How the hotel General Manager can make better investment decisions

22 March 2022
Everything hotels purchase constitutes a business-to-business relationship. In a B2B relationship, four different types of outcomes motivate the investment and the cost. The result must always be higher than the cost. Otherwise, it will be a wrong business decision.
The four types of outcomes are business, risk, organizational, and personal. It is easier to evaluate whether the decision is sound or not when you clearly understand the outcome category before making the decision. You can test any investment decision against any, many, or all outcome categories. Let's assume that you will buy a commercial system in the example below.

Business outcomes

Business outcomes are often the main reason to invest in a new system. There are two business outcomes. One is higher revenue, and the other is lower costs.

Higher revenue

There are only two ways to increase revenue in any business. The same two also apply to hotels. One is to increase the number of customers, and the other is to increase sales to each customer. A commercial system would ideally help the team increase the number of customers and sell more to each customer. The concept is dead simple. Just find out how many customers you have and how much each customer buys. Then start to acquire more customers and sell more to each customer, and you will soon see revenue beginning to grow. Successful startups follow this formula for growth, so why wouldn't it work for hotels? First, many hotels do not have the data and do not know the current situation. Second, many hotel departments work in silos, so there is no goal to maximize the sale to every customer or guest. The lack of accurate and readily available data is likely the only argument you need to invest in a new commercial system that can provide just that.

Lower costs

If a new system does not bring in more revenue, it could reduce the company's costs to motivate the investment. One unique solution could replace several old systems, and a modern system could save valuable time and even reduce the number of employees. In addition, the total cost of ownership of a cloud-based system could be substantially lower since the hotel does not need as much hardware.
 
Increased revenue and a cost reduction would generate an even higher return on investment.

Risk reduction

Companies buy insurance to reduce financial risk. However, a new commercial system could also ease several risks in a hotel. The most obvious one is the loss of data when the data is spread out in many different systems, sometimes without any solid backup solutions, and depends on one exceptionally skilled person to manage the system. In addition, the high employee turnover rate in the industry increases the risk of the loss of customer data. A system could prevent the hotel from losing customers when employees leave.

Organizational

There are two organizational outcomes. One is happier guests, and the other is employee satisfaction.

Guest satisfaction

A commercial system has built-in BI tools to analyze segments, behavior, and other variables. As a result, the hotel can create suitable offerings that will attract the ideal guests that spend more than just the hotel room. A guest that buys more also tends to be happier.

Employee satisfaction

Employee turnover is excessively costly. It is so expensive that hotels do not even dare to measure the cost correctly. Moreover, a younger generation requires modern systems and tools. They expect to work in software with the same look and feel as apps on their smartphones. Unfortunately, proprietary hotel technology is not even close to that feeling. Old systems are hard to learn and impossible to master. Making the new employee productive faster increases employee satisfaction, and easy-to-use systems decrease employee turnover.

Personal

The fourth outcome category is personal. People buy from people, and they will not always tell about their often hidden individual desired outcomes. Here are some examples. As an owner, I would like to have a feeling of having control over my company and see the progress towards our goals. As a salesperson, I would like less admin work to spend more time with potential customers. Finally, as a revenue manager, I would like to be able to swiftly print reports when the team wants to get an update of the forecast. Most personal outcomes align well with company goals.

Hotels need a revenue growth engine

Revenue is essential to maximize profits in hotels. When the demand for overnight stays disappeared during the pandemic, hotels could not decrease the costs as fast or as much to compensate for the loss of revenue. Therefore, hotels need to focus on bringing in revenue and build a revenue growth engine to capture more of the market than the competition.