Guest Blog: How To Find The Optimal Financial Path To Profitability For Your Hotel
Even in the best of times, running a small hotel is no simple task. With current forecasts predicting that it could take up to 7 years for the industry to fully recover, the pressure on smaller businesses in the hospitality industry is understandably severe.
Creative marketing, exceptional customer service, and the creation of a unique offering all have roles to play in keeping your hotel running, but all of these elements need to be underpinned by sound financial strategy.
Here are some insights on how to go about maximizing hotel profitability in an environment of uncertainty.
#1 – Actively Manage Revenue Streams
Room revenue is usually the primary driver of hotel profitability, but it shouldn’t be the only one you spend time managing. Each of your revenue streams can deliver good ROI if managed properly and treated with the respect of a small business. Whether it’s your food and beverage operations, corporate and office facilities, spa facilities, or even your parking, take time to brainstorm each department as though it were a standalone business, and brainstorm all ideas for increasing revenue.
As well as bolstering existing revenue streams, you may need to think outside the box to introduce additional, viable streams that your hotel is positioned to take advantage of in the current climate. Consider creating hygienic co-working and overflow workspace for offices, hosting local events, introducing activities for cultural, adventure, or eco-tourism, and more. While management can assess current and potential revenue streams for viability and deliver a clearer picture on how to move forward, remember that anyone and everyone on your team can come up with a unique, actionable idea. So be sure to give everyone a chance to be heard, and bring an open mind to the discussion table.
#2 – Make Your Website Booking Process Effortless
Make sure that guests can directly book through your website using an easy, user-friendly process. While over 70% of travelers use their mobile phones to research destinations and hotels, and 42% of people worldwide (48% in the USA) have booked a hotel online using their mobile phone, it’s essential to make sure that your website and booking process is mobile-friendly. These direct bookings carry no commission fee, which directly translates into increased profitability.
Hotel apps can play a key role in the booking process also, as they have had positive responses from guests who are increasingly interested in having more control over their stay, and easier access to facilities and activities, all while securely social distancing. One-third of travelers say that apps allow them to better research their hotel, make it easier to use their mobile to complete a booking, and encourage them to book activities once they arrive. Apps can also be integrated with hotel systems for keyless entry, check-in, and numerous other activities that improve overall customer service while taking a burden off staff.
#3 – Leverage Your Existing Network
The most effective and affordable marketing comes in the form of word-of-mouth recommendations, so make good use of your network of fans, suppliers, past guests, and clients to show the market what you have to offer. Ultimately, retention is a critical growth strategy.
Create social media competitions where guests share their experience online, partner with suppliers and clients to post online recommendations that promote both sides of the story, introduce hotel loyalty programs, and keep in touch with past guests with special offers they can send on to friends and family. Remember to link back to your website’s direct booking page to promote commission-free bookings.
#4 – Profitability Over Revenue
Top-line revenue is undeniably critical, yet it’s easy to get too focused on driving numbers. Hotel profitability is the ultimate end goal, and achieving this means looking at operational efficiency and operational expenditures to discover areas of waste that are eating into profits.
In current conditions, increasing revenue is a significant challenge, so look to opportunities to increase profitability at the same time. This could include implementing hotel software solutions that allow you to reduce labor costs or reallocate staff to more key positions, reducing operational costs through property management software solutions or energy-saving technology, or sourcing new local suppliers. Even if this doesn’t result in an immediate improvement in profitability, you’ll feel the benefits down the line as top-line revenue recovers.
#5 – Reach New Audiences
Be sure your hotel has high visibility on all major booking sites and OTAs. Work on setting up a high-quality profile with great written content, beautiful photography, and plenty of information on what you have to offer, keeping your target audience at the core of your message. Talk to your customer reps within each site, and create a strategy to achieve premium placement over time.
While there is a lot of competition on these sites, the increased reach your business achieves by accessing 490 million monthly active users around the world (with 37.7 million from the USA alone) is worth it. In fact, 86% of current TripAdvisor users would recommend the platform to fellow travelers, which ties back into those all-important word-of-mouth recommendations. Remember to encourage past guests to leave reviews to build trust with this new audience, and that it’s essential for management to respond whether the reviews are good or bad.
Evolve Your Financial Strategy for a More Profitable Hotel
These practical tips are designed to show smaller hotels exactly how to make your hotel business more profitable, more resilient, and more appealing to your target market. By evolving your financial strategy, hotels can access new sources of revenue, reduce waste and appeal directly to travelers looking for their next vacation.
About the author:
Colin is a Co-founder of Proven Partners, an international real estate consultancy firm specializing in the hospitality and hotel industry. He is passionate about helping real estate and hotel developers create game-changing projects that stand out and excel. He does this through a combination of his specialized marketing expertise and hands-on industry experience.
At Proven Partners, we specialize in hotel business development, delivering the expertise, guidance, and experience needed to deliver a comprehensive business strategy that delivers on hotel profitability goals. Contact us today for practical insight and solutions that position your hotel for a brighter future.