Making Money And Driving Sustainable Profitable Revenues
I worked many years in the hospitality industry and it is something I always enjoyed and is part of my soul. Communicating daily to various hospitality leaders and enthusiasts, I believe hospitality needs to be able, to quickly move from one hotel business strategy to another.
The industry is extremely competitive and the only way to stay ahead is by taking strategic approaches based on in-depth analysis.
Where Are We Today? COVID-19 pandemic has been a catalyst in transforming the hospitality industry. And it is continuing to do so. Currently, it is much better than what it was a year ago. The industry has been scoring a moderate growth number and has great potential to score an even greater number in the future, but it will take time to get back to 2019 numbers and new travellers preferences accrued.
The year 2022 and beyond will definitely go to be different in terms of both traveller demands and hotel operations.
I laid down and will share over the next few days with you, 12 key points as a business plan and roadmap guideline, which an effective and creative hotel business strategy should consider, based on the needs. This helps them to make a business strategic decision based on their core pain issues, to get a competitive advantage.
Making smart distribution decisions
‘Play by the rules but be ferocious.’ – Phil Knight
The first and foremost thing to do is to relook at all the distribution strategies you have made so far. Hotels must be investing in various distribution channels. But which of them deliver the results that hotels expect, and what exactly do hotels expect? If they are, well and good. But if they aren’t, then hotels might want to have a peek and see what can be done.
The best way to go about it is by analysing cost vs profit across all their distribution channels. This can be done with good benchmarking technology, which is freely available and easy to work with, hotel revenue manager can calculate the cost-per-acquisition of each channel and determine which ones are faring for hotels and which ones aren’t.
Just because distribution is important, hotels cannot afford to invest everywhere. Hotels need real partners, which are aligned with their vision, and do not only sell their products to the smallest margins. It is prominent to control cost if hotels want to navigate the difficult waters.
The years 2022-23 will definitely going to be different in terms of traveller demands. So, hotels and brands must lay down their business plan and roadmap at the earliest.
Optimise your direct booking channel
‘ Success is not final; failure is not fatal: it is the courage to continue that counts .‘ – Winston Churchill.
It always surprises me when I see hotels, which are listed on all the possible OTAs and I am wondering seeing all the business they are getting from that, and then they are thinking they got a pretty good deal.
Yes, true they getting many bookings from OTAs, but they completely overlook the direct channels. Did they forget about the commissions they are paying to those OTAs? Or do they think, now they need to pay for fewer sales employees and save money?
I am not saying you should break ties with them. But what I am trying to state here is that direct bookings are more profitable. But this is only when they start to step in and start optimising their direct reservation channels, using also benchmarking technology to make the right decisions.
The most prominent one is a hotel website. There is nothing better for any hotel than having an attractive and business-oriented website. A hotel website should have a robust booking engine for channelising direct bookings and a better conversion rate.
Hotels also can optimise their social media pages by using a ‘BOOK NOW’ button.
Monitoring demand to achieve a better marketing
‘ Business opportunities are like buses, there’s always another one coming. ‘ – Richard Branson
Undoubtedly one of the creative business strategy tips for hotels and brands.
Hotels have to start monitoring traveller behaviour and preferences. Then to create a competitive advantage in marketing, will be an AI engagement platform where guests will communicate directly with hotels.
Like myself, I am not happy to receive generic promotions via email, or social media where companies waste millions on. I prefer personalized promotions based on my needs via digital channels. It is proven that digital revenues are influenced by personalization and in addition, your guests want digital loyalty scheme options.
Travel behaviour is changing and hotel marketers need to tap into every new demand, smartly. For example, a diving centre based hotel has to run marketing campaigns for divers and adventure enthusiasts, which never dived before. This can be combined with relaxing and maybe working ‘from home/hotel’. A trend some people are looking for, and then send, an automated personalized message, with promotions from interest to guests and your potential customer direct.
Soon, hotels could see a good amount of bookings coming in.
Incorporation of revenue management in hotels
‘ At least 40% of all businesses will die in the next 10 years if they don’t figure out how to change their entire company to accommodate new technologies. ‘ – John Chambers
Revenue management is in every hotel business strategy. If it isn’t, then the hotel will never have a competitive advantage.
Unfortunately, there are various misconceptions around revenue management systems. I came across a significant number of leaders thinking that it is expensive and doesn’t deliver results. But that’s absolutely not the case, time changed. I am talking a lot about revenue management in my blogs, and I cannot emphasise enough the role it plays in boosting a hotel’s revenue.
A revenue management system will be the best friend of a revenue manager, a hotel must ensure that it has someone who is an expert in making smart pricing decisions.
Revenue management systems, today are a cost-efficient vast segment, from outsourcing the best revenue management systems to deploying AI-powered systems, everything is possible.
Market positioning analysis & Compset analysis
‘ Clearly, the thing that’s transforming is not the technology – the technology is transforming you. ‘ – Jeanne W. Ross,
As part of the revenue management system, a hotel business strategy needs the possibility of analysing the property and seeing where it stands in the market. This is where positioning analysis comes into the picture. Also, it should be aligned with the target market’s demand.
In simple words, marketing positioning analysis is the process of determining how a hotel brand is perceived with the needs of the targeted market. Only if a hotel has this insight, the hotel then can create better offerings and other aspects to match the changing preference of the marketplace.
This needs today AI technology as there is no time to do this manually as if completed any sort of positioning analysis manually, it is already no more valid and has changed.
Hotel leaders like to work with compset analysis, to explain to owners and shareholders, where the business is standing and to gove to employees KPI’s.
There are different competitive hotel business strategies used in the industry, but competitor or compset analysis remains one of the tops. When a hotel is in the hospitality domain, a hotel can never overlook what its competitors are doing.
Technology is improving so quickly, and the better a hotel understands its rivals, the better it can make decisions about its hotel and its operations. This has to be put in the prominent hotel business strategies of 2022 because of the benefits it brings to the table.
Re-evaluate supplier partnerships
‘ Don’t be fooled by some of the digital transformation buzz out there, digital transformation is a business discipline or company philosophy, not a project. ‘ – Katherine Kostereva
Price inflation of daily use products, eatables and other supplies have risen steeply in the last few years. While that has affected all the industries, but it takes a huge portion of issues and challenges faced by the tourism and hospitality industry.
A visible solution to this would be to keep a constant check on the inventory, control stock and reduce the wastage as much as possible. And consider further implementing useful cost savings strategies at a hotel, which would help to manage the rising costs. This is not a small issue. I have seen how it has taken a huge toll on hotels. What can be done? Re-evaluation is the key. To look at all supplier partnerships and identify if anything is going wrong.
But this is only the tip of the iceberg, and some organizations have cut down already to the minimum and quality and brand standards suffered, guest expectations are not met, employees get frustrated too and the brand image takes a downturn. This results in losing a competitive advantage, lost revenue and profits, unhappy shareholders until the end.
Hotels and organizations need to join compliance management platforms that use digital technology and is connecting the marketplace @@ item and cost management @@ B2B communications @@ vendor score carding @@ invoice from PMS @@ scan-based trading @@ automated ordering.
Re-look at the hotel’s tech stack
‘ Every successful organization has to make the transition from a world defined primarily by repetition to one primarily defined by change. This is the biggest transformation in the structure of how humans work together since the Agricultural Revolution. ‘ – Bill Drayton
What does a hotel technology stack look like?
It is not about the internet, intercom, door locks, etc. Rather, more on technologies like:
Property management system (PMS); Mobile app; Point of sale (POS) system; Channel manager; Booking engine; Revenue management system; Review management system;
Customer and Employee relations management system, compliance management systems etc.
These are some of the hotel tech essentials. A property with an arsenal of these technologies is more likely to succeed in this competitive industry. Furthermore, these systems work in sync with PMS being at the heart of it.
Meaning, PMS is the epicentre of all operations, departments, data and more. And when other systems are connected to it, systems work together seamlessly.
“Think of digital transformation less as a technology project to be finished than as a state of perpetual agility, always ready to evolve for whatever customers want next, and you’ll be pointed down the right path.” – Amit Zavery
Hotel reservations and digital waiters and digital services on mobile devices have gained tremendous traction in the last couple of years. At present, it is one of the most preferred ways to book accommodations by travellers.
Therefore, hotels must ensure that they have an app to let guests book a stay on the go.
Now, in terms of a hotelier, mobile hotel PMS is also on the rise. There are PMS providers who offer mobile PMS as well. Meaning, hoteliers can manage their properties’ each and every operation without even being present on the property. Guests can order any service required via their mobile, and the digital concierge can answer any questions and inquiries. People are actually inclined towards businesses that offer some sort of mobile-friendly services.
This also has to do with contactless hospitality which is here to stay. Ever since COVID happened, people are inclined towards safety over luxury (if not all, then at least the majority of them). Now, what’s more, interesting is that people have built a notion that to make their travel safe, they should take charge of certain things such as checking into a hotel without standing in a queue at the front desk.
And a contactless hospitality solution helps with just that. Guests can choose their room, check-in, avail services, food and beverage orders, make payments, and even check-out, with little to no human contact. This allows the operator also to get more time to focus on other aspects of the hotel operation and make the entire guest journey satisfactory.
Employee engagement and retention
‘ IT teams have had to pivot dozens of times since the pandemic hit. There’s little room for those who are stuck in old ways. ‘ – Lev Gonick
The hospitality industry is one of the largest employers in the world. But the employee turnover rate in this industry is also supremely high. And when COVID-19 happened, it just increased the employee turnover rate. However, despite knowing this fact, the industry is sort of operating in denial and not focusing much on retaining and engaging the staff. This should not be the case at any cost. Employees are the brand ambassadors of a hospitality establishment and retaining them is a prominent hotel business strategy to succeed.
A connected workers’ platform will within a hotel, or a global brand connects all employees via smartphone with chats, voice, and video messages, and soon, VR techniques. This will help in value-added problem solving and root cause analysis discussions and equip all to communicate based on their skills and abilities. This will improve business outcomes.
The system will measure trends of engagement, will flag ‘flight risks’ and poor teams and at the same time help spot and develop emerging talents. It can be set up to generate and provide analytic reports to suit your needs. The system will show real-time live employee engagement results and replace time-consuming annual employee satisfaction audits.
Implementing connected workers platforms that put the tools for success and communication in everyone’s hands helps hotels to become an employer of choice, through engaged and energized employees. This will guarantee a heart, mind behaviour change of employees.
Hoteliers need to take every necessary measure to retain employees. It is not just about the reputation, frequent hiring is an expensive task and might take a serious toll on any business.
Implement sustainable practices & Identify new hotel risks
‘ Don’t forget that without customers, you don’t have a business. Make sure that customer experience efforts are fully funded and resourced to provide the best experience possible in a competitive marketplace.”- Dan Gingiss
Climate change is real. To contribute to saving our environment, many industries have stepped in and done their part. And hospitality is no expectation.
At present, it is important for hospitality establishments to contribute extensively in minimizing the impact on the environment by reducing the unnecessary use of energy. It can be done by turning to alternative energy, reducing greenhouse gases, and various other practices. There are so many incredible technologies out there to help in creating a paperless operation, food and beverage waste control, chemical and electricity control, just to mention a few.
It should not be done to gain traction it should be done to change the course of global warming. The planning has to be sustainable, going for the earth, and then for business.
Talking about risks for hotels has to become a common task when running a hotel business.
It is a strategy for hotel businesses because they must know where the water is difficult.
When hotels are preparing their strategy for 2022 and beyond, they should not forget to identify and analyse all the potential events that may negatively impact their hotel business. Next up, determine the severity of the risk so that they can prioritise their actions accordingly.