By Karen Codilla, CRME, CHDM, Corporate Director of Revenue and Distribution, Outrigger Hospitality Group, and member of HSMAI’s Revenue Optimization Advisory Board
Capacity constraints due to physical spacing requirements and staffing shortages, combined with a new kind of traveler have created a new perfect storm – how to balance revenue optimization with reduced service levels and long-term reputation management. Members of HSMAI’s Revenue Optimization Advisory Board (ROAB) discussed their ideas for maximizing revenue while still maintaining a quality level of service on a recent call. Here are key takeaways from our discussion:
PRICING STRATEGIES FOR LIMITED SERVICES
During the pandemic, many hotels have been forced to cut services such as breakfast buffets and limit the amount of pool loungers. ROAB members discussed the feasibility of offering discounted rates for similarly limited services in the future. “I’m curious if you could develop, like airlines have, a different level of service in the same hotel,” one member asked. “Either you could choose full-service or you could have the same room with limited service, like housekeeping every three days, for a cheaper price.”
Many hotels have cut back on housekeeping over the past year to reduce contact with guests. One ROAB member said that they have already been advertising a discount for limited housekeeping services. “People will need to kind of wrap their head around the idea of getting a discount for something that was pretty much enforced throughout 2020,” the member said. “We’ve tried it, and the first test wasn’t so successful, but we’re going to do it again with a slightly different angle. But I think this is an awesome opportunity for us.”
Another member noted that some hotels continued to maintain limited housekeeping for all guests and offer daily full service for an additional charge. But another member said that they didn’t think it was a good idea to reduce any core services at any point. “Your class is a certain brand of hotel and a certain service level, and that’s the reputation of the brand that the ownership has bought into and charged you with managing,” the member said. “So, to offer something lesser for a discount or to offer something more for price, I worry about the long-term repercussions on the perception of the brand or perception of the hotel and their ability to drive rate.”
One member noted that it’s key to work closely with operations to understand not only how many rooms there are available to sell for a certain date, but also the specific rooms, to understand the available room types and maximize pricing on the available premium categories. Another member suggested to optimize length-of-stay pricing in addition to room types.
“Housekeeping labor has been the primary constraint,” one ROAB member said. “But I think it’s helped drive length-of-stay strategies by looking at how many arrivals we can handle per week and then adjusting pricing accordingly to give advantage pricing for longer stays.”
Revenue optimization professionals are working with fluctuating inventory each day due to these limitations. Many hotels could sell more rooms and offer more services if that were able to fill their open positions, but they have had difficulties hiring for positions such as housekeeping, impacting how many rooms they could service and sell. One member said that she has seen hiring bonuses balloon up to $600 for entry-level positions. “It just goes to show how desperate we are to find good talent that will stay,” she said.
Other hotels are removing caps on overtime in order to keep hotels fully staffed. “It makes financial sense right now,” a member said. “The hotels don’t have to stress about scrutinizing overtime, and staff is appreciative after going through their own income challenges last year.”
Another member suggested that hotels apply content optimization best practices and revamp job descriptions to better attract the targeted audience. “We took a look and found that people aren’t searching for housekeeper in a job title right now,” the member said. “So, you have to look at what they are searching for and target your description to that.”
MAXIMIZING OPPORTUNITY WITH REDUCED SERVICES
Because business travel has been so reduced, leisure travelers are the primary guests at many hotels, even if they weren’t pre-pandemic, creating new complications for hotels that had a heavier group and business mix pre-pandemic.
“It’s not the business traveler who is in the room alone and gone all day and sleeping only, it’s a family of four who needs seven towels, so not only do we have fewer housekeepers, but the demand on our services and amenities has increased,” one ROAB member said. “We want to capture the demand, but how do we do that and meet the customer expectation?”
Another member noted they have a self-imposed occupancy cap and choose not to sell more rooms in order to preserve their strong review scores and service levels, prioritizing long term reputation scores over short term revenues.
One member said that when pool reservations filled up at their hotels, they had success offering a discounted rate for guests who were willing to book a room knowing they will have no pool access. “We were really upfront about it,” the member said. “We just put it in the rate description, so they knew.”
The pandemic also has led to guests staying in hotels for meals more often instead of going out to restaurants and bars, which puts a further strain on hotel resources. “It’s been a challenge with limited resources and restaurants to manage the expectation that they have when they’re not going out as much,” one member said. “Breakfast through room service has been an absolute nightmare, especially on Easter and Mother’s Day, when everyone wanted breakfast in their room. The biggest complaints we’ve gotten have been on room service. We have to do something so that people don’t have the expectation that they’re going to get a nice breakfast in bed, when in reality they’re going to be waiting four hours for their eggs.”
When hotels do have limited services and/or limited rooms, it’s crucial that they communicate this not only to potential guests but also with their marketing teams to maximize ROAS.
“When we’re talking about limited inventory, and you don’t inform your marketers, you’re put in a double-loss situation, as they’re spending money on campaigns and selling inventory you don’t have available,” one member said. “So, you take the hit on that marketing spend, you take the hit and loss of revenue, and the lack of communication can certainly make the P&L suffer.”
- Understand that ownership’s priority is to maintain reputation scores and long-term quality ADR or to sacrifice on services short term and test new revenue optimization strategies.
- Work closely with operations to understand the amount and type of rooms available each day to optimize revenues at the room category level of detail.
- Communicate transparently with guests and marketers on any service changes. Set expectations of the guest to avoid future challenges with guest reviews and paid media strategy.