hone and start to understand bridging the gap between the data that we have internally about our portfolio and what’s happening in the marketplace and sort of aligning it to find the right inflection point, as he talked about at the end. What are some good strategies and it’s good tips for everybody?
Glen: Look, the main one is its relative performance. If you’re purely looking at your own occupancy and you put your price up, you suddenly find that your occupancy has fallen. The danger is if you’re not looking at a relative performance to compensate is that it could be market driven. The market could have just had a bad day, a bad week or a bad month. So the key things are you need to look at things on a very granular basis. So a Tuesday to Thursday might be a very different strategy to a Friday and Saturday because you got different business segments. Yep. And it’s much easier to test this inelasticity on public pricing channels. Much harder to do on a corporate. But if you stick to that, and you look at the comparative, it’s then important to actually agree on a timeframe that you’re going to test this for.
There’s no point going well, I’m going to test it and as soon as you get the first bit of occupancy to come off, you drop that testing platform, you need to test it for at least a period of eight to 12 weeks to understand whether it’s just admin, normal blip, or whether it’s a proper trend, and then you can go again if there is no blip there. I think the second thing is to understand that public pricing on corporate pricing. It comes down to really consumer behavior and thinking about it like that. One of the biggest things in Australia is that we all like convenience. So if I’m in an office building, I’ll typically pay three times as much to park underneath my office building than I would in a public car park next door. The same goes with hotels, if I’m negotiating a corporate contract, and my corporate client is right next door to my hotel, and they’re saying, well, you’re competing against this and the Four Seasons in Sydney, you’re competing against the Western.
I can sit there and say well, I can hold my pricing firm because they’re going to choose us over the western because we have a competitive advantage that is sustainable because it’s location driven. So understanding those sustainable competitive advantages and those competitive advantages, and then understanding more who that customer is what do they come in here from are they come in here for say, a football game and you’re located right next to the stadium? Well, they’re going to pay a massive premium then somewhere where they have to drive so it’s understanding your competitive advantages, understanding your customer and then all your comparison should be your relative occupancy compared to your relative rate difference.
Only then can you really understand whether your pricing impact is actually shifting people from your hotel to your competitor hotel, because that’s the biggest fear that hotels have with the SDR data? No one wants to be that my cat sticking their head above the parapet. Right. And so it’s very easy then to go and focus on volume rather than pricing. Thankfully, COVID has actually taken that out for a number of hotels, and I think especially in the CBDs maybe some of them have found that pricing by accident, because they didn’t, as you say didn’t have enough staff to actually service the whole hotel so they use pricing to cut down that occupancy.
And then you hear the comment. Oh my goodness out. That’s worked right. It’s actually worked out pricing people are still paying for that. And then they go well, I hope it lasts. And my point to some of these people has always been well. Have you ever thought we’ve just got our pricing metrics wrong over the past 20 years, and we’ve never actually found out where our true pricing should be? With we’ve never tested that. You look at caravan parks. You look at Airbnb, you mentioned that before. The pricing on those apartments down the south coast of Sydney now is three times as much they’ve gone from in peak season, maybe 1000 bucks a night or a week to 3000 to $6,000 a week and they’re not great products. Why? Because they use this supply and demand product. They’re better at it than we are as hoteliers. And so we’ve got better products and better service but sometimes we’ll have caravan parks that charge more than a five-star hotel in Sydney because its location is supply and demand-driven.
Bart: I couldn’t agree with you more on all of those, my head is swirling because I’ve got so many different cars. I really wanted to cover up one thing, I think will and probably add the most value to everyone. And that’s why I don’t apologize and haven’t gone over it again. But just finding the inflection point, right and you’ve kind of started to cover a bit. You said you’re gonna take eight to 12 weeks to do some testing. And I guess there are different ways that we can do that and increase our prices. But how and then we’re looking at the competitors. We’re seeing what’s going on and hey, occupancy seems to be okay in comparison to everybody else. Is that when do we know that we’re getting on the wrong side of the inflection point?
Glen: When you have a trend we haven’t gotten there yet in any of our hotels but in one of our hotels in Perth on two days of the week, which is a softer day in the last couple of weeks. We’ve actually seen our occupancy materially deviate from where it was previously, and the comp set and that tells us one of two things either we’ve reached the point of inflection or demand the markets just had two bad weeks. Yep. So we don’t know which one it is at this point in time. So we sit there and say, Well, okay, maybe we’ve made that point of inflection for those two days. So let’s just keep the rate at that level and not let’s not continue to push for the next eight weeks and see what happens. On those other five days of the week where we haven’t got, they will continue to push. But we’re sitting there and we’ve been very cognizant not to jump to a conclusion that we’ve met that point of inflection we think there’s a reasonable probability we have, but then we always need to test their assumptions.
Because sometimes there are other factors that come in there. So for us, it’s actually we’re trying to disprove our theory that we’ve met the point of inflection. Yep. Rather than just accepting that we have, and that’s the biggest thing. It’s actually taking that approach where we sit there and say, Yes, we see what’s happening. We’re not going to panic that we’ve reached this point of inflection and sunny bring down our pricing. We’re going to sit there and monitor it to actually understand whether we are at that point. And if we are, then we might just gradually bring that back and see where that occupancy goes. So we only do it by a couple of dollars at a point in time. So it is constant monitoring, and then holding firm to this strategy. It’s like in business entrepreneurs, you don’t sit there and at the first sign of failure or rejection. You sit there and go okay, we’re giving up we’re going to do something new. These things actually take time to culminate and they will change in one week you might be at that level.
The next week, especially in an inflationary environment, it might change. So that point of inflection is not a point-in-time thing. What it can tell you though, is on this day of the week, what is the differential in pricing either above or below our competitive set that we get to where we start to see that impact on occupancy? And that’s quite a powerful thing on this property and heard what we’re talking about the hotel has always said we need to be $30, $35 below our comp set. And we said why? We know were the worst product in the market. We are the cheapest Why do we have to be the cheapest to buy $30 Why is it not? 20 or 10? No one knows what it is.
Bart: It’s incredible. Incredible the number of conversations I have with people who say why have you priced yourself that way? Oh, it’s always been this way. We’ve always done it this way. Oh, this is what people are willing to pay. Okay, if you’d be tested it, so you’re absolutely right now, to wrap it up. To wrap it all up. We did promise everybody a little bit of behind-the-scenes-on inflation and current matters. And actually before we got on we started talking about this as to is inflation good for this. Is it bad for this? Well, how do we deal with pricing in a high inflationary environment? And I’m going to add another one in the back of it which is my killer You bet. Why not? Recession potentially as well. You know, I mean, we can’t it’s something that we can’t see but it might be coming. What were what are your best tips?
Glen: The best tip is to look at history as a starting point. And so with the inflationary environment, we did a lot of work early on in terms of understanding. When was the last time we had a high inflation high-interest rate environment? And that was back in the 80s was the last time we had that. And what we’ve done is we’ve modeled interest rates, inflation, and average room rates over that period of time and supply as well. During that time to see what the impact was on all of those. And in every market across Australia. We found that average room rates in a high-inflation, high-interest-rate environment actually grew faster than inflation. In every single market. Now, I’ve heard some comments say Well, that was when the Japanese were coming through in droves.
Yes, they were in, say a Cannes or Sydney market. But when you look at other markets where the Japanese weren’t as strong like Canberra, ICT, or WA, they still outperformed inflation over that point in time. And I put it down to what we’re seeing today. Our grocery bills are going up rapidly. Our rents are going up rapidly. Our fuel costs are going up rapidly. Everyone is used to things going up and expects pricing to go up. So when you actually push your average roommates up, yes, you might get some grumbles but with the grumbles, everyone knows everything else is going up. So now’s the best time to actually leverage that and actually grow it.
If we then look at the second question and I’ll come to recession in a second well, as interest rates start to buy surely people are going to stop traveling I have a different view on that. And that’s a view that has been culminating since really the GFC, post-GFC there was a massive change in consumer behavior and spending suddenly goods retailing decreased significantly as they shifted towards services and experiences which went through the roof. Now, in my view, this has always been my heart hypothesis and no one’s ever argued about it. But my view on that was that was where you had the advent of social media coming on. You had this period where people suddenly wanted to share new experiences with their friends and get this instant gratification. The problem was at that point in time, everyone had their new big flat-screen TVs with their Louis Vuitton handbags. So sharing that on Instagram was nothing new. It was nothing exciting. It didn’t get that and so people started looking for unique experiences whether they were food or culinary or travel.
What happened during COVID goods retailing went through the roof why? Because people couldn’t actually have those experiences. What we’re seeing now post-COVID And it’s quite widely published by The Economist and banks is that goods retailing is starting to come back down and experiences and travel is really starting to come by the second avenue to that which is coming through which is COVID induced is the fact especially as you would appreciate being in Melbourne. I mean Sydney, is the fact that we had so many lockdowns we were stuck in our house for so long. Now we’ve got to work from home. So when are spending two or three days a week generally still working from home, and so more and more people need to escape. We didn’t spend that much time in our homes or our suburbs previously. They want to escape more often for shorter breaks to get out and experience a new location. So my view in terms of the venture rates, you’re gonna see goods retailing, suffer the most. And travel and experiences will be the last to be cut back as interest rates start to bite.
Bart: Yeah, interesting, interesting take on it. I really appreciate it. And I think the reason why I appreciate it is because we already talked about people wanting to travel for a long time. This is you know, throughout all the lockdowns, and that’s when prices start to really boom in terms of the cost of travel. And accommodation. Flights are still cheap but accommodation got very expensive. And then it’s really interesting that even though we’re facing more uncertainty and everything going up, you’re still saying, hey, you know what, we’re still good. We’re still good people still want these experiences and they still haven’t had them. I haven’t had mine personally. And I know a lot of people that haven’t I see, open up my Facebook and there’s probably only a small percentage of people that are doing those trips. But it’s kind of becoming these, you know, once in five years or 10-year trips that they’re going to be trying to go and accomplish, and to do so I think you might be onto something. I think you might be onto something. I really liked that.
Glen: I might finish on your recession point because you did ask me to touch on that briefly. Look, there are different recessions there are global recessions or there’s a US third recession technically they’re already in recession, but how much worse does it get? If you look at a US-based recession, what you’ll find is that the markets that will be impacted the most are Sydney, and Melbourne the other markets that have less exposure to more US corporate lead decisions like Brisbane or Perth. They won’t be impacted significantly at all by the US recession. What a US recession does is it impacts corporate demand because where you have corporate offices with the US head office, they generally tend to make a US-centric decision around Okay, the US is bad. We’ve got to cut our workforce, and we’re going to cut it by x percent globally. Australia might be breaking records, but the decision from head office is getting rid of 10% of your workforce, even though you’re growing so that affects your corporate demand travel patterns. Those markets and we got to remember Australia is very much still a domestic focus market. Those markets that are more infrastructure-focused, defense domestic-focused, should come out of this relatively unscathed even if we have a mild recession in Australia, which I still don’t think is necessarily going to happen.
What you see is that you’ll still have that demand growth and the main reason for that is that Australia is a very balanced economy when Sydney Melbourne suffers because it’s financial services or insurance, then generally what’s happening as governments are spending infrastructure to buy their way out of recession. So the markets of Brisbane, Adelaide, and Perth, which are very much mining resources focus actually grow and balance it out. So I mean, we had 28 years of no recession. Why? Because our economy naturally balanced itself out. So if you’re invested in markets that are very domestically focused and diverse, they won’t be impacted so much. If you’re invested in markets that a highly leisure reliant then they could actually have a bit more of a hit. But Sydney and Melbourne are generally the ones that will suffer more so out of the US base or global recession, as opposed to the other markets.
Bart: Awesome. Look, I have probably around about 40 more questions that I have in my mind about inflation about going back to that pricing, but I think that we’ve put a really good bow on this particular topic in this episode. And as with all the episodes, we just really want to get people to get a bit uncomfortable and to think about things in a different way. So then they can go back to what it is that they’re doing. Hold on, I need to have a look at this. This is for some really good ideas. I can look at data in a different way I can think about my pricing in a different way. So I really appreciate the time you spend with us to have a chat about all of these topics. It’s invaluable. It really is said forever, very high level as well. So I appreciate it.
Folks, if you are tuned into The Accommodation Show on a podcast and make sure you give us a like and a follow and leave your comments and your thoughts on the episode. If you’re watching on YouTube, make sure you guys subscribe and also leave us a comment and we’ll be able to answer those questions for you. Glen, what is the best way for people to network with you keep in touch with you, and get to know you a bit better?
Glen: We’ve obviously got a LinkedIn page. We can comment on that the alternative is our website, wwwserenecapital.com.au provides an email address that will get through to me if you want to connect and network through that process.
Bart: We’ll have those links in the show notes as well so you’ll be able to click on them and find all the information there. But thank you so much for your time. I can see that it’s got brighter in Perth there as we’ve been talking to lots of a brighter side. I wish you a very pleasant day.
Glen: Thanks, Bart. Appreciate the time.
Thank you so much for listening to the show. You can find this at theaccommodationshow.com where you can find all the show notes. links to resources we have talked about in transcripts from the show. I really do appreciate you listening. And if you’d like to support the show, please subscribe. Leave a comment and share it with others.
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