Revenue-per-available-room growth has flatlined, the labor environment is still complicated, and costs are continuously on the rise. In this third installment of HNN Answers, hoteliers share their best practices for protecting NOI.
Editor’s note: You ask. Hotel News Now answers. In this occasional series, we pose your questions to industry experts for answers, opinions and advice on everything from the big-picture stuff, like where we are in the cycle, to small potatoes, like whether to serve mashed or au gratin on the breakfast buffet. Submit your questions to HNN Senior Managing Editor Robert McCune at firstname.lastname@example.org.
REPORT FROM THE U.S.—Revenue per available room in the U.S. hotel industry is softening and labor remains tight, which means hoteliers are putting plans in place to protect net operating income.
From identifying operating efficiencies to leveraging technology to optimizing business mix, owners, operators and asset managers have gotten creative.
Carlos Rodriguez Sr., president and CEO, Driftwood Acquisitions and Development
“With flat-lined revenue growth going against a 2% or 3% rise in costs, the key is finding operational efficiencies. Labor is the biggest driver of costs, so sourcing and retaining our own company’s associates helps rein in costs. We also leverage our buying power whenever possible. Technology helps drive efficiencies, but it can take some time to realize costs savings after the initial investment. On the revenue side, another way hoteliers are increasing NOI is by growing their food-and-beverage service. Some are embracing ‘foodies’ and offering unique dining options that appeal to both hotel guests and the community more broadly.”
Ernie Catanzaro, EVP hotel division, Blue Sky Hospitality Solutions
“We believe the best way to protect NOI is by hiring dedicated GMs with a firm grasp on technology. While this may seem obvious, it is amazing how many owners seem more willing to throw good money after bad, chasing iffy solutions rather than invest the time necessary to find the right leader to protect ownership interests.
“Today, technology provides innumerable options to identify potential new business and maximize profits. However, it takes the right GM to implement solid action steps to utilize this information and protect NOI as opposed to passively receiving information and only occasionally reacting.”
Diane Fox, SVP, CHMWarnick
“Remember the hard lessons learned during the last downturn related to business travel. Be careful with amenity and rate concessions; know your market and what’s really being offered by competitors; and embrace small accounts for protection purposes.
“Focus on optimizing business mix and net revenue with emphasis on cost of acquisition and ancillary revenue contribution. Monitor your yield system. They price on history, and patterns can change in a downturn.
“Sell ‘green programs’ a different way. It’s really more about the value of points to the traveler. Create meaningful bonus programs for group sales managers and front-desk agents to optimize participation in housekeeping opt-out.
“Go back through historical expenses and look for cost creep over the past cycle.”
Gary Gray, CIO, Twenty Four Seven Hotels
“Twenty Four Seven Hotels is proactive in collaborating with the brands on initiatives such as environmental waste, which typically reduce costs while at the same time enhances the guest experience or resonates with our guests’ values.
“We also think outside the box. For example, we are one of the first companies to utilize Uber’s centralized billing instead of shuttles. This elevated the guest’s impression of the hotel while simultaneously reduced labor and vehicle related expenses.
“Lastly, we are highly competitive with wages, as employee retention is actually lower in cost than excess turnover. In addition, we complete annual confidential associate opinion surveys to inform action plans.”