7 Tips to Increase Revenue at Your Hotel
I have been lucky enough to work at a multitude of hotels. From motels to chains to individual mom/pop operations. And the one thing that stood out the most was, the varying degree of the understanding how revenue management works. The difference was noticeable between mom/pop Vs. Chain hotels.
The mom/pop hotels cared more about “heads in beds” whereas the chain hotel was more focused on sustained growth through proper revenue management techniques. This is where I learned the acumen of how to be a good revenue manager. Even though my official title was General Manager, that did not stop me from taking the reigns of the hotel I was put in charge of.
Here I will list some of the tips/tricks which I have used to increase bottom line revenues at my hotel. Most of these 7 tips will likely apply to your hotel as well. If you’re lucky enough to have a dedicated revenue manager then you can discuss these with them for consensus on some of these tips.
1 — AAA Discounts
This sounds like the most basic of things, but could totally add tons of revenue to your bottom line. At most of my hotels the discount percentage has ranged from 8% — 10%. So if we take the 10% example for simplicity sake we can do some quick math. Lets say your room rate is $100 per night. And now lets assume that your hotel gets approximately 2 AAA guests per day. These numbers are very conservative and will totally vary based on your property.
Now let us calculate how much money this adds up to at a 10% discount.
$100–10% = $100 — $10 = $90
@ 2 rooms per night = $20 discount per night
@ 365 day * $20 = $7300/yr
That is a lot of money given away in discounts. And this is just AAA discounts. Every hotel I’ve worked at had a plethora of discounts in their system. Most hotel owners/managers did not have strict control on when front desk agents would apply these discounts. In fact, at one of the chain hotels I worked at, we had the authority to completely override the rate. That is just a recipe for lost revenue.
Picture this scenario: A guest checks-in to a hotel using a 3rd party booking i.e. Priceline. And say they had an opaque rate of $43. The guest checks-out and then comes back a month later. Only, this time they did not make a reservation. They’re a walk-in guest and your front desk agents are told that they stayed here before and would like the same rate. Would you really want your front desk agent to override your rack rate with the $43 rate? I’m guessing not!
And this is where revenue control comes in. You as a manager/owner have the authority to control who gets what rate. I used to run a rate override report every morning for the previous day. If there were any red flags, I would bring it to the attention of the responsible front desk agent. This exercise was painful in the beginning because of the sheer amount of rate overrides. However, as time progressed and the staff was retrained; the amount of override eventually went down to almost nothing.
Back to AAA discounts. Unless this is coming from your corporate HQ, there is no reason you cannot change the discount percentage to fit your market needs and also compare it with what other hotels in the area are doing. But don’t solely base it on what other hotels are doing. Why? Because penguins follow penguins. You want to be a leader in your market, not a follower.
2 — OTA Priceshops
Online Travel Agents (OTA’s) are a great source of revenue for hotels. I like to call them our “frenemies”. I like to use OTAs to fill some of the hotel rooms and get that base occupancy. Then I can fill the remaining rooms with locally negotiated rates + corporate accounts. This is easier said than done, because there is no way to shut OTAs On/Off. You either use them or you don’t.
So the best thing I would recommend is to price shop all OTA sites. You can either designate this task to say a night-audit shift, or an assistant manager. The idea here is to make sure your hotel rates are in line with the OTA rates without any rate parity issues. A price shop can be stored in an excel file or a shared google doc. Doing a price shop will help you with a few things:
- Ensure that your rack rates on your hotel’s website is in line with rates on these OTA sites
- Give you an indication if your rates are at par with what the competition is charging. Sometimes this alone can increase your ADR (average daily rate)
Expedia Price-Shop Example
Expedia.com price shop for Meriden, CT March 19 — March 22
continued. Expedia.com price shop for Meriden, CT March 19 — March 22
In the above example you will see I shopped Expedia.com for a check-in date of (Monday) March 19 — (Thursday) March 22. Most business people travel Monday-Thursday so that is what I put in for the dates. If your hotel is a leisure travel hotel then you’d change these price shop dates to the weekend. You know your market best, so conduct a price shop based on your market knowledge.
Now, lets break down our price shop to see where we can find areas of opportunity? I noticed a few hotels that could potentially be leaving money on the table.
Observation 1: The first one that stands out is the Comfort Inn & Suites. It is priced at $61/night for my stay duration and is rated as a 2.5* hotel with a ranking of 4.0/5 on Expedia. With 400 reviews I’d say that is a pretty good rating. Immediately below that is Extended Stay America. It is also rated 2.5* at $81/night with 3.7/5 and 216 reviews. In this case Comfort Inn looks like the clear winner. They could raise their rates by another $10 — $15 per night and still beat Extended Stay America on rate.
My suggestion for Comfort Inn & Suites: Raise your rates by $10 — $15 and test to see if there is a drop in bookings.
Observation 2: The second stand out hotel is the Hawthorn Suites by Wyndham. It is priced at $77/night for the stay duration and rated as a 3* hotel with a ranking of 3.9/5. With 570 review this hotel is definitely leading the review pack and at a 3.9 rating it is higher than the only other 3* hotel i.e. Sheraton Four Points. The biggest discrepancy I see here is that the Hawthorn is selling their rooms at $77/night Vs. the closest 3* hotel Sheraton 4 points, selling their rooms at $101/night.
Most popular hotel as listed by Expedia
Hawthorn also seems to be the only hotel in the Meriden, CT area that is listed as the “Most Popular” on Expedia. I would totally use that to my advantage if I were the General Manager/Revenue Manager for this hotel. Based on where the rest of the hotels are, Hawthorn is definitely leaving money on the table by not raising their rates. If they raised their Weekday rate from $77 to $89/night it’ll be a jump of $12/night and would still keep them competitively priced based on their star rating and reviews.
My suggestion for Hawthorn Suites: Raise your rates by $12 — $15 and test to see if there is a drop in bookings. Being a market leader means you should be able to experiment and not be scared of the competition.
3 — Hotel Coupon Book Strategy
If you have a hotel coupon book in your area, I would highly suggest using this particular revenue strategy. You can head on over to their website to see if your State/City is listed on there. My Return on Investment (ROI) with hotelcoupons.com was about 1:8. So for every $1 I spent with them, I would get $8 back. That’s not a bad deal at all. Just remember to treat hotelcoupons like any other OTA. I believe their monthly listing fees is between $650 — $900 per month. So if you’re selling your rooms at $80/night, you would need to have 11 people use the coupon every month to break even. In my market, we used to get coupon guests at least once every other day.
The key to remember with hotel coupons is that it’s a physical book. They do have an app now that guests can use as well. When you fill out the form to be listed in the book you have to mention your rate and what days that rate is available. If you’re a business hotel that gets the bulk of its revenue from corporate travel i.e. Monday — Thursday then I would list my Mon — Thu rate in the coupon book higher than the weekend rate. You also have the ability to change the rate every 3 months I believe. Another thing to remember is that rates are subject to availability. Which means if you’re close to selling out you do not have to honor the couponbook rate for any walk-ins.
I would also suggest having a special rate code in your PMS that corresponds to the couponbook rate. This way you can track how many times it is being used every month and decide if you want to continue using it or if it’s not worth the ROI.
4 — Raising Locally Negotiated Rates
This is a definite no-brainer. Every hotel has LNR’s staying with them. I’ve seen a mix of LNRs at all my hotels. Some were setup because there is this 1 guest who visits the home office once a year for 1 week. And then there are those gems where the company is headquartered near your hotel and has people coming all the time with 500+ room nights per year.
When setting up locally negotiated rates with companies it is important to understand the needs of the company. And those needs can only be understood if you’re sitting with the right decision maker within the company. Most times it’s hard to get past the gatekeeper in order to get in touch with the decision makers at these companies. But this should be a non-issue with the 21st century tools available at our disposal i.e. Linkedn & Twitter to name a few.
Once you’ve successfully secured an LNR it is important to not just keep them happy, but to also keep your coffers happy. This means you have to start using the data available at your disposal. Every GM/Sales person/Revenue manager should be running reports on a regular basis to understand how many rooms are being consumed by LNR’s. This would depend on what goals or terms you’ve set with these companies. For example: you could have a deal which guarantees XYZ company a rate of $50 if they produce 250 room nights per month.
Well, what happens if they don’t meet this goal? Do their rates go up? In my experience these rates are set in your Property Management System (PMS) and are not touched for at least a year. And this could very well be the case with your hotel. But it is important to look at the production of rooms you’re getting from all of your LNRs and re-think if the rate offered is still valid? You will be surprised what the actual room consumption is Vs. the promise some of these companies might have made to you.
It is good business sense to look at all your LNRs at least once every 6 months and then decide if you’d like to increase their rates or keep it at the promised rate based on their consumption of room nights.
5 — Min/Max LOS Strategy
MIN LOS stands for minimum length of stay and MAX LOS for maximum length of stay. At my hotel this has always been the function of a revenue manager with input from the General manager. But you might not have a revenue manager or a sales manager. In which case it’ll come in handy to know when to use MIN Vs. MAX.
A MIN LOS would come into effect when the goal is to restrict guests from booking less than a certain amount of nights. Say you’re having an event that sells out your area every year. This year that event is going to be on a Friday & Saturday. If you know for sure that your hotel has sold out in the past (look at reports) and it is going to sell out again then I would put a MIN LOS for Friday/Saturday. This would mean that your PMS would not allow any bookings coming in for just one night on that Friday and/or Saturday night. This helps the hotel tremendously with getting more revenue and charging a higher rack rate, especially if all other area hotels are adopting the same technique.
A MAX LOS is the exact opposite of MIN LOS. The idea here is to restrict how long a guest can stay at your hotel. When they sign their registration cards they should be made aware of any of these length of stay restrictions. I’ve rarely seen MAX LOS being used at hotels. Two scenarios that come to mind would be:
You have a large group in-house that is going to overlap with another group. And if the 1st group does not check-out then you’d be oversold. A MAX LOS can prevent that from happening and from potential displacement of revenue.
You’re a long term stay hotel and have too many low rate long term guests. When updating guest registration cards this might be a good time to enforce the MAX LOS policy or increase their long term stay rates.
Since MIN LOS is what is used by most hotels, that is what I’d like to talk about a little bit more. When implementing a MIN LOS it is important that you look at some of the historical data and also perform a price shop as discussed earlier. Too many hotels get too greedy and implement a MIN LOS, only to not sell out. If you implement a MIN LOS too far out in advance then guests might start booking at other competitor hotels and, if you wait too long you might run into an oversold situation. The only way to know what the right time to implement these booking rules is using your historical data + knowing your market + practice. If you’ve worked at your hotel for a few years and have a good pulse on what kind of rates you can get by adding a MIN LOS then go for it.
MIN/MAX LOS can be great for hotel revenue but do come with the perils of not being able to sell out. I would suggest you use these strategies very minimally, unless you know what the heck you’re doing. In which case — more power to you!
6 — Raise Rates During Special Days/Dates
This one goes hand in hand with Min/Max LOS. In order to maximize your revenue and not leave any money on the table, you should definitely take advantage of special dates. Maybe you’re near a school that has it’s graduation every year. This will bring in parents from out of town and organically raise the average rates in the area. It is your job as a general manager/revenue manager/director of sales to keep a good pulse on these events and adjust your rates accordingly.
The one thing I have done in the past is to raise my rates for Valentines day & New Years Day. We would also require a $150 deposit during these dates and would not rent to anyone below 25 years of age. This can be done at the GM’s discretion. I personally did not want to deal with the riff raff and the after math, hence the strict policy. It wasn’t worth it for me to rent these rooms to locals, only to have upset guests plus hours being spent by housekeepers cleaning trashed rooms. The risk was not worth the reward.
7 — Employee Rates
Every hotel (mostly chain hotels) has an employee rate. This is a great perk for the employee’s and also a benefit for hotels. The one thing that I was always very particular about, was using the right channels. Employee rates had to be approved by managers and submitted using the correct forms. At a previous hotel, I worked at this policy was not being properly used.
Mis-use of the policy was causing our ADR to drop because of the low rates we offered our employees. Upon closer scrutiny, I found that employee’s were booking rooms for their friends and not really using it for themselves.
This would be something that’ll probably be at your discretion. Make sure you have the proper policies in place to make the right call. It is also best practice to limit the number of employee rooms to be booked each night, including & especially during sold-out nights.
Conclusion
This are some of the tips and tricks I have used in the past to maximize revenue at my hotel. I have also been lucky enough to have excellent revenue managers who have been instrumental in teaching me some of these tricks. I know want to pass that baton on to you.
Do you have more tricks that you’d like to share with fellow hoteliers? Feel free to mention them in the comments below!
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