How to Increase Your Hotel Profits

Instil Some Core Values at any Cost

Before you address running costs, evaluate the way you work and set standards for staff. You shouldn’t need to operate at your rack rate to provide great customer service and if you can get staff in the correct habits, you can justify a better rate all year around. People may choose to stay with you during off- peak times if you provide a great experience even when you are busiest. Monitor your staff performance with regular appraisals and check they are meeting or exceeding standards even if you have a very small or family run business. 

Embrace Booking Portals

Not strictly monitoring, but many businesses in hospitality let themselves down by heavily discounting certain bookings for a particular channel. Online booking is the mainstay of many large hotels, but you can still get involved with your family run establishment. Booking portals will introduce a market that would not have found your hotel through normal searches. Be consistent and only offer a fixed commission to any booking portal. The industry expects 10%, but many will ask for much more. You need to be firm when negotiating and sell your hotel on benefits not price. Customers will find your hotel on booking portals regardless of the commission you pay and the booking portal needs your hotel as much as you need their customers. 

Plan any Discounts

Refrain from giving last minute discounts to customers simply because you are under-occupied because this will set a precedent. However, if your hand is forced, make sure any discount provided helps increase your average stay. At least this way, you can justify the discount. If possible, offer upgrades or add value to the booking rather than give a discount because this will attract customers that are not entirely price conscious. Join a bidding war and the only way is down.

Plan any discounts

Choose an Appropriate Metric

Rate management is one of the most difficult tasks in any hotel. Many variables that affect rate and if you think your B&B should have a flat rate with total transparency you could miss out on large profits during peak periods or put customers off during quiet periods because you are too middle of the road.  There are two targets to reach for when approaching your hotel pricing:

  1. Occupancy Rate
  2. RevPAR ( Revenue Per Available Room)

Large hotels and especially those that are part of large chains often concentrate on ensuring high occupancy, but this squeezes margins and leaves little room for manoeuvre if there is a sudden downturn in business. Smart hotel managers and owners use the RevPAR system to ensure they run a sustainable business.  Both are great ways to aim for and reach profit, but both have flaws that translate through to bad customer service on the front line if you are not careful.

High occupancy is all well and good if you are operating the whole ‘pile them high sell them cheap’ mentality…

…but you need to realise that high occupancy incurs great costs and you need a diverse product range that increases revenue to make up for shortfalls in room rate break-even. Some bargain basement Mediterranean hotels charge for almost everything; from TV use through to fan rental, but you can’t justify charging for a TV in the UK because it will result in a slating on Tripadvisor. However, you can offer meals, arrange tickets for events or provide/resell services that someone visiting your location is likely to appreciate.

 

Hospitality is the Room Key to Everything

Hospitality is the Room Key to Everything

Of course, you can do all of these things when you operate with RevPAR as your key metric taken over a longer period. The problem many hotels have is the preconception that low cost should come with less service. The best way to ensure both high occupancy and RevPAR is to give great value for money regardless of your rate card.

You can argue (incorrectly) that people expect less when they pay rock bottom prices, but the experience should still be enjoyable. It’s not unusual for peak periods to come with lots of stress and this can negatively impact staff performance and ultimately result in bad reviews and low repeat business. Change is gradual, but it doesn’t take long for hotels to drop off the map among tour operators and online reputation is almost instant in the travel industry. 

 

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