What C-Level Executives Need to Know About Total Hotel Profitability

Beyond Buzzwords

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | July 09, 2017

If attaining guests through loyalty programs, personalization and the provision of choice is the hospitality industry’s Holy Grail, then profitability is the infinite abundance it promises. When it comes to achieving higher degrees of hotel profitability, nothing provides more opportunities for the incorporation of these elements than an intelligent revenue strategy.

While a hotel revenue strategy doesn’t lend itself as the panacea to every organizational crossroads, it does provide hotels with a way to profitably navigate through the unpredictability of economical and geopolitical climates, natural disasters and terrorism. This is in addition to finding profitable success in hypercompetitive online environments prone to fluctuating markets and intensifying competition. Strategic revenue management is also recognized as an important component to increasing asset value, attracting investors and improving overall operational efficiency.

Among other things, today’s hoteliers face mounting pressure to increase their hotel profitability. From acquiring brand new customers to driving repeat business and loyalty, making the right operational decisions and running a hotel with optimal efficiency continues to be an ongoing challenge for top hotel executives. However, with increased scrutiny focused on the best ways to drive total hotel profitability, what exactly do the industry’s c-suite executives need to know about revenue strategy and profit optimization?

More specifically, what is this push toward profit optimization and where does it need to begin for the best results? What are the KPIs that paint the most accurate picture of a hotel’s health and performance? How do hotel distribution channel costs impact overall hotel profitability? And, finally, what are the tools that facilitate these critical activities for hoteliers?

What is This Push Towards Profit Optimization?

Revenue management used to be considered a very niche function, and one that was only applied to guestroom strategies without the influence or contributions from other hotel revenue streams. Over the years, however, hotels have recognized its benefits and enthusiastically adopted more scientific and analytical approaches to strategic revenue management – experiencing significant financial rewards in the process.

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Social Media: Engagement is Key

There are currently 2.3 billion active users of social media networks and savvy hotel operators have incorporated social media into their marketing mix. There are a few Goliath channels on which one must have a presence (Facebook & Twitter) but there are also several newer upstart channels (Instagram, Snapchat &WeChat, for example) that merit consideration. With its 1.86 billion users, Facebook is a dominant platform where operators can drive brand awareness, facilitate bookings, offer incentives and collect sought-after reviews. Twitter's 284 million users generate 500 million tweets per day, and operators can use its platform for lead generation, building loyalty, and guest interaction. Instagram was originally a small photo-sharing site but it has blown up into a massive photo and video channel. The site can be used to post photos of the hotel property, as well as creating Instagram Stories - personal videos that disappear from the channel after 24 hours. In this regard, Instagram and Snapchat are now in direct competition. WeChat is a Chinese company whose aim is to be the App for Everything - instant messaging, social media, shopping and payment services - all in a single platform. In addition to these channels, blogging continues to be a popular method to establish leadership, enhance reputations, and engage with customers in a direct and personal way. The key to effective use of all social media is to find out where your customers are and then, to the fullest extent possible, engage with them on a personal level. This engagement is what creates a personal connection and sustains brand loyalty. The February Hotel Business Review will explore these issues and examine how some hotels are successfully integrating social media into their operations.