The boutique hotel had a successful 2014 and everything was looking good for 2015. 2013 had been a disappointment, so 2014 only needed a few minor changes to right the ship, with the goal of surpassing the record year of 2012. 2014 beat the pants off 2013, but was only a (respectable) 1.5% growth over 2012. For 2015, the goals were more ambitious: doubling the revenue growth compared to 2012 and aim for 5% growth over 2014.
In short, the hotel succeeded in the first goal, and came real close with the second. This is a look at what was implemented at the hotel to cause the growth.
To build revenue, a property either needs to increase the occupancy with a room rate similar or greater than the previous year, or it needs to increase the room rate with an occupancy level similar or greater than the previous year. With this hotel, I noticed that the ADR had dropped off from 2013 by around 2%, occupancy had risen close to 6%. Increasing the occupancy was going to be more difficult because this hotel was nearly sold out for the summer months, so more focus was put on increasing the ADR and maintaining the occupancy, at the very least.
Rather than staying with the same rates for 2014 and focusing on eliminating the lower rate channels, I decided to apply better yield tactics year-round, instead of only in our peak season, and increase our base rates across the board. The only exception to this rule was our rate for locals, which account for one of the largest segments for this hotel and also tended to eat more in the restaurant than others.
Using the pickup report, I was able to develop a better plan of when to be yielding, regardless of the number of rooms on the books. For example, I could determine that May was the busiest month for reservations in July-September, so I increased the summer rates for those months in May. I could also tell that the lead time of reservations for October-December was less than 30 days. Meaning, when I looked at the forecast for 2015 in June and saw little on the books for the final three months, I did not panic and drop room rates, overly promote, etc.
After going through 2014, I realized that my pickup form was too basic. I took the time to redevelop it to use in 2015, and I am fairly confident that the data collected will pay off. The key difference between the pickup form used in 2015 (and now 2016) and the one from previous years is that the form allows you to collect data daily for the month. This will allow me to yield even more precisely this year: instead of boosting rates for a month in advance, I can raise/lower rates in more specific lead times and do a better job of predicting walk-in demand.
I am so confident in people using this pickup form, that I will put it on sale for this month.
OTAs: Expedia, Booking.com, etc
OTAs are going to be a constant challenge for hotels. I previously wrote about how hotels need to take ownership of their guests in order to cut down on the amount of commissions you lose each year. It is something that will be worked on more for 2016, but for 2015, I decided to squeeze what I could out of them without hurting the overall revenues. This meant yielding the channels much more closely, and closing them off much more aggressively.
Overall, the strategy worked. Expedia and Booking.com are the two largest providers of revenue and dwarf the others, so I will focus on them. Between them both, revenues grew by a small percentage, but- this is the key - only in the softer months of the year. Looking at the total numbers for the year, they almost negated each other (i.e. July, August, September were up for Expedia, but were down the same amount for Booking.com.) When looking at January, for example, Expedia was down, but Booking.com increased dramatically to makeup the difference and then some.
Instead of using the OTAs as filler for last-minute rooms, I use them to create a base level of revenues for the hotel, like most would do with group tours or convention blocks. They may provide a lesser rate than if a guest booked directly at the hotel, but I compensate for the loss by increasing our other rates for last minute guests. I estimate the allotment I will receive from the OTAs using their reports and build my other rates accordingly.
The result is a net positive for the hotel: revenues and ADR increase; OTAs receive their allotments to keep them happy.
Another change that I was able to implement was tighter integration between Booking.com and our CRS, InnLink. Inventory between the hotel’s PMS and InnLink is synchronized constantly through the day, closing out room types for web bookings or GDS bookings automatically. Before 2015, that synchronization was not available for the OTAs. They released that feature for Booking.com, which meant less management for me. Previously, I had to keep adding rooms to inventory at Booking.com as needed when a room type ran out. For 2015, I was able to leave it wide open and then close off as needed. In previous years, I would close off it off a few days prior to an arrival date just in case the front desk staff sold the remaining rooms quickly. I did not want to be left with an overbooked hotel. This feature worked extremely well for 2015.
All yield management happened manually, up until September. Before September, I was watching the availability, adjusting rates for periods of stronger demand, closing out the OTAs, etc. In late August, InnQuest was offering an upgrade to unlock their yield management tools at a discounted price. It was too good of an opportunity to pass up.
The yield management controls are based on availability. You set various parameters so that when the hotel reaches certain thresholds, rates adjust upwards. Conversely, you can set discounted rates for people booking the first few rooms automatically. There are other controls available in roomMaster: ignore yielding over long-term stays, people who book x amount of days in advance, minimum amount of yielding, and more. Yielding can apply to all rates or specific ones, and can include meeting rooms.
It’s a great feature and worth looking to see whether your current PMS offers that functionality.
TACS: Travel Agency Commission Settlement
Dealing with travel agency commissions are always a pain, especially if you use a CRS to handle GDS bookings. Multiple faxed statements for commissions, manually punching in the reservation numbers, and constantly having to double check whether that commission had been paid previously or not. TACS is a service that eliminates a lot of those hassles.
There are two parts to it. The first part is that all relevant reservation data is uploaded automatically by the CRS (meaning only GDS reservations, not direct web bookings). When you log in to TACS to look at the commissionable reservations, all the information is there for you to look at and adjust: name, stay dates, rate, confirmation number, commission due, etc. Reservations still need to be confirmed, but it goes quickly. Copy and paste of the reservation number into the PMS and you’re done. Confirm all the commissions, submit, and payment is sent to each agency for you automatically. The hotel has the amount taken off a credit card or withdrawn from a bank account.
The second part to the system is likely the most useful. It is a full history of all the commissions paid that is searchable by agency name, guest name, arrival date, or confirmation number. You can pull up a list of your top agencies, look up previous statements, and more. It gives you a quick tool to confirm that yes, payment has been sent out and the date the payment was issued. It saves a lot of time and no double payment mistakes.
How does this apply to increasing the revenues? When travel agents look up the available hotels in the GDS, your property gets highlighted as being a partner in the program. It gives them an assurance that commissions will be paid for on time, automatically, without them having to send invoices to the hotel. Travel agents are more likely to book your property, and then those guests help spread the good word when they’re talking to their other colleagues in the office.
The best part is the service is not that expensive and should be available for all major central reservation systems.
There were a few minor and a few major additions to the hotel that helped us propel the occupancy higher.
The major upgrades took place with the purchase of Samsung 48” LED TVs. The hotel had plasma TVs before, the only hotel in the city with them, and now as other hotels are upgrading to flat-screens (finally), our hotel is staying ahead with the LED TVs. They look fantastic, and they’re priced under $400 right now. We had the wall mounts previously, so the effort involved with installing them was not too difficult. A great upgrade that did not cost a fortune.
To go along with new TVs, the hotel upgraded their cable service to receive set top boxes with HD channels being offered. A good TV should have the best quality content available for it. It was an easy decision to make, and, again, not a big cost involved.
Another upgrade dealt with our internet service. The hotel was able to upgrade to a fibre-optic connection to increase our speeds and bandwidth. The service upgrade was not that expensive. The more costly venture involved upgrading our WiFi routers to take advantage of the new speeds. We purchased Meraki Access Points, which allowed for them to be controlled through a central dashboard on the local network, but also because it allowed us to setup tiered WiFi solutions. The hotel offers a basic connection, a premium paid-for connection, and then the premium connection without a fee for our regular or VIP guests. The basic connection allowed for the usual internet browsing and basic gaming. The premium connection was designed for people that needed to do Skype conference calls or wanted to stream Netflix at night. The cost for the premium connection was minimal enough to encourage people to purchase it. The hotel basically recovered the costs of a few of the access points in the first year of having them- not a major revenue source for this small boutique hotel, but a worthwhile one in the end.
The final upgrades had nothing to do with the physical property. The hotel is too small to have a fitness centre be installed. Instead, we approached one of the gyms in the city and created a partnership with them. The only cost for us was a few free nights in our suites each year, and in exchange the guests had full access of their facility for free. The other change was an upgrade in our airport shuttle service. We switched companies to one that had newer vehicles and a more reliable service. The costs were the same, but service better, which made it a worthwhile switch.
For 2016, I will be applying a lot of the same revenue management strategies as I did for 2015 but in a more focused manner. Based on the information found in the pickup report, I will be able to develop a game-plan for the year well in advance. Rates will be adjusting for certain periods weeks or months in advance with the goal being to slowly fill up the hotel instead of have it reach 100% as soon as possible.
Marketing-wise, we launched a new guest loyalty program for the hotel. Punch card rewards and a tiered membership plan with benefits to give us a further edge over the competition. The only other reward programs in the city involve Air Miles with no direct recognition of guests staying 20 times through the year. Our marketing push at the end of last year has brought several inquiries from guests who stayed with us before but switched to other hotels. The hope is to build stronger guest loyalty with the guests we have and give better incentives for others to switch. Tough to say how well this will turn out right now. The cost of the program was only around $20 a month, far cheaper than the AirMile programs.
The only other addition to the hotel that we are starting to market is a digital subscription to the NY Times. Currently, people viewing their website are limited to ten articles a month. With the subscription, anyone viewing the site through the hotel’s WiFi connection will be given unlimited access to the site. Given that the hotel is in Canada, we are not positive how much this will be used. Again, a minor cost experiment of around $20 a month.
Looking at their revenue forecasts for the upcoming year, every month is ahead by at least a 10% margin compared to the same forecast a year ago. A very promising year. Hopefully this time next year, my update on this boutique hotel will give even better results than 2015.
From Four Sides Hospitality
Case Study: Boutique Hotel - introductory post about the hotel.
Hotel Loyalty Program - an overview of the loyalty program Flok and how it applies to hotels.
Owning Your Guest - strategies to encourage people to book directly with the hotel.