Profitability Drivers of City and Resort Hotels
What Drives the Bottom Line of Your City or Resort Hotel?
By S. Lakshmi Narasimhan Founder, Ignite Insight LLC | February 03, 2013
Revenue streams as well as profitability movements are very different in a city hotel compared to a resort hotel. Developers and stakeholders of both types of projects are keen on ensuring that the project is able to produce a healthy return on investment.
What are the factors that are critical when a hotel project is envisaged as well as once it becomes operative?
The Project Perspective
What are points to be weighed when a hotel project is mooted?
The first question that needs to be answered when envisaging a hotel project is: city or resort Hotel? The answer to this will indicate that most paramount of project decisions, the location. A city and a resort hotel have totally different location considerations. A city hotel will want to find itself in the business district so as to attract the clientele from offices in the neighborhood and drive corporate traffic. This is normally a huge strategic decision involving cost of investment for starters since a commercial development in a business district has a high price tag.
The answer to the location consideration will decide whether the business will cater predominantly to the corporate or leisure segment. City hotels generally cater to the corporate segment while resort hotels tend to address the leisure segment. This does not stop a resort hotel from having corporate business driven by convention and banquet revenues. Similarly, but to a lesser extent, city hotels also service the leisure segment where guests stay at the hotel to sight see and move around the city. This depends on where the hotel is located within the city and proximity to a landmark or place of tourist or historical significance.
Project costs also vary between city and resort hotels. On a per room basis, resort hotels have a higher investment than city hotels. This is because resort hotel rooms are larger to accommodate a longer length of stay. The number of occupants in a resort hotel room taking into account a family with adults and kids is yet another factor.