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How to Own A Hotel – 12 Tips for Explosive Success
February 11, 2019
Many investors who become hotel owners delegate day-to-day management tasks to a general manager. Instead, the owner directs operational, financial and marketing strategy, perhaps developing a new brand name or controlling a group of franchises. In this article, we’ll discuss how to become a hotel owner and succeed. Owning a hotel or owning a hotel franchise requires expert marketing and revenue management to attain success.
How to Own a Hotel
To help achieve success, consider the following points regarding how to own a hotel:
Point 1: Concentrate on Value
By owning a hotel, you’ve learned that many customers are price-sensitive. Not only must you offer good value to these customers, you must help them perceive that value. You can help achieve this by offering:
- Superior customer service
- Free parking
- Free breakfasts that offer healthy alternatives
- Attractive packaging of food and beverages for sale
- Pet-friendly policies
- Free newspapers
- Weekend discount packages
These and other extras will help you distinguish your hotel from its competitors. Earning positive responses from customers can help you with word-of-mouth and social marketing. You’re also more likely to book repeat stays from satisfied customers.
If you purchase an independent hotel, you don’t enjoy the marketing power of a franchisor. Therefore, you need to understand the different marketing channels available to you. These include broadcast and cable ads, email campaigns, high-ranked website, social media, newsprint and others. In other words, you should research the effectiveness of each marketing channel in terms of cost and delivery. Also consider how to leverage technology and integrate your advertising with your property management system.
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Point 2: Understand Your Marketing Channels
If necessary, you might have to upgrade or replace an antiquated reservation system to handle more direct bookings.
Point 3: Encourage Direct Booking
A critical success factor is to encourage customers to book their stays directly with your property. Relying on a hotel comparison sites is dicey, because it’s likely that potential customers will choose different properties. It’s also costly, as you must pay a fee for every booking delivered. A direct reservation system helps encourage customer loyalty. You can strengthen that loyalty with incentives to use direct booking, including:
- Price reductions
- Discounts on beverages and food
- Discounts on future stays
- Free upgrades
- Lower rates for longer stays
- Loyalty points
Point 4: Prevent Complacency
It’s all too easy to accept good as good enough. As someone facing the challenge of how to own a hotel, you will benefit from setting a non-complacent tone. That is, you should encourage a culture that emphasizes improvements in revenue management. You can reward employees who suggest good ways to save money or increase revenue. This will boost awareness throughout your organization of your intent to fatten the bottom line. Don’t minimize the importance of small efficiency improvements. They accumulate over time to the benefit of your income statement. This is how to own a hotel profitably.
Point 5: Reorganize Your Data
Data is crucial to the success of any enterprise, and should be key to your revenue management efforts. As the hotel owner, you should separate pertinent data from extraneous information that offers little value. It’s critical to distinguish important data from noise to make correct business decisions. A modern management information system with cloud storage and decision support helps you retrieve, process and interpret data. With it, you can set up dashboards of important information and support ad hoc queries without programming. You’ll gain insights that will help you sharpen your revenue management decisions.
Point 6: Monitor the Latest Consumer Trends
Consumer behavior is forever evolving. If you want to know how to own a hotel that remains relevant, you must stay up to date with the latest trends. You might do this, for instance, by reviewing all the different channels customers use to book rooms. A change in consumer behavior, such as a rise in weekend last-minute bookings, can tip you off to important trends. Also, monitor social media for all mentions of your hotel and see what guests are saying. You should respond to all comments and address specific complaints head on. This will help you follow the latest trends.
Point 7: Automate, but Don’t Overdo It
Automation is great where appropriate – for data collection and reporting. But your systems should not be so rigid that humans have trouble operating it. Specifically, you want to be able to override default procedures to accommodate special requests. For instance, you might offer a bereavement discount for someone attending a funeral, even if that isn’t in your systems. Your staff will find itself constantly confronting complex decisions that require flexibility and a human touch. Support them with revenue management systems that allow them to inject human capital into any situation.
Point 8: Update Your Interfaces
To put it bluntly, many websites and smartphone apps suffer from obsolescence. This is very bad for two reasons. First, it turns off tech-savvy travelers. Second, it sets an expectation that your hotel is old fashioned, and not in a good way. Whether they use a phone, PC, laptop or tablet, customers look for a modern interface that utilizes the latest concepts in ease of use and security. For example, never make a prospective customer enter the same data twice. Provide for optional two-step verification before allowing access and updates to a customer’s account information. Your website should use SEO to enhance your Google search results and support your social media accounts. Your phone app should have the look and feel of software specifically written for a phone. Review your design every six months to ensure it remains fresh and timely.
Point 9: Use KPI Data to Assess ROI
Key performance indicators (KPIs) are measurable values that can help you determine your return on investment. Using KPIs, you can see whether the investments you make are paying off. For example, one KPI might be average weekday vacancy rate. If the rate is too high, you might need to invest in boosting it. You can do this by offering special mid-week rates, free upgrades, discounts at local restaurants, and so forth. Compare the cost of these actions against the potential revenue gain to assess ROI impact. In some cases, the cost of improvements might outweigh their benefit. You need KPI data to suss out the costs and benefits of your revenue management decisions.
Point 10: Map Customer Demand
Part of revenue management is accurately predicting demand. This allows you to optimize rates for regular days and holidays. Mapping is a process in which you track where your demand arises. For example, you might map customer demographics – gender, age, place of origin, etc. You can also map more complex information, such as how much customers spend per age group, what kind of reservations do long-distance and local customers make, and so forth. With this information, you can modify your sales and marketing initiatives to maximize your revenues.
Point 11: Don’t Skimp on Physical Security
The price of security systems has fallen dramatically in recent years. Given the modest outlay, there is no excuse for lax security measures. You want to flood your physical property with cameras that feed an automated recording system. This will not only help protect your customers, it might protect you from undesirable employees. Install and frequently check your alarm systems, and use keycards rather than physical keys wherever possible. A sophisticated security system can protect you from theft, vandalism and other problems that can quickly cost more than the system itself.
Point 12: Consider Refinancing Your Hotel
If you have the ambition to create your own hotel empire, you don’t want high interest rate loans or large equity deposits. Assets America® can show you the best way to reduce your debt service and/or equity contributions through an intelligent refinancing strategy. For example, we can arrange a mezzanine loan to lower or eliminate your equity capital commitment. You can use your freed cash to help acquire another hotel. Speak to us today about the best ways to grow your company through smart hotel financing.
Summary
With these 12 points in mind, you can conduct a comprehensive review of your hotel operations, marketing, staffing and finance. Armed with review results, you’ll have a much better idea of how to own a hotel and achieve explosive success. For more information on how to become a hotel owner or owning a hotel franchise, read our Ultimate Success Guide to Buying a Hotel Franchise.