Case Study: Boutique Hotel

May was the end of the first full year I had been working with a boutique hotel as a hotel consultant. I did a very thorough review of the year in a blog post, Year-End Review: Boutique Hotel, but I will include a few more details about it here.

The boutique hotel is small, under 40 rooms, in a remote city. It is also a new hotel having only been in operation since 2009.  The local economy is based upon mining and exploration activity happening in the area, as well as tourism in the summer time. Winter tourism is minimal, but is slowly gaining traction as the Asian markets look for alternatives to Vancouver/Whistler, Calgary/Banff. The hotel has a leased restaurant space, but no other amenities that you would find in a larger hotel in most of Canada (no fitness room, business centre, sauna/hot tub, pool, or elevator). Regardless of the lack of these amenities, the hotel is gaining in popularity with the locals and is ranked 4.5 stars on TripAdvisor.

They first approached me in April 2011 to get guidance with their revenue management as the summer season approached, but have extended my contract based upon the successes it had during the summer, and have increased my responsibilities to help out in other areas of the operation.

Year One Results

Here are the results for revenue growth (click to expand)

And ADR change:

Overall, revenue has been up 6.4%, ADR has been up 5.9%. I’m pleased with the result, but know there are improvements to be made. I was rather disappointed in how November and December performed, and really disappointed in April. November-January are historically the worst months of the year, so I was going into the months with the aim to at least match the year before. I go into detail in the blog post about the problems faced during those months.

If I take out the three down months, the revenues increased 9.2%, which shows how disappointing those three months truly are.

Changes Made

There are quite a few things that were changed that are impossible to track completely, but here’s a short list of actions I initiated:

1. New rate structure with higher rates overall (RACK, Corporate, Government)
2. New CRS to increase hotel exposure and capture higher paying guests
3. Tweaks to roomMaster 2000 to improve how the agents take bookings.
4. Tweaks to the website to improve search rankings, with plans to release new website after the summer.
5. Formalize contracts with companies with negotiated rates, have one controlled source for rates instead of multiple people.
6. Slowly increase advertising expenditures in smart ways (targeted magazines, ads on certain community radio stations).
7. Implement guest satisfaction survey that is automatically sent to guests after a stay.
8. Track revenues for pace reports.
9. Create and implement marketing plan for longterm growth
10. Smart negotiation with companies.

Company Contracts

The last point has been an important one. One of the major issues with the hotel was how they handled negotiated rates with companies and groups. The companies had rate structures which were very low in comparison to the RACK rates, and didn’t match each other. The hotel stayed away from group business completely, which is very lucrative in the city and can be very beneficial. Bus groups generally arrive late in the afternoon, and check out early morning, allowing the housekeeping staff to work right away without delays during the day while waiting for people to check out. Plus they tend to stay on site and eat in the restaurant, which helps keep the restaurant busy on slower nights.

When the contract came up for re-negotiation in the fall with one of the companies, I was put in charge of it. Here is what happened:

• Agreed to rate increase of nearly 10%
• Agreed to late fee worth 70% of room rate
• Agreed to firm deadline for room schedule, addition/subtraction

With the late fee factored in, their room rates effectively increased by 82%.

Other company contracts were renewed for higher rates, and new ones were won with competitive rates without completely sandbagging them in comparison to the competition. Being competitive with these RFPs for corporate rates can be tricky, but the hotel is coming out on the winning end more often than not now. New group business was also found as companies were looking to switch away from the other hotels in the city. If things go well in the coming season, the group business will only increase as word of mouth spreads with the operators.

The CRS

The company I went with was InnLink. There were four factors that helped push me in their direction:

1. The startup costs were miniscule in comparison to SynXis and TravelClick.
2. The layout of the booking engine was exceptional in my opinion compared to most hotel booking sites.
3. The backend was easy to navigate and offered a lot of flexibility to control what I needed to control.
4. It interfaced with the hotel’s PMS, which no additional fees to set it up.

The switch worked wonderfully, and the new CRS has been producing over 20% of the hotel’s revenues. The percentage is even higher in the off-season, which is when the hotel needs the bookings the most. The ADRs have been exceptional, as well. Even taken into account the bookings coming from Expedia and other OTAs, the ADRs are outperforming the hotel staff. If interested in learning more about InnLink, get in touch with the two lovely ladies I link to on the Resources Page.

Advertising & Social Media

Before I started, the hotel did no advertising in the previous year. They did some when the hotel first opened, but none in the following year as there was a change in management. The social media presence was minimal, as well, with only a very inactive Facebook page. I started the process of finding some favourable advertising locations, and developed the advertising myself (copy and artwork) and had some positive results. The main campaign targeted the outlying communities that traveled to the city to do shopping, medical appointments, etc. In the winter time, people tend to make extended trips to avoid traveling long distances in the cold temperatures. We ran the campaign towards the start of the off-season and saw locals stay 10-15% more than they did the previous year. We plan to run a similar campaign in the next off-season.

Other advertising has been placed in business magazines for the area and a directory of supplemental services to the mining industry. The latter advertisement was just published, but the advertisement stands out from the competition with its size and content. We plan on following up with the companies listed in the directory to do a direct mailing campaign, and will be attending more conferences related to mining activities in the near future.

Social media campaigns have fallen flat, due to the lack of activity in the region. To give you an idea, the main competition has 250 followers on Facebook, this hotel is a hundred under that. By comparison, the hotel near me in Kelowna has 600 followers, and it’s a small hotel. This is something I would like to improve upon, but it will be a slow moving process. I did redesign the Facebook page to a custom one which helps the hotel stand out from the competition. Engagement is starting to increase as we enter the summer season. I am interested to see how it fares throughout the rest of the summer.

2012 Projections

Based upon the value of the company contracts, this year is going to be excellent in terms of revenue and ADR growth. Even with the slip-up in April, the summer season is looking to increase by 10%. The company contracts bleed over into the off-season, which will help that revenue base. The off-season should increase by at least 10% itself, with the overall increase being between 12–16%.

Things to look forward to:

• New website with improved SEO
• Better yield management strategies with roomMaster 2000
• An effective advertising campaign through the year.
• Reliable, loyal, well-trained staff.
• Stronger social media presence.

Learn More

If you want more information on how I managed to get these results, please Contact Me.

Look at my Services page for more information on how we can work together.

Read my Hotel Consulting Notebook for more ideas.