Hotels continuously think about improving profits, and many revenue managers have become more profit-focused than only revenue-focused. Here are three ways where even minor improvements hugely impact profits.
Increase the market share
Using benchmarking, hotels will better understand the real market and how they perform compared to their competition. These insights automatically trigger hotels to try to capture more of the market and thus increase their market share. A system where the hotel can see patterns to understand where to find the highest potential will make capturing more of the market easier. In addition, the right insights into the performance during specific days of the week and seasons will help the hotel craft a plan to increase its market share successfully.
Hotels can easily calculate the potential impact of increasing the market share with 0.01 using this formula: The number of rooms x 365 x RevPAR / RGI x 0.01
Calculate the impact for your hotel to see how much extra revenue this is.
Increase the average rate
How much would the revenue increase if the hotel managed to increase the average rate by 1 %? If the average rate is $100, a 1 % increase is only $1. The potential guest would not even notice a rate increase of $1.
Hotels can easily calculate the potential impact of increasing the average rate by 1 % using this formula:
The number of rooms x 365 x Occ % x $1
Decrease the Customer Acquisition Cost
Over time the Customer Acquisition Cost (CAC) has increased from 5-6 % (in the 1990ties) to 15-25 % of room revenue. If the hotel could save one percentage point of the CAC, it would immediately impact profit since this is a saving. Decreasing CAC is probably a little more complex than the other two options, so the hotel needs a long-term plan and will need to be persistent in its efforts. However, decreasing CAC will have an impact over several years.
Hotels can easily calculate the potential impact of decreasing CAC by one percentage point using this formula: Total room revenue x 0.01
Three profit improvements combined
Hotels manage many things at the same time. So take the time to add these three profit improvement suggestions to determine how much they will impact the profit. You will be surprised how minor improvements can considerably affect the hotel's profits.