The hospitality industry is slowly waking up from a slumber it was forced into due to the recent economic downturn. Thankfully, things are looking up now and hotels are not wasting time making up for the low occupancy they had to endure. Incidentally, there are number of things that hotels can do to increase sales. The trick is to use a multi-pronged approach.
Discussed here are some strategic ways through which hotels can increase their sales and profit margin:
Hotel owners and asset managers are frustrated.
They no longer want to hear about "branding initiatives" or fuzzy math from their management teams… they expect their sales and marketing leaders to contribute to revenue in a measurable way, communicate in number-speak and be accountable for tangible results.
So it's important to have complete fluency in the KPIs that affect the bottom line.
While the revenue recovery has been well documented, hotel owners, investors, and lenders are more interested in bottom-line performance. Based on PKF-HR'sTrends® in the Hotel Industry report, net operating income (NOI) for U.S. hotels has increased at a compound average growth rate (CAGR) of 10.7 percent from 2009 through 2013
To better understand hotel managers' ability to maximize profits during this period of increased revenues, PKF-HR studied the financial performance of thousands of hotels that voluntarily participated in its annual Trends® survey. For this analysis, NOI is defined as income before deductions for capital reserve, rent, interest, income taxes, depreciation, and amortization.
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Revenue Managers and Marketing Directors understandably are keenly focused on the top-line impacts of revenue decisions - including pricing. Owners and most General Managers are more attentive to figures further down the P&L statement including Gross Operating Profit (GOP) and Net Operating Income (NOI), since performance at this level is most often directly tied to the value of their hospitality asset.
Fortunately, a simple pricing formula has been created that will help clarify the risks associated with a given pricing decision on GOP - before that pricing decision is implemented. While tolerance for risk varies from one individual to the next and from one corporate culture to the next, at least all parties involved may now have a common starting point from which smart pricing decisions can be made.