As a lifelong hotelier, I have enjoyed many great moments that are etched in my memory as career highlights. Recently, I found myself grinning from ear to ear with the results of one my clients—a down-on-its luck hotel that made good—and thought I would share some of the “secrets” of its success with you.
Downward Spiral: The hotel in question will be referred to simply as Hotel A. The property exists in a very difficult hotel market that is overbuilt and never reached expectations for demand that caused a flurry of hotel developers to bet on the outcome. Hotel A engaged us to help them figure out how to gain revenues and ultimately help them work out an exit strategy. Hotel A was caught in the classic downward business spiral. Demand softened so they were seeing less revenue. Because they were seeing less revenue, they stopped spending money on operations and stopped reinvesting in the hotel’s offerings. Because they stopped investing in the hotel, clients were less impressed by the property, and they lost even more market share. And so it went.
The way out: First, let me tell you a little more about the hotel. It is branded, but independently owned and operated. The owners considered hiring a professional management company but no best case pro formas could show a positive result for Hotel A with the various fees and overhead they would need to pay the management company. Don’t get me wrong, I am a big believer in professional management companies having worked directly for a company for six and a half years as an assistant GM and GM. However, they aren’t necessary for all hotels, and in this case, it was certainly true.
Online presence: When I first got to Hotel A, I noticed they looked worse online then they did in person! This is a classic mistake and certainly the opposite should normally be true or at least they should look as good online as they do in person. Much of the photography was dated; channels were closed, and the reviews and reputation of the hotel were suffering as a result of the lack of money coming in the door.
Misspent dollars: When I took a look at Hotel A’s profit and loss statement, I found close to $75,000 dollars that was either being misspent or deployed in ways that could be reduced. That may not sound like a lot of money to you, but if you consider that money as freely discretionary spending, it does amount to a sum that can make a big difference in a less than 200-room hotel, if invested properly.
Let’s talk about what happened:
Reinvested dollars: Having identified the new source of money ($75,000), we began to invest in the hotel’s systems and marketing efforts. We developed rational pricing methods for online and in-person rates and implemented yielding programs. We made the breakfast area better and started an effective preventive maintenance program at the hotel that made it look more appealing to guests. We bought new vacuums for the housekeepers. And so much more that cannot be listed here.
The results: In the previous five years, Hotel A had never outperformed its competitive set in revenue per available room. After two months, Hotel A started beating its comp set one or two weeks during a month. After three months, Hotel A was consistently beating its comp set RevPAR every week for 12-weeks running. It is stealing shares from others and is doing a better job gaining new business on its own. It has gone from dead last out of 24 hotels on TripAdvisor to No. 11 and still climbing. Hotel A just had its best month ever in March, having the highest amount of gross revenues in an off-month. Before that, the best month the hotel ever had was in July. The owners are excited about the prospects for the upcoming summer.
The moral: This success story is not unusual but far too often gets squashed by the “downward spiral” mentality that can kill a hotel. As an owner, you already pay for your brand affiliation, distribution channels and many other costs that might make it hard to have a professional management company. But there is hope and your property can succeed. Hotel A has become one of my favorite career projects because I think we all love a good redemption story in these difficult, but improving times in the hotel industry.
Gavin Landry is a 25-year veteran of the industry. He is a graduate of Cornell University’s School of Hotel and Restaurant Administration and Principal of Landry Hospitality Consulting Services, L.L.C.; a full-service hospitality consulting practice specializing in hotel development and existing hotel cost and revenue improvement programs. He is an Adjunct Professor at NYU’s Preston Robert Tisch Center for Hospitality, Tourism and Sports Management teaching graduate level courses on Tourism Policy Analysis, Tourism Planning and Tourism Principles and Planning. LHCS offers a complimentary financial analysis for hotel properties that want to find new revenues and improve the hotel’s operating income.
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