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Hotels: Are You Managing Revenue or Profitability?

Rising operating costs, continued changes in demand, and escalating distribution fees mean that hotel operators are looking even closer at their bottom line than ever before. Revenue management is becoming more about profitability than room rates.

Duetto, the hospitality industry’s #1 Revenue Management Software (RMS), has released its latest Special Report, entitled ‘How to Boost Your Hotel’s Total Profitability,’ in which it has compiled best practices and case studies from hoteliers, revenue consultants, technology providers, and Duetto revenue drivers, to provide a comprehensive guide to total profitability for hotels. Download for FREE here:

The report explains why profitability matters now more than ever, how hotels can measure and manage all their revenue streams, and how creating loyal guests is the key to increasing on-property spend.

“Hotel professionals have been historically hyper-focused on revenue. However, to achieve maximum profitability, they need to dive into more precise data. Revenue only tells you part of the story. It describes how much money is coming into a property, but it ignores operational efficiency and how much money a hotel is spending to run the entire operation,” explains Sabrina Jackson, Senior Director of Product Management, Duetto.

“When analyzing hotel performance, Revenue Managers should think of themselves as Profit Managers. They are in a unique position to directly impact and attract high-value, loyal customers and focus on net cash generated and return on investment (ROI). If they can achieve higher profitability and growth, revenue teams will solidify themselves as the most valuable department within a hotel’s operations. To do this they must implement a dynamic revenue strategy,” she adds.

Total profitability means different things to different property types. For resorts, it might be value-adds such as upgrades, creative packages, or promoting food and beverage spend; for business hotels it could include understanding the potential revenue displacement of accepting a large group or event.

Total profitability is about understanding all of your property’s multiple revenue streams, channels, and costs and creating a strategy that makes them work together to maximize your top and bottom-line performance.

However, despite the many different types of hotel properties out there, there are three basic considerations to a total profitability strategy:

  1. Clarity and data to understand the spend and stay patterns of guests
  2. Channels through which guests book
  3. Costs of acquiring guests through various channels and providing ancillary services

Guest Spend

To measure customer value, hotels need clarity and understanding of the spend associated with each guest or segment and to apply a relative weighting to that spend. Spend can include food and beverage, spa, parking…

The challenge in measuring holistic guest spend is that this spend data could be sitting in your PMS, loyalty program database, or in your CRM. Here is where having an integrated technology stack comes into play. By being able to access this data, understand it and act on it in your RMS, you can better drive revenue.

Channel Management

Profitability is about understanding your top-line revenue streams and the bottom-line profit they feed back into your property. It’s a simple equation of revenue – costs = profit.

Understanding and managing the cost of delivery on any of your revenue generators is vital. For rooms, this is often a case of channel management. Commission structures vary from online travel agents (OTAs) to global distribution systems (GDSs) or your own channel website or call center.

Costs can be flat fees, a cost per booking or a commission structure. Either way, they erode profitability and need to be tracked and managed.

Knowing your acquisition costs will enable you to understand which channels are most profitable.

Guest Behavior

It’s essential to understand the behavioral inclination of the guest to ascertain what it is that you need to put together, whether as a package or promotion, to drive revenue for the hotel.

If you know what will appeal to the guest, and what channel they prefer, you can provide personalized offers that convert and are profitable to your business.

Learn how Duetto helps hotels and casino resorts drive profitability through member rates, flexible segmentation, and room-type pricing. And discover how Mexico’s Grupo Posadas, and Europe’s Van der Valk Hotels are getting started on their total profitability journey. Download How to Boost Your Hotel’s Total Profitability now.