Do you like wasting money?

18 August 2022
No! Wasting money is terrible. However, hotels waste significant amounts of money by ignoring the cost of how to attract guests and how to sell more to each guest. In addition, the way many commercial teams work in hotels risks draining the hotel's financial resources and does not contribute to the profit as much as they could. Here are a few reasons why this waste of money continues as the hotel industry recovers.

Wasting time

Time is precious in the hotel industry. We know the value of time since time is what we sell - the right to stay in a hotel room for a specified time - check-in after 3 pm and check-out at noon, a time slot of 21 hours. If the guest wants an early check-in or a late check-out, it comes with an extra charge. Hotel guests can use the gym, pool, spa, tennis court, etc., as long as they pay for the time they use. The hotel industry is all about selling time. The traditional KPIs such as occupancy and RevPAR are time-based are time-based measurements. The general manager/CEO/owner gets upset if the hotel does not use its capacity well and monetizes all the available time slots.
Being obsessed with time, it does not make sense to waste endless hours every week manually collecting, copying, pasting, and storing data in Excel. In addition, manually creating a mediocre analysis and reporting before deciding how to better sell all available time slots in all the facilities in the hotel does not help much in optimizing revenue.
 
The cost of wasting a revenue manager's time is probably not high, but alienating, exhausting, and boring the revenue manager to death will certainly not lead to the best decisions that grow revenue and profitability. The revenue manager is crucial in making the hotel successful, so treasure, care about, and treat them as diamonds. Give them all the systems, tools, and personal development they need. Optimize the use per revenue management hour, and the return on investment will be fantastic.

Missing opportunities

Hotels use rate shopping tools to ensure that they are not over- or underpriced compared to other hotels. The belief is that the hotel will not sell any rooms if it is overpriced. On the other hand, if the hotel is underpriced, it will sell too many rooms at a low price and practically give away money to its guests and competitors. Keeping an eye on the competition minimizes the risk of making mistakes. Worse is when salespeople miss opportunities, such as contracting a corporate customer or a tour operator with a too low rate or miss the agreement altogether. Again the general manager/CEO/owner will be upset if the salesperson screws up and miss a large deal and the hotel ends up with unsold rooms, meeting space, and food & beverage.
 
The cost of missed opportunities is high, and since the business is time-based, there is no way to make money on time slots that have already passed. Everyone in the industry knows how this work, so by investing in a solid Hotel B2B Sales CRM where opportunities automatically show up, salespeople can immediately act on the possibility of winning the business. The system can also alert the salesperson to be more proactive and contact customers before they know they need to book their next meeting or conference. Finally, a Hotel B2B Sales CRM pulls data automatically from the hotel PMS and keeps track of the actual production for each contract compared to what the customer has promised to deliver.
 
Salespeople are vital to seizing opportunities and winning more business for the hotel, so hoteliers should make sure that salespeople have the best tools, systems, and training to capture even more opportunities. Optimize won opportunities to maximize return on sales.

Not managing the customer acquisition cost

Hotels complain about the high commissions they pay to OTAs and other third parties for helping them attract guests. According to Kalibri Labs, a US-based company collecting data and researching customer acquisition costs (CAC), the CAC is between 15 % and 25 % of room revenue. Hotels, however, struggle to collect the data needed to analyze CAC because the information sits everywhere in many contracts and departments. In addition, some costs do not show up in the P&L. Is it a good excuse not to manage a cost that is between 15 % and 25 % of room revenue because it is a little bit more complicated than managing other expenses? Every percent a hotel saves on CAC will show up on the bottom line (GOP or EBITDA).
 
Getting a good grip on CAC is a project for the commercial manager and the CFO. The commercial manager knows all the costs, and the CFO has all the documentation. A thorough analysis of CAC will also reveal insights into the profitability of segments, feeder markets, distribution channels, room types, and campaigns. The commercial team can use these insights to spend marketing dollars where the highest return on marketing spend can be achieved. You have probably heard the John Wanamaker quote, "I know half the money I spend on advertising is wasted, but I can never find out which half." Analyzing CAC will at least lead to wiser spending of marketing dollars. Optimize marketing dollars to the most profitable market segments to grow revenue and maximize profits.

Care about your team

Growing revenue is the key to success for a hotel. Everyone working in the hotel is part of the success. Operations deliver the guest experience to create happy and satisfied guests. Without excellence in operations, the commercial team will have an impossible job of attracting more guests and selling more to each guest. The most critical asset in a hotel is all the employees in all the different roles needed to make the hotel a remarkable place to stay. Hotels are paying their employees for their excellence, so make their jobs as easy and smooth as possible to maximize their performance and the hotel's success.