Profit Potential
Maximizing Returns: Investing Strategically in Accommodation
The main goal of any business is to make money. However, this is easier said than done in a lot of cases. To begin making money as a business requires an initial investment, and you strive for a return on that investment (ROI). This can then be reinvested into the business or taken as profit.
What is the Act of Investing in a hotel?
Specifically within the hotel business, there are a plethora of areas that require investment. This spans employee training, property marketing and hotel software. As with every decision made, there are positives and negatives. An ‘investment’ extends to any spend that is made to create profit, whether direct or indirect.
What is Considered a Good ROI For Hotels
It’s important to consider that you may not see the initial return on your investment within the short term. However, due to the nature of the industry, your initial investment may not see a return for a formidable amount of time. For instance, if you invest in more comfortable bedding. The return on investment won’t be seen until you start gaining more visitors due to positive reviews about bedding and comfortable sleeping. But don’t be disheartened by this, as guest experience should be at the forefront of all managers’ priorities, and the inverse effect of a more positive experience is more guests staying at your property.
If we are talking purely numbers based on return on investment, it is widely considered that a 5-7% ROI is a good return. Many in the hotel industry have a similar understanding with the industry believing 6-12% ROI yearly is a strong return.
Potential Strategies to Increase ROI
Adapting to industry standards and going above certain expectations is crucial in the hotel industry. Prioritising investments for your property correctly will help ensure your budget spend is contributing towards an increased bottom line and occupancy rates.
Here are some potential investment areas that could be beneficial for your property:
1. Using OTAs
Utilising the large reach and connectivity of OTAs is a valuable resource that has so much potential upside for little investment. This cost-effective investment has the potential to increase your bookings tenfold. These platforms take a small commission fee from every booking you receive through their service. This commission-based investment is both worth the advertising and sales you gain from that service.
Not only does this service increase sales it has the potential to increase direct bookings as well as superseding the commission aspect of an OTA. As many travellers understand, it’s cheaper to book directly than through an OTA. The OTA will help them find your property and then if you have your property’s website linked to your profile they can easily access your direct booking.
Additionally intertwined with the use of OTAs is the use of a Channel Manager. With the use of a channel manager, this allows for bookings on your OTAs to be automatically updated within your PMS. With real-time capabilities, this eliminates the risk of over-booking your rooms. Also allows you to utilise more OTAs and increase your property’s online presence.
Explore GuestPoints Channel Manager options here:
2. Staff and Housekeeping
Studies show that 30-40% of hoteliers don’t employ any staff. Which may work for many smaller bed properties 1-5 rooms. But, when the room count starts exceeding 7-10 then this is when a staff investment should be considered. Employing someone to help around your property allows you to focus on the business and growth side of your business.
These opportunities to free yourself some time can go towards a variety of things. For example, it could give you time to go over your property’s accounts finding ways you could save money or produce more revenue. Another example could be with your property’s marketing, allowing yourself time to set up a property social media or track your website analytics and enhance your SEO (search engine optimisation).
Additionally, finding someone with experience in housekeeping and cleaning can be highly beneficial. An initial thought of a consumer is about the cleanliness of a property, spanning from the front desk to the rooms. So if you hire someone with experience within the space they can utilise their skills to enhance your guests’ experience.
3. New Technologies
Within the modern era, it has never been easier to access technologies that can benefit you, this is the same with motels. A lot of the technology related to accommodation is not applicable to smaller to mid-sized motels. However, there are a few things that can help free time for yourself and create a nice ROI for their purchase.
Technology that allows contactless check-in can benefit many properties significantly. This can be done in a few ways either through a check-in lock box or rooms with pin codes. This opens up the ability for your guests to use late check-ins and allows for better flow when checking in. Although face-to-face interactions are beneficial to properties, these self-check-in options are an alternative for when the front desk is unavailable or busy.
To best utilise such technologies the use of an online payment solution is required. If guests want contactless check-in they either would have to pay before arriving online or have to pay at the check-in station which would also need an online payment solution.
Explore GuestPoints Payment solution below:
4. On-site facilities
Adding onsite facilities can be the difference for people looking to stay at a property for extended periods rather than single-night stays. If your property had onsite facilities such as a pool or gym this would create a greater guest experience. Although these things require higher levels of investment initially, they can create a significant point of difference compared to competitors. This opens up your target audience to families or corporate travellers, looking to use the facilities to either entertain or rewind.
Understanding What to Invest In
For many properties, you have a limited budget and it requires you to be smart with your money. When evaluating potential investment areas, your initial focus should be on creating a budget and cost structure that ensures you have money to invest in the first place.
When creating your budget, there are a few areas you should consider:
- Fixed costs (e.g., rent): Independent of business activity.
- Variable costs (e.g., wages): Fluctuate with business activity.
- Income: Anticipated and other projected revenue.
- Actual costs: Discrepancy between budgeted estimates and realised expenses
It is important to remember this budget isn’t a one-time thing. It is important to look back over your budget and analyse the forecast areas and adjust your investment strategies to what is working. Accurate budgeting takes time and knowledge to refine your process and get greater insight into how your money as a business is spent and made.
The ability to track and forecast your budget can be assisted through the use of a PMS. With comprehensive reports on many areas related to the general operational cost of a property and things such as occupancy rate, a quality PMS can assist you with your budgeting processes.
Once you have refined your budget and have what you consider to be an accurate method. Then explore areas you think are important within your business and that with investment can make you a good return. Once you identify this area of business you would like to invest in, consider other people’s opinions about this. As others may have varying opinions and can give you valuable insight you may have overlooked.
In closing, it should be remembered that you may not see a significant return on your investment straight away. Take this into consideration when analysing your potential investments, no investment should be off impulse, take the correct steps to plan to evaluate your business decisions.
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