Margins under pressure | Article

Just as the industry is finding its feet after two of the most tumultuous years in living memory, hotels are now faced with a fresh challenge. The well-documented cost of living crisis impacting us all has forced a review of spending habits as energy and food prices escalate. For hotels, the challenge is compounded as in addition, staff shortages are seeing the cost of labor increase. Faced with this, hoteliers are looking at ways they can protect margins wherever possible. We explore some key areas that where, with some focus and attention, positive impacts to your bottom line can be made.

Embrace a culture of ‘Total Profit Management’

The last few years have seen ‘revenue management’ evolve into ‘total revenue management’ with the growing importance of non-room revenue. Now faced with rising costs, hotels need to take this one step further and look to embrace a culture of ‘Total Profit Management’. All teams with a commercial responsibility – sales and marketing, revenue, finance, F&B, operations – should understand how their commercial decisions not only impact revenue but also bottom-line profitability. Hotels need to work to break down management silos, and come together with objectives shared. Every sale has an associated cost and teams need to be open and collaborative in their exchange of information to ensure the most profitable business is prioritised.

Priority cost optimization

It’s time to take a long, hard look at your expenditure and where your money is being spent. A review of ongoing contracts and annual subscriptions and the value they bring to your business will highlight unnecessary recurring costs. Dig deeper into your tech stack and assesses the value to your business apps and programs bring. With guest expectations in the last couple of years, the way we run our businesses have changed too and something deemed necessary three years ago, may no longer be bringing value. Also, explore the capabilities of your existing tech solutions and ensure you know what your existing technology can do for you.

Savings of course can be made outside of the tech environment. Can you renegotiate some of your long-standing contracts? With rising food prices, can the more price sensitive menu items be replaced with more cost-effective alternatives? Scrupulous attention to detail on even the smallest costs combined can mean a significant dent in your total profit across the year.

Automate, automate, automate

While the industry is suffering from rising labor costs and staff shortages, engaging manpower in manual, repetitive processes is both costly and ineffective. The good news is that guests are now, more than ever, open to digitisation of processes and in many cases expect it. Take some time to understand areas of your business ripe for automation. A highly manual check in process can be automated with a contactless system. Speedier check-in not only enhances the guest experience but will free up resource to add value elsewhere. We need to make friends with technology, understanding where it can support, streamline and enhance our operation, and leaving staff to deliver exceptional customer service where it matters.

Investing in and upgrading technology can involve a short-term cost – but over time, the cost of ignoring it could cost you both in increased staffing costs and the negative impact on the guest experience.

Focus on your team

Automation of processes not only enhances the guest experience, but also builds team motivation and job satisfaction. Less time spent on mundane, repetitive processes means staff have more time to focus on more interesting and engaging tasks.

The key to getting the most out of any technology is ensuring your team are trained and comfortable using it. Rushed implementation of any new system, with inadequate training, will increase stress rather than adding much needed efficiencies. Take time to invest in staff training to not only get the most out of your technology but also maintain an engaged and motivated workforce. Ensure your technology provider offers online resources so operational queries can be solved quickly and with minimal effort, a must have when faced with a busy check in queue.

Review distribution costs and book direct!

With the market in flux over the last few years driving bookings- any bookings- for many has been the priority. But now is the time to dig deeper and identify if your distribution strategy is as profitable as it could be. An understanding of each channels cost of sale will help build a distribution strategy that optimizes profitability. But don’t be dismissive of more expensive channels if they open up new markets to you or typically bring guests with a high average spend. They can be a great way to market your hotel to guests who may not otherwise have found you.

All this being said, a robust ‘Book Direct’ strategy will pay dividends as the most effective cost of acquisition. Leave website visitors in no doubt as to why they should book direct with you. Review your website content so all customer questions are answered; invest in compelling copy and upgrade imagery to present your hotel in the best possible light; Ensure the customer journey is as clear and simple as possible; incentivise direct booking with exclusive benefits. ‘Book direct and enjoy a 15% off our evening menu” will not only reduce cost of sale but will also encourage additional spend in F&B outlets.

Take time to uncover if your website is working for you. Use Google Analytics to find out where visitors are coming from and shape your marketing activity accordingly.

  • Lots of international visitors? Create a landing page to highlight distances from tourist attractions and airports.
  • What pages are generating the most interest and are they converting to bookings? If not, how can you increase page ‘stickiness’?
  • Are you seeing high drop off rates on some pages? What can you do to improve onsite engagement?

Unfortunately, like all metrics, this isn’t a one-off task and requires ongoing monitoring. But the return on investment will be worth it.

With the growing importance of Metasearch, and the increasing importance of Google free booking links There is much you can do in house at no cost to build your Book Direct strategy.

And don’t forget, every direct booking provides you with an important opportunity to develop a direct relationship with your guest allowing you to creatively upsell additional products or services before or during the stay and positively impact your hotel’s margin.

Get to know your guest

With certain segments significantly impacted as a result of the pandemic, and booking patterns changing, it’s crucial to understand and segment your existing guests. PMS data will help identify guest behaviors and preferences and should be used to structure targeted marketing activities. Although personalisation has been a buzzword for some time, in a world of Netflix and Amazon, it’s now a given. Be targeted and relevant in your marketing activity to optimize engagement and conversion.

Think local

Our working practices have changed over the last few years. Working from home is commonplace and towns are buzzing as workers have shunned the daily commute to the cities in favor of spending their days in their local areas. Capitalise on this new trend by transforming your space into a subscription based on a communal working area for those looking for a change of scenery from their home office four walls. Explore lunch and dinner offers. Look to host local events, fitness classes, book clubs, anything which raises your profile within the local community and helps build a loyal local following.

If you cannot measure, you cannot manage

At the heart of informed, robust commercial decisions is a comprehensive, up to date and accurate dataset. And with the landscape changing on a daily basis, it’s more important than ever that data is reviewed and monitored daily to quickly get on top of negative trends and optimize opportunities. Key metrics should be easily accessible and highly visible allowing all those with a commercial responsibility to understand the ‘state of the nation’ at the touch of a button. And as cost control is more important than ever, pay special attention to areas where strategy changes can quickly and effectively see improvements on your bottom line.

For more information visit

Leave a Comment