Outsourcing: A Way Out of Stalling Hotel Revenue Streams
Have you realized this ticket to sustainable incremental revenues?
By S. Lakshmi Narasimhan Founder, Ignite Insight LLC | February 02, 2020
The Year-On-Year Growth Mantra
Hotel managements have long been frustrated with the year-on-year mantra that stakeholders throw in their faces. The year-on-year mantra can also be called the growth obsession. Irrespective of whatever kind of abnormal circumstances that come up during the current year, stakeholder demands are transfixed on the growth syndrome. In other words, it does not matter what circumstances are different from last year, they want growth delivered in the current year.
This unreasonable expectation can get unpleasant since the hotel being a seasonal business does deal with peaks and troughs more than any other industry. Peg that to the state of the economy and you have quite a few reasons why business may not be the same as last year. Tourism and hospitality are two causes as well as effects of a strong or weak economy.
Given this scenario, hotel managements have to pull out all stops to keep that revenue graph edging upward if not entirely soaring year after year. This would mean having laser focus on target markets including new ones that will deliver incremental revenues. And never mind if last year included some abnormal event which delivered a chunk of revenue and which is unlikely to be repeated this year. Tough luck!
The Traditional Weary Ways
Hotel revenues traditionally are delivered by rooms and food and beverage departments. Rooms tend to be between 65% to 80% of total revenues while food and beverage tends to be between 20% to 35%. Other operated departments fill in the small gap in most cases up to a maximum of 5% of total revenues. This entire sourcing year after year in the hope of sustained incremental revenues is getting to be a weary exercise. A lot will depend upon whether the hotel is a branded one or an independent one. The former will be able to call upon its brand muscle in delivering revenues each year. But achieving consistently incremental revenues year after year is easier said than done.
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