Control has traditionally been the focus of asset management. Hotels have been reducing the operational or flexible costs on the balance sheet in order to determine the profitability of a hotel. Over the last few years the focus has shifted!
To control staff payroll, purchasing costs and overhead spending used to be the main components of the job of a hotel asset manager. With the rise of the internet and increased dynamics of hotel distribution we have seen a shift in focus over the last few years.
Room yield
The attention of hotel asset management has been increasingly moving towards room yield. Driving occupancy and average room rate is the key nowadays to controlling the bottom line of the hotel. A good hotel revenue manager should have a hotel pricing strategy that goes far beyond REVPAR. NREVPAR (read article) and GOPAR are of instrumental importance.
Looking at the numbers of our own clients we have seen an overall revenue growth of 15.8% in first three quarters of 2011, through strategic pricing strategies. We looked beyond mere cost control and had our hotel clients invest in SEO and internet marketing to increase direct sales. As a result, distribution costs were reduced and profit increased.
Of course this does not mean we advise hotel asset managers to let the costs uncontrolled. That would be irresponsible, as with the recovery from the crisis hotels have to be weary not to reinstate cut services amenities too quickly. However the scope of attention has to be widened and emphasis needs to change. Simply cutting costs and ‘trimming the fat’ will also have an impact on the long term service levels of hotels and in the end impact financial results negatively.
Push up ADR/ARR
Fundamental to success will be to gain more market share in a recovering market. With the occupancy rising across the board in many markets, it is important to fight and pick up several points more than the competition. ADR / ARR should be pushed up where demand allows, in an effort to improve your hotel’s RGI (revenue generation index).
The solution of classical asset management companies will almost always be to put a flag on the roof. However in the era of online distribution, social media and online reputation management, a brand is no longer needed. One should also consider the fact that the costs of such franchise are tremendously high. Moreover their model is out of date. These companies are no longer the best solution in today’s market place.
Total revenue management
Modern day revenue management, internet marketing and online distribution are the solutions to generate a healthy ROI on your hotel investment. The industry has to move beyond operations to manage business development well. And the next logical trends to be implemented in hotels will be total revenue management and business acumen, taking revenue management beyond the hotel rooms and optimizing the results of all hotel revenue streams.
Do you wish to know how to increase hotel sales? Xotels is a leading international hotel management company with a specialization in revenue management, online distribution and internet marketing. We invite you to visit our website.
Author: Patrick Landman @ Xotels
Hotel Management Company - Xotels Ltd. 