Being a hotel owner or manager, one of your main interests is to generate sufficient revenue to cover all the expenses and still make a profit. However, the chances are that you may see a decrease in revenue at one point in time. The reason for it may stay hidden from you, making you unable to act in time and prevent further losses.
It’s time to put on your detective hat and try to see what is causing your hotel revenue to go down. If you are less experienced, you might not know where to start. This is why we are here. Below are the most common factors that harm hotel and room revenue.
If you see a decline in your hotel’s top-line, it is worth checking whether it has to do anything with your hotel at all. Sometimes it could be something that impacts the entire hospitality industry on a global level. Yes, the first thing that comes to mind is the worldwide COVID pandemic. It impacted even the hotels with almost limitless budgets, let alone small businesses.
Take Accor, for instance. In 2020, the company reported a revenue decline of 60% and RevPAR down by 62% compared to 2019. You can learn a lot from observing the recovery strategies they used to cushion the blow of the COVID pandemic:
- Optimize revenue management to focus on getting whatever small piece of business
- Offer alternatives to cancellation such as rescheduling
- Keep communication channels open and offer detailed information and updates via website and social media profiles
Guests are Not Aware of Ancillaries and Upgrades you Offer
It’s hard to keep up with and manage all resources that can generate miscellaneous income for a hotel. A couple of these resources are ancillaries and room upgrades. You can see a decline in your hotel revenue if guests are not aware of the attractive room upgrades and ancillaries you offer. Over 40% of your potential guests book rooms online. Unfortunately, online resources are too scarce, and they can’t see what else you can offer.
This is not too big of a challenge to overcome. You can generate new revenue streams for your hotel through room upgrades and ancillary sales with the right kind of software. One of these solutions is UpStay.
UpStay helped over 1,000 hoteliers generate more revenue by converting up to 20% of their guests to buy ancillaries and upgrades. The best thing about it is that it works on autopilot and seamlessly integrates with property management systems, channel managers, and booking engines.
Poor Yield Management System
It is a subset of hotel revenue management for those of you who are not familiar with yield management. It is defined as selling the right room at the right rate and time to the right customer. Your revenue might be dwindling because you either have a poor yield management system, or you have none at all.
One of the most critical aspects of successful yield management is demand forecasting. You can easily do with the right hotel revenue management software such as Duetto. With RMS software, your revenue team will be able to do demand-based forecasting and leverage automation. You will optimize prices by distribution channel, room type, and segment to deliver profitable strategies.
Too Few Renovations
The hospitality industry is very competitive. Hotel owners and managers do a variety of things to cut through the noise and attract more guests. One of these things is renovation. Old sheets, carpet, wallpapers, furniture – it all adds to the experience your guests have while staying at your hotel. It can also be a cause for a decline in revenue.
You don’t need to invest tens of millions of dollars as El Cortez did in its renovation project. It is essential to keep your hotel clean and good-looking. It has to be more than just regular maintenance. You should ensure that both your hotel interior and exterior provide an exceptional and memorable experience to your guests.
Insufficient Property Management Efforts
Your hotel may be losing revenue because the quality of your services has fallen behind the competition. Too slow check-in and check-out process, poor guest information and data management, and basing business decisions on a hunch can all result in poor hotel performance and revenue going down. It calls for action. More specifically, you need to revisit your PMS software.
One of the most important things you can do is use one of the latest and best PMS tools on the market. These solutions have extended beyond minimal functionality. Today they provide support for all areas of hotel operations. You will automate daily tasks, make your hotel data available across multiple channels, personalize offers and guest experience, and get insight into actionable business data.
The last reason is climate change, and it appears to elude even the most experienced hotel managers and owners. The latest research shows that temperature fluctuations due to climate change lead to a decrease in the profit rate in hotels.
The records of more than 1,7000 hotels indicate that due to climate change, there were fewer guests because of the higher cost per occupied room. The pricing went up due to the substantial increase in water and electricity usage.
The solution to this problem is to adopt smart, green, and sustainable technologies. The hospitality industry can keep the electricity and water bills minimal only through the use of green tech and smart HVAC solutions.
Hotel revenue can go down for many reasons. However, it is most likely that the reason you are losing profit is on the list we’ve shared with you. It’s worth double-checking your findings to ensure you are implementing the right strategy to generate more revenue streams and improve the bottom line of your operations.
Graduated from Standford University, Arielle has over 5 years of experience in the Hospitality industry. She holds an MBA in business administration from the IDC Herzliya, Israel. She currently works as Account Manager at UpStay, building and maintaining strong, long-lasting customer relationships. She is deeply passionate about helping hoteliers unlock significant new revenue streams from unsold premium inventory.