Anatomy of a Hotel Audit

By Steven Klein Partner, Gerson, Preston, Klien, Lips, Eisenberg & Gelber | January 06, 2019

These are challenging times for the hotel industry. Due to skyrocketing operating costs, most U.S. hotel groups have still been unable to reach operating margins commensurate with the industry peak in 2007. Consumer preferences demand upgrades in technology and room renovations, cutting into the bottom line even as rising salaries, wages, benefits and staffing levels add to labor costs.

Historically, hotel management raised room rates in order the balance the books. But new challenges on several fronts are making that approach impractical.

Non-Traditional Competition

Airbnb, the home-sharing platform going head-to-head with hotels, continues its phenomenal growth. Through 2014, hoteliers in cities such as New York, Los Angeles and San Francisco that offer significant inventories of Airbnb options saw variable profits shrink up to 3.7 percent, according to a recent report from the National Bureau of Economic Research. The greatest losses came during peak seasons in tight markets –– think Manhattan on New Year's Eve or Cambridge, Massachusetts at graduation –– when room rates soar and hotels traditionally post their highest margins.

According to the study, as of November 2016 Airbnb reported an inventory of just over 3 million listings worldwide –– nearly three times that of industry frontrunner Marriott International. Most recently, Airbnb announced a 2,500 percent growth in bookings in 2017.

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Coming up in June 2019...

Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.