Hope is not a strategy

24 March 2022
All hotels need an overall strategy created based on the primary target group for the hotel. A path to success is finding an audience with a need that no accommodation provider currently meets. A strategy always includes attracting a selected target group, which involves product development, including the physical product and the service concept, marketing, sales, and revenue management.
The overall strategy for any company has its foundation in the customers the company wants to serve. So, for example, hotels need to create three sub-strategies for three very different jobs in a hotel.

Commercial

Everything starts with a commercial strategy where you build the foundation on top of the selected target groups. The desired outcome is to attract guests that will spend as much as possible at the hotel. The key to success is understanding the target group's needs and behavior in contrast to just distributing the available rooms through Booking.com and hoping for the best.
 
All commercial activities are an investment in your future that will make or break your business. Revenue is the only lever you have in a hotel to increase profits and reach long-term success. The strategy is to build a strong commercial team with skills and knowledge on how to bring in revenue. The plan is also to implement well-designed processes for attracting guests and acquiring customers. People and processes need systems to become productive and not lose business to the competition. Without revenue, the hotel cannot deliver a superior guest experience nor make any profit. Therefore, the commercial strategy is essential for long-term success. The primary system is the commercial system.

Guest management

Now it is time for the attracted guests to arrive at the hotel. The focus here is to make the guests happy so they would like to spend more, return for another stay, or spread the word to colleagues and friends. Happy guests will give the hotel a better reputation and have many positive side effects. It is less costly to get a guest to return than to acquire a completely new guest. Employees stay longer since happy guests create a good atmosphere in the hotel. In addition, happy guests spend more at each stay. The guest experience is the hotel's promise to the guest, so the hotel must keep its promise to make the guest satisfied.
 
However, guest management is just a cost, so hotels should streamline guest management without jeopardizing guest satisfaction. A clever strategy would be to move the day-to-day work from the hotel employee to the guest. Guests love being in control and having access to service 24/7 in any form. Therefore, making guests perform the job will increase guest satisfaction and reduce management costs. The primary system for guest management is the hotel PMS including all the add-on pieces of software to make processes more productive.

Business control

Business control is about making a sustainable profit. Therefore, the focus here is to make money. How could the hotel make as much money as possible on the revenue the commercial department brings to the hotel? Financial analysis, management reporting, and other tools will help hotels understand their performance to take action that improves long-term profitability. The job in business control is to convert as much revenue (top line) to profit (bottom line).
 
Planning and financial management is just a cost, so hotels should keep planning costs at a minimum without jeopardizing attracting new or returning guests and guest satisfaction. The primary system for financials is the accounting system.

The three circles

It is easier to understand the business of hotels when you see the company through the lens of the three circles, each with specific jobs to reach the hotel's overall success. Strategy, processes, planning, systems, and finding the right skilled people become more manageable when you take one circle at a time.