While the term wasn’t widely used a few years ago, more than 60 percent of hotel professionals see comprehensive hotel revenue management becoming commonplace today.
You know you need to optimize your rooms and food, but stopping there is a mistake. Lily Mockerman, revenue management expert and president at TCRM Services, says hotels, especially independents, can uncover other profits by thinking outside the room and restaurant.
With her insights, we put together four strategies you should use to optimize your independent hotel revenue.
1. Position Your Property in the Right Channels With Software
Effective revenue management requires technology—Mockerman’s company helps hotels review their revenue management practices to identify areas for optimization, and this is her first question: Is the software set up correctly?
“It’s really important that the systems are set up correctly to be able to optimize things, and often we’ll find some quick wins for our clients in areas that are not functioning the way they thought,” she says.
Each system is different, but two best practices can ensure you’re getting the most out of the revenue management software:
- Push inventory to the right channels
- Make sure your rates are updated
When the system is setup correctly, these actions can be automated. But what are the right channels? For most hotels, a mix of the major online travel agencies makes sense.
The curated OTAs attract the luxury traveler looking for an independent hotel experience
Independent properties with a focus on luxury, however, can find greater success by participating in a curated collection like Smith Hotels or Tablet, catering to a specific luxury traveler.
2. Optimize Rates for Your Unique Rooms
Rooms still make up the lion’s share of profits in a hotel. In a large chain property, most rooms are similar and guests probably aren’t willing to pay more for one on a higher floor with a slightly better view. This isn’t always the case with smaller, boutique hotels.
“With independents, there’s often corner suites or room types that really have a specialty feature in them, so understanding what the demand is for those and optimizing the price points across that is important,” Mockerman says.
You need to take inventory of your unique rooms and compare them to direct competitors in your market. If you don’t have a method to do this, several options exist:
- Rate shopping tools available within many hotel management systems or as standalone products
- Rate shopping services from one of the major online travel agencies, like Expedia or Booking.com
- STAR Benchmarking reports delivered from hospitality research firm STR
These tools can help you price a special room at your property. In the example of the STAR Benchmarking report below, you find an aggregate of the occupancy rates, average daily rates (ADR) and revenue per available room (RevPAR) for your competition right next to yours.
This excerpt from a STAR Report includes useful data to help make revenue decisions
These services can also help you define the compset (a.k.a. your direct competitors) for your unique rooms. From here, Mockerman says a few questions can help determine the best rate for these rooms:
What is the demand for these rooms? How many guests reserve these rooms and at what cost—full price, upgraded with a discount or upgraded at no cost?
- What can be done to improve the way rooms are described or conveyed online? Can we highlight the unique features and views in the description? Will better photos increase the attractiveness of the room?
With the best data and testing different marketing techniques, you can optimize and reap more revenue from the unique aspects of your property.
3. Modernize Your F&B Offerings
Food tastes are changing—travelers seek out exotic flavors, local delicacies and foods produced sustainably and responsibly. Cheez-Its just won’t cut it anymore.
“You can’t just have the hotel restaurant with one salmon dish, one chicken dish and one beef dish anymore,” Mockerman says. “People are really looking for craft beverages and specialty food items in the hotel.”
Especially in bigger cities, hotels can find a wide variety of local, specialty foods that are far higher quality than your typical vending machine fare, convey character about your area and entice guests to spend more on-site.
A tabletop at Hotel St. Cecilia in Austin offers a selection of local products
Mockerman offers a couple updates to typical F&B offerings that can make a big difference with guests:
Move the Minibar to the Tabletop
A growing trend is revitalizing the standard minibar by providing local, long-lasting treats on the counter or tabletop instead of the stodgy mini-fridge.
Locally sourced vegan and gluten-free options can hit all the right notes for the lucrative Millennial segment, who tend to spend more on hotel-related expenses than other groups.
Plus, Mockerman says hoteliers are offering items that last to maximize their spend.
“Even if ten guests don’t buy anything from the minibar, if the eleventh guest buys five things, that covers the cost because there’s very little cost associated with the food,” she says. “It’s just waiting for the guest who wants it.”
Move the Room Service Menu to the Tablet
Another smart revenue trend: The paper room service menu goes digital.
We’ve seen the rise of technology in hotels by way of smart locks, check-in kiosks and more. So why not engage guests on platforms they’re already on?
It adds a level of convenience travelers want and gives you a look into their spending behavior by generating data to help you see what is popular with guests and optimize your selection.
“What is that guest browsing? What are they looking at? And if they didn’t buy, can we convert them by giving them a personalized offer?” Mockerman says.
4. Form Profitable Partnerships with Local Businesses
After rooms and F&B, activities make up the next largest revenue source for hotels. Local partnerships can expand your revenue streams and provide authentic experiences for your guests.
“A hotel team should first ask themselves the question of why guests are choosing their market, and that will help them discover what’s trending or interesting to their guests,” Mockerman says.
A local winery could offer a tour and tasting for your guests, she says, or a fly fishing experience in Montana, or LegoLand in Anaheim.
Big local attractions, like LegoLand, could be the main draw for your guests
Local businesses around your property are likely to be open to some kind of partnership to encourage business. You just have to reach out.
If direct bookings deliver significant profits for your hotel, offer a deal where guests receive a reduced cost for the activity or some kind of exclusive offer for booking direct at your hotel. The keys to a smart partnership are clear goals for each company and a viable plan that delivers value.
Think Convenience and Stay on Trends to Boost Revenue
Finally, Mockerman says hotel managers should ask: What is the guest really looking for? What trends are popular with my type of guest? How can we monetize that?
Surveys, training front desk staff to make note of details during informal conversations and effective hotel CRM use are ways you can identify potential revenue streams.
As you increasingly provide guests with an authentic connection to your area, a well-configured hotel revenue system can help you maximize these strategies and boost revenue streams.