The hotel industry has 23 facts and trends to know.
Boutique hotels and B&Bs are turning to revenue management to drive performance and profit growth.You risk falling behind the pack if you don't get on the revenue management bandwagon soon.
We will run through the three key revenue metrics for B&Bs, average room rate, Occupancy rate and RevPAR, as well as offer expert advice on how to improve your performance in each area.
While keeping an eye on the different key performance indicators, revenue management is the art of managing rates and availability.
Big hotels and groups usually have dedicated revenue managers.Small players like you don't have this luxury, but that does not mean it has to be the chink in your armour.All you have to do is know your formulas to be a savvy B&B operator.
Knowledge is power and your property can learn to use it.
How much do you expect to make as a bed and breakfast host?The answer varies a lot.
The revenue management world has hundreds of metrics, formulas and key performance indicators, but we don't want to overwhelm you, so this article focuses on the essentials.To see how well your small property is doing, you must use three success metrics.
The average room rate is a measure of the average rental income of a paid and occupied room during a specific time period.
The average price that a guest pays per room at your hotel is one of the most critical metrics.It allows you to compare room revenue generated during a specific period of time against the amount of revenue paid for by guests and the number of occupied rooms at the property.
You can create promotional campaigns that can help drive traffic and increase revenue by knowing where your ADR is during peak seasons and slow seasons.It gives insight into how you stack up against the competition.During the peak times of the year, you can maximize your income and manage your assets.
One might assume that a complex formula is used in order to come up with an average daily rate.Surprise!It is pretty simple.
If you are using this formula, you need to exclude any rooms that are currently being occupied by staff members.
Revenue management isn't all about revenue, you also need to monitor your costs.You can make more informed pricing and marketing decisions by knowing the average costs incurred per occupied room.
Variable costs can be as high as $75 per room night for a luxury hotel and as low as $12AUD per night in a budget property.
Implementing pricing strategies that allow you to increase the revenue you generate from each individual guest is the key to increasing your ADR.Upfront and cross-sell offers are included.
Shuttle transfers, room upgrades, equipment hire, and tours and activities are some of the complimentary offers that will enhance the guests experience.
1.Many guests will choose the bundled option over the standard room rate if it is presented to them in a way that makes them want to stay.A local experience includes a tour for guests, a gift pack of local goods, and passes to a must-see attraction.Depending on your target market, you could offer a champagne breakfast and high tea package to make your guests stay just a little bit more fancy.
Adding optional extras is another way to make travellers spend more when they book.Consider offering an airport shuttle or early check-in for a reasonable price.It's inconvenient for you, but convenient for your guests.
Let your guests know what options are available to them.It is out of mind if it is not seen.
You can be creative about how you position your rooms.Instead of charging more for a certain room that automatically comes with dinner and a car park, sell these as extras that can be added onto any room.
Guests can spend more on things they prefer without feeling like they have to book a more expensive room if you place your features as extras.
2.Point-of-sale opportunities can be found at your front desk or other designated area.This enhances the guest experience and brings in revenue.
Whatever the product, give guests something to remember their time with you and add a new revenue stream by making some of your products available for purchase.For the beach, there are sunscreens, shampoos, and towels.This could prevent them from accidentally packing your bathroom towels in their bags.
B&B guests like authentic experiences and local goods so they are more likely to buy a souvenir from you if they know it was created by a nearby artist.
If you have staff, train them to make more money.Encourage guests to spend more on arrival if a customer has booked a basic room.
Being a small hotel makes upselling seem less commercial because you get to know your guests on a personal level.When a couple arrives at your property, they mention their anniversary as they chat.That is your chance to strike!If you have a honeymoon suite, you can upgrade them for a special rate or give them a discount.
Sometimes this can result in a little extra revenue for you, because you want your guests to get the most out of their stay with you.It is a win-win.
3.Customers should be encouraged to refer friends and family to stay at your property.Potential guests can redeem a promotion code at the time of booking on your website.
A post-stay email can be sent to your guests with a specific promotion code and discount.Word of mouth is the most powerful marketing tool.
4.Travelers would love to travel with their pets.If you can make your small hotel pet-friendly, you might be able to charge a little more for your rooms.
This could be a great point of difference for your property, and is a way to give guests that " home away from home" feeling, not to mention it saves them having to sort out pet-sitters or spending a lot of money on kennels while they're away.
5.You can offer discounts for extended stays.You may want to offer extended stay discounts in order to encourage longer stays.
People stay at small hotels for the weekend.If you offer guests a 20% discount if they book for seven nights or more, you could encourage them to stay longer.
Ensuring solid financial performance for your B&B is dependent on high occupancy rates.Small property owners want their hotel to be full.
Why?If a room is empty for the night, you lose revenue and miss an opportunity to grow your business.
Occupancy rate is the number of rooms filled as a percentage.A lot of booked rooms have a higher rate than empty rooms.By day, week, month, or even longer, you can see this figure.Depending on the length of time you consider, the rate will be different.
Divide the total number of rooms occupied by the number available times 100 to calculate yourOccupancy rate.Occupancy is 75%.
When you consider bed nights, roomOccupancy gets more specific.If you dare, read on because this section is more advanced.
A room night is the number of rooms occupied on a given night, whereas a bed night includes guests in those rooms.When a room is the unit of measure, a bed night calculates the number of beds in the entire hotel with the nights each of them are booked.
Let's say your hotel has 10 rooms with 2 beds.If 5 people book 5 rooms for the entire month of April, your hotel will have a room night rate of 50%.There are 20 beds spread out over the 10 rooms.If 5 single and separate people booked 5 rooms for all of April, the bed nightOccupancy would be 25%, because 5 beds were used out of a possible 20 for April.
This is even more complicated when you consider the nights.If a hotel with 12 rooms each with 2 beds was booked by 12 separate, single people for 15 each of the 30 days in April, the roomOccupancy would be 50%.The bed night calculation would be 25% if you wanted it, because 12 beds were occupied out of the 24 available, and only 15 days in April.Get it?!
1.It is important to keep an eye on your competitors pricing.Staying on top of what other properties are charging will give you more context when setting your own rates.
Extra services your competitors are offering can increase your ADR, as we covered earlier.
2.The travel industry can change frequently.If you leave your rates the same, you will miss out on major opportunities during business booms and may drive customers away from your door during busts.Track market changes and reflect them in your rates.
3.Every destination has a high season, and most have events at different times of the year that will increase traffic.You may miss high-volume windows if you don't take this into account.
Occupancy rates should increase in line with revenue management best practice.
Know what's going on in your area and prepare a market strategy.You can advertise to guests who are already looking for a place to stay.For example:
When yourOccupancy rates have been particularity high, then replicate what you did during that time for periods of lowOccupancy.Many B&B managers get caught up in the high season.
It's easy to make the mistake of predicting the same success throughout the year, but don't get dollar signs in your eyes just yet.Proper revenue management means taking into account the low times as well before you make any long-term plans.When business might decline, look into the data surrounding your destination.
4.If you aren't already on your booking channels, audit them.Make sure you monitor your performance if you advertise on online travel agents.
Make necessary changes if one site is performing better than the other.Sometimes it can be as simple as updating property images or tailoring the wording on your listing to better appeal to the site's audience.
If you aren't advertising your property on any of the websites, you should seriously consider doing so.Booking.com processes over 1.5 million room bookings each day, so they are a rich source of data.).
Revenue per available room is the most important figure to consider when calculating the financial performance of accommodation.It tells you the revenue per available room and creates a relationship between rates andOccupancy to understand how your B&B is performing
Without tracking it, it will be hard to know how to improve.
You will calculate your RevPAR according to a specific point in time, and compare it across the same time periods.
It is difficult to say what a successful RevPAR is, as it depends on demand and other factors.
This example shows some limitations while it is considered accurate.If a hotel sells 50 rooms for $20 or five for $200, the revenue is $1000 for a consistent RevPAR of $20.This does not mean that the net operating income of the hotel will be the same in both cases.
A new metric has made its way into the industry because of the limited abilities of building strategies based on RevPAR.Taking into account the total revenue of the property, including the bar, room service, breakfast, and so on, makes a more meaningful look at the profitability of a hotel.The total revenue is divided by the number of available rooms.
With the ability to accurately measure your pricing and revenue data, TrevPAR will give you many more options in how to conduct your revenue management strategy.
There are three common RevPAR mistakes that small accommodation providers make.
1.There is too much reliance on online travel agencies.While they entice travellers with their discounts, you will lose money in the long run because of how much it costs to service that room.
2.Try not to charge less for rooms in order to get more guests.Adding additional extras will increase the perceived value of your room.
If you charge a higher rate and have fewer guests, you will be able to increase your revenue.
3.Reducing waste is important when it comes to electricity.There are ways to reduce your carbon footprint without compromising the guest experience.
Breakfast items are another area to be aware of.Are you always over-stocked and the bread goes to waste?Determine how much you need so that the bread doesn't end up in the bin.
Minimum LOS restrictions can be put in place when you expect a period of highOccupancy so that the period after remains profitable.Busy periods will spill over into quieter times.
When you plan to sell rooms at higher rates, LOS Maximum should be implemented.Guests who want to stay beyond max stay can be charged a high rate if you accept discounted rates during this time.
You need to be careful.It could have a negative effect on your bottom line if there isn't enough demand or if the tactics are poorly executed.
Adding new room type levels based on attributes like an excellent view, a balcony, or a big bath can increase revenue.
3.Give guests access to exclusive perks that increase the perceived value of the rooms to increase room rates.There is a free shuttle to and from the airport.
We promised not to overwhelm you with metrics, but we couldn't resist leaving a few more here for you to get familiar with.We will give the formulas a rest for now.
1.The market penetration index can be used to compare your success to other properties.The market penetration index shows your share of bookings in the market.It can help you adjust your marketing strategy to capture a higher volume of your target market, and it allows you to understand how many guests are selecting your hotel versus another.
2.The revenue generation index is a metric that allows you to compare your property's RevPAR with your competition in the local market.The total market RevPAR is used to calculate it.You are generating a portion of the market revenue if the result is greater than one.You will want to consider options if it is less than one.
3.It is possible to understand your hotel's success across all levels by using gross operating profit per available room.It is known in the industry as the GopPAR, and it allows you to identify which areas of your hotel generate the most revenue.
4.The marketing cost per booking metric gives you an idea of how much you are spending to generate bookings from individual distribution channels.To calculate this metric, you need to know the distribution costs for that channel and subtract them from the booking amount that the guest pays.To maximize profits, you will want to focus on the least expensive distribution channels.
If you are new to revenue management, it is important to focus on the ones you can control and impact with new strategies in order to maximize your revenue.