Hotels rely on three metrics for operational and profitability planning:
- Average Daily Rate (ADR)
If rooms are too expensive, Occupancy will be low and RevPAR will suffer as a result. On the other end, if rooms are too cheap, Occupancy will be high, but ADR will be low and RevPAR, similarly, will be commensurately off.
To mitigate risks like economic downturns and location-specific challenges, many larger hotel chains take a portfolio approach to hit a ‘blended’ target. They have some high-end brands where they hold the line on price to maximize Average Daily Rate and suffer with lower occupancy. At the same time, they have value brands where they price aggressively to maximize Occupancy. Combined, they hit collective system-wide targets in a perfect world.
But hitting this perfect blend of supply and demand, and pricing correct is essential to maximizing unit-level profitability. One key lever in differentiating business performance is a loyalty “program”. The challenge, however, is that most hotel loyalty programs are not unique. They, by and large, go something like this: Stay x nights and the next night’s free; or you get some vouchers for meals, spa treatments, etc.
All well and good, but this no longer meets the needs of today’s guest who has so many data points and options at her fingertips, and whose expectations for customer service are at an all-time high. In the same way that all rooms are not equal and even the same room might go for a different rate depending on the circumstance, all customer experiences should not be the same either. With a thoughtful, well-orchestrated and data-backed personalization strategy, hotels can move from “four nights and the fifth night is free” eighty cents on the dollar paradigm to “these four nights were so special and well done that we can’t wait to pay for the fifth night-- at full rack rate!” goal.
Take Friction Out
You know who likes waiting in line? Nobody. Allow guests to “check in” to their rooms like they do flights. They then get a room “key” they store in their mobile wallet or hotel app. The hotel gets ample opportunity to prepare for their arrival.
In a recent HotelManagement.net article, Michael Cline, Salto Systems' VP of hospitality sales said, “The hotel industry is embracing mobile access to electronic locks for many reasons. Mobile applications that allow a guest to directly access a hotel room provide more convenience and result in improved guest satisfaction. In many cases, the guest can skip the check-in line at the hotel’s front desk and go directly to their room.”
Is there a material savings of time or effort that’s so material as to impact the big picture guest experience? Not really. But that’s not the point. The point is that it seems innovative and guest friendly. The benefit is that you get more advanced notice of each guest’s approach and time to marshall resources accordingly depending on each customer’s individual status and importance to your business. Did they have a bad experience during their last stay? If so, you have the data to ensure this stay is flawless. Did they express love and gratitude over a specific feature of their last stay? If so, replicate it or even surpass it now that you know where the bar’s been established. On a tangential but no less important note, you may also maintain a presence on that guest’s phone before, during, and after a stay. Carving out even a sliver of that prime real estate has an incalculable benefit to your business.
Put Perks In
The customer has checked in. If it’s a first stay, which you should have visibility into, consider a note from the manager welcoming them to what you hope is the first of many stays. If it’s a lapsed customer, a welcome back and a token of your appreciation-- maybe two nights credit for a one-night stay. If it’s a VIP, maybe it’s a bottle of wine or something similar. In addition to winning that visit, look to see if frequency and/or spend increases. If they don’t, try something different. Spa credit. Free breakfast. Tickets to local events. Free car service. The options are bountiful. See which works, append that “lever” to the customer’s profile, and see how far you can ride it.
In the end, rooms and their pricing and utilization are the balls and strikes of hotel management. They’re how you keep score; barometers of how well you utilize the potential of each room. But there are other metrics that count, too. Maybe it’s equally important to measure how you optimize the potential of each customer. Did she stay with you even when she had options? Did she bring family or stay on leisure visits? Did she avail herself of all the amenities? Did she recommend you to friends? Maybe there can be customer numbers you measure, manage and report on with the same discipline. Perhaps these ‘utilization rates’ are even better indicators of the health of your operations. At a minimum, they’re a leading indicator of how your rooms will perform.
Motivating customers to act is the only way to grow Occupancy, Average Daily Rate and RevPAR. They align the back of the house to what your front of the house staff does every single day--put the customer at the heart of your business. To harmonize total operations, you’ve got to track customer metrics and know where you started, where you’re trying to get to, and which tactics have moved you closer to the goal.
Succeed and you’ll be far more than on PAR with the competition.
Patrick leads Marketing efforts for SessionM. Prior to that, he ran marketing and strategy for two successful startups in the streaming audio industry. He also has client-side experience as CMO of a publicly traded retailer as well as multiple leadership positions with leading international advertising agencies. Patrick has contributed articles on disruption and innovation to Forbes, TechCrunch, and VentureBeat among others, and spoken at CES, NAB, and SxSW.