Revenue Strategies for Boutique Hotels

By Robert Rauch Chief Executive Officer, RAR Hospitality | October 02, 2016

The market is poised for boutique hotels to make an impact on the hotel industry like they never have before. With an expected soft landing of the economy in 2017 (2-3 percent RevPAR growth max) it is more important than ever for independent hotels to ensure that they have proper revenue strategies in place. Competing with the big brands for market share can sound like a herculean struggle but with execution of the proper procedures, a boutique hotel can stand apart from the crowd.

Revenue Generation

Understanding where your business comes from is the first step of proper revenue management. Millennials now make up the largest share of traveler demographics and are the biggest factor as to why independents will be performing better than in previous years. They remain neutral regarding their opinions on branded hotels and they prefer seeking out an experience rather than staying loyal to any one particular chain. Think urban renewals and adaptive reuse of space; these factors are highly attractive to a millennial traveler because they embody elements of the surrounding area and create a unique experience. Remember that technology plays an important role in their day-to-day lives so ensure your Wi-Fi systems have enough bandwidth to meet their demands. This technology is not only required in each guestroom but also in any large social gathering area that promotes a work/play environment.

With an established buyer persona, we can now look at your ideal revenue mix. Direct bookings are by far the most cost effective business for boutique hotels so it is always the goal to drive business to our own booking channels. Identifying what percent of business you need from group sales, Global Distribution Systems (GDS) and Online Travel Agents (OTAs) is important to a successful revenue strategy. Understanding the cost of all of your booking channels allows for you to properly layer in business by evaluating the effective average daily rate (ADR) and adjusting your available rates accordingly. Set occupancy thresholds for your hotel as key indicators of when to increase your rates. The further out a guest books, the better deal they should obtain in most cases. The worst thing you can do is to train your guests to book last minute by reducing rates or making last minute deals available.

A savvy sales team can make or break your independent hotel. Group business generally books well in advance and provides the ideal base business for a hotel. Without the power of a brand sales team and the tools that they provide, your independent hotelís sales efforts need to ensure that they are utilizing the right channels to be effective. While GDS business is mostly pay-to-play, it provides exceptional return on investment (ROI) in the right markets. Responding to requests for proposals (RFPs) from these national accounts can be tedious but it is an essential piece to your revenue puzzle. Local negotiated rates (LNRs) are equally important for your sales team to seek out. These accounts are special rates set up with local businesses that have travel needs in the area. They are entirely driven by the relationships your team develops with the travel manager of the company and the service your operations team provides to these business travelers. Right now is the time to ensure these relationships are tapped for 2017.

Group revenue management is much more complex than transient revenue management. Balancing meeting rooms and sleeping rooms has always been tough for revenue managers who have not been on the group sales side of the business and salespeople not familiar with RFPs must equip themselves with new tools. Identify your hotelís ideal rooms to space ratio to maximize profits on any piece of group business and to ensure your revenue manager and sales team are on the same page.

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Coming up in February 2018...

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.