Revenue Gains Aren’t Adding up to Higher Profits for Some Hotels: Here’s Why
Last month, we published a blog article about hoteliers starting to focus more on profit metrics than topline revenue metrics. That focus is proving to be critical as expenses, such as labor and benefits, continue to grow. In fact, according to CBRE Hotels Americas’ Trends in the Hotel Industry report, 2018 marked the first year since 2009 that expense growth exceeded revenue growth.
While all hoteliers keep a close eye on operating expenses, certain expenses are harder to manage. For example, labor expenses saw an increase of 3.1 percent for U.S. hotels last year. Total labor costs comprised 50 percent of operating expenses through GOP with costs for employee-related benefits growing 3.2 percent.
According to CBRE, 59.2 percent of the properties in the survey sample saw revenue gains, but only 54.3 percent experienced GOP growth. As a result, hotel gross operating profits slowed to 2.3 percent in 2018. Why is this slowdown significant? Hotels that want GOP growth next year have two choices: they can continue to cut costs (although many feel squeezed already) or they can find ways to increase profits.
When it comes to increasing profits, hoteliers have more control than they often realize. While room rates can be tricky to raise due to local competition, there is a lot of profit in amenities and upsells and it’s easy to automate the sales process to ensure that all your guests have the opportunity to enhance their stay and drive profits in doing so.
As we mentioned in our Email Marketing Strategy Guide, pre-arrival emails, sent shortly before the guest’s stay, are the shining star in the automated email category and the best way to drive incremental revenue. They get a global average open rate of 61.9% and a 21.3% CTR. To prove that guests are intrigued by the prospect of enhancing their stay, the highest open rates for pre-arrival emails occur when ‘room upgrade’ is mentioned in the subject line. Upsell offers work. Revinate Marketing customers generate an average of $2500 a month in upsells alone.
What are some good upsell offers that guests are sure to love? Of all the upsell offers we studied, the breakfast discount is the most popular and well-received, driving the majority of upsell revenue for Revinate Marketing clients. The second most popular offer is advanced parking purchase. Other lucrative offers include early check-in and late check-out offers and transportation to and from the airport. But you know your hotel and your clientele the best. Create relative offers, automate the process and focus on your existing guests and the profits will follow.
If you need help getting started or want more information about driving revenue through email marketing, let us know. We’re here for you.