Are you putting too much emphasis on your hotel revenue strategy? Many hotel professionals miss an important fact: Your focus should be on overall hotel performance, not revenue alone.
Consider this: Last year, the New York Yankees pulled in more revenue than the league’s bottom six professional baseball teams combined. But they didn’t win the World Series.
Why? The simple answer is on-field performance.
It’s the same for the hotel industry. Unfortunately, when it comes to building a winning hotel performance strategy, many hoteliers concentrate their efforts solely on revenue, when a focus on expense is just as important. That’s because a mix of revenue maximization and expense control leads to what hoteliers, specifically owners, are after: profitability.
Before you put your plan in motion, give it a second look. Here are the five things you need to include in your hotel performance strategy.
1) Operational Data
Revenue is vital toward a profitable hotel, so consulting data focused on revenue is necessary. But it’s not all about room revenue.
In hotels that feature myriad F&B outlets, meeting space, spa and other guest services and amenities, hoteliers should consider, beyond rooms revenue per available room (RevPAR), total revenue or TRevPAR, which is the total amount of revenue generated by a property, regardless of whether rooms are sold. As a KPI, its value is in demonstrating how effectively space is being used for revenue-generating purposes.
Although revenue data certainly has a place in your plan, there are other KPIs that speak beyond revenue that should be considered. Figures like gross operating profit per available room (GOPPAR) give you a deeper understanding of your business; the KPIs allows you to see how much money you are actually making on a per-available-room basis, after taking expenses into consideration. . In this way, the focus is not only on the money coming in, but also on the money going out.
When market conditions change, labor prices rise or uncontrollable events rattle revenue streams, but the hoteliers who master operational data excel. That’s because they know where they can cut back in a pinch and which parts of the business they can rev up for more returns.
2) A Holistic Approach Over a Hotel Revenue Strategy
In the hotel industry, rooms get a lot of attention. But a strong hotel performance strategy goes beyond traditional revenue strategies—especially those that make room rates the end-all-be-all metric.
Instead, successful hotel strategists drill down into the numbers and decide how to use every tool in the toolbox. This means digging into the data that’s driving bar and restaurant operations. It requires poring over inventory numbers and labor costs.
By making each of your assets work toward the same goal, your hotel operation will be running more efficiently. This means that the hotel will be less reliant on revenue and the whims of the market.
3) A Renewed Focus on Customers
It’s called the hospitality industry for a reason. Customers are at the heart of the industry, and they should be at the center of every hotelier’s performance strategy.
Some trends suggest building out better customer experiences can make all the difference. A recent Deloitte survey on customer experience found that for every point increase in satisfaction from their preferred loyalty program, guests are 21% more likely to leave a positive review and 12% more likely to come back to the hotel chain.
Still, a fresh customer focus isn’t just about giving the customers you have better experiences. It also means taking the time to target the right customers. By segmenting your customers and sending them the messages they find attractive, you’ll be putting money to use.
Pay attention to why customers are traveling. Are they stopping in for a business stay or looking for a fun vacation? Maybe they’re looking for a relaxing weekend. With this info in hand, you can showcase your best hotel features to the visitors who care. This data can also help you set the most effective room rates for the biggest returns.
4) A Strategic Hiring Plan
A focus on strategic hiring should be the beating heart of your hotel performance strategy. If you’re hiring a strategic manager, make sure they have the full picture in mind.
They need to be able to use data to find that perfect combination of rate structures, sales, marketing campaigns, and cost management. And they need to understand how revenue is driving profit.
Revenue generation is important. But throughout strategic roles within the operation, it’s crucial to find people who see beyond revenue generation. They need to be able to identify revenue sources and move the chess pieces that will make that revenue go farther.
On a more granular level, hiring the right people to run your hotel operations can transform your entire hotel or resort. Labor is the highest cost hotel operators face. This is why it’s so important to take the time to make sure you’re getting a high return on your investment.
Wondering how to?
Dig into the numbers, find operational bottlenecks and devote time to improving productivity. This also requires a focus on operating expenses, distribution costs and sales costs to free up resources that help employees succeed.
Upping productivity may not shave down the direct cost of labor, but if you do it right, it will add value that radiates across your operation.
5) A Fresh Approach to Third-Party Partners
Take a second to think about all of the third-party partners and vendors that hotel managers deal with. From something as simple as detergent to a complex range of food and beverage items, those costs can press heavily on your bottom line. This is why setting up a bidding process can make such a big difference. By vetting vendors and comparing costs, you can lower costs significantly.
At the same time, taking time to consider new partners and new technology can pay off. For instance, adding technology like a point-of-sale (POS) system can drastically improve both employee and customer experiences. Such technology cuts down on frustrating errors and makes it easier to track numbers.
Putting Your Performance Strategy Together
As you map out your hotel performance strategy, remember that there’s more to financial capital than what you’re bringing in with a traditional hotel revenue strategy. Focusing on operational assets and greasing the whole machine will protect your bottom line in rocky times and boost profit. And that’s the recipe for a winning strategy.