2023 Revenue, Profit and Sustainability insights from industry executives

As we wrap 2022 we review the opportunities and insights brought to us by high profile industry executives and innovators with a few highlights from the Hospitality Marketplace 2022, the second edition of live-streaming series created as an event platform to connect the latest innovation in the space with hoteliers looking for inspiration on best practices and technology to incorporate into their budget and strategy for 2023 and beyond.?

Dedicated innovation in Revenue Maximization, Distribution, Direct Bookings, Operations and?Sustainability, - how we can?integrate them into every layer of the business to gain efficiency, productivity and increase our profit margin while connecting with our guests at a deeper level.

Digital Transformation

When we talk about Digital Transformation we need to think of a wholistic??transformation??supported by 3 key Pillars:

• Technology adoption and the setting of clear objetives
• Processes audit and identifying changes needed
• People transformation, very often underestimated, it helps transform the corporate culture to reflect changes needed and the opportunity for growth?

Using these pillars enables organisations to create a plan and identify the right processes and strategies to get there

Macro economic outlook on hospitality

A lot of the focus in driving growth for the business has been residing mostly with revenue and commercial teams. However with escalating inflation and soaring business rates, profit margins top the agenda for many businesses.?

Healthy demand and rising ADR have been cushioning most of the profit erosion but there is considerable uncertainty as we look towards 2023.

There is a deeper layer of profitability that sits at asset level and directly impacts performance for the?business and the ability to scale and drive incremental revenue.

• To run an efficient and profitable Asset management – businesses need a clear view of each asset in real time – and this can only be achieved by?digitally?transforming the entire operational backbone.
• Hotels can immediately identify?Operational Pain points, Reduce unnecessary Costs while improving guests experience and property?sustainability and reputation (which we know is directly related to driving revenue)

WHAT DOES IT ALL COME DOWN TO??

You cannot improve what you cannot measure

Driving Revenue and Profitability - A Tech Innovation Model

Minor Hotels Europe and Americas manages and operates cca 400 hotels, which enables the chain to control the promise, the branding and the technology being used.?

Fernando Vives , CCO, nh Hotel Group: ''My opinion is that politicians do not change the world, they just need to make things easy for entrepreneurs,?who are the ones to bring the spirit of innovation to change the world. At nh we listen to the entrepreneurs and startups how we need to move forward into the future.''

Our model for identifying technology - ''We have an innovation circle where we invite different startups and entrepreneurs to pitch to?us about what they are doing. Hospitality Marketplace makes this innovation available to all the hotels. ''

Joe Pettigrew , CCO, Starwood Capital Group :

''What we care about most is predicting forward looking demand and have a system that allows revenue managers to put pricing and tactics together''.

Inflation and Pricing strategy

Christopher Cooper CCO, Christopher Cooper Consultants:

'' Although the energy rates have added considerable costs we don't pass these costs onto the customers, utility rates haven't necessarily impacted pricing, but the demand has helped us increase average rate. We are seeing very short lead for direct bookings especially for groups, meetings and events with a lot of the staycation demand making forecasting quite difficult. What is clear is that we need a much stronger direct bookings message.''

Fernando Vives , CCO, nh Hotel Group Performance:

''2022 has been an incredible year. Since April 2022 we've seen most of the pent-up demand coming back, and most of our KPIs are?improving from 2019 , with record figures and margins. In September and October more than 50% of the business has come from corporate?travel, M&E, cruise, FIT. In August and September the company has seen the highest share of international mix its history, with over 60% of the business driven by non domestic revenue. This has positively impacted the ADR and RevPar, international customers pay 30% higher ADR and RevPar than the domestic and between 30-50% higher revenue on all the other revenues.

Distribution?& Business mix?

Joe Pettigrew , CCO, Starwood Capital Group: ''We've been pleasantly surprised with? the level of travel demand we've all experienced, that's the general sweeping statement across the board, predominantly led by leisure travellers which has been a lot easier to recover, followed by groups and lastly by the traditional corporate travellers although a lot of the business travellers have been hiding in the leisure travel segment.'' ?

Fernando Vives , CCO, nh Hotel Group:

''We focus a lot on the segmentation, we never put all our eggs in the B2C segment basket. We understand that to continue with sustainable profitability in hotels it means having the best and healthiest segmentation with a?balance in terms of feeder markets, channels and accounts that are producing.

We changed our distribution strategy in the last 2 years, we betted on Distribution which has given us all the control and the capillarity we needed and this has been a big change we have done.?When we look at commercialisation it is not only B2C but also B2B , we started with a technology project and value proposition in 2017-2018 called nh Pro where we focus on the B2B side of our website for professionals - and more specifically on 3 targeted customer personas: the corporate traveller , the travel agent and the meeting planner''

Ancillaries

Understanding the whole guest and capturing spend data across all revenue streams whether for in-house and outside guests is critical in order to optimize the ancillary streams in an integrated and collaborative way with the room strategy.

Upselling and cross-selling are such a major part of a total revenue strategy and hotels are looking towards pre-stay and in-stay opportunities?to build up a portfolio of experiences. Integrating upselling into the room revenue strategy through segmentation and making it seamless and automated opens new avenues for total revenue?

Chris Crowley , CRO, Duetto

Fernando Vives , CCO, nh Hotel Group:

"30% of our revenue comes from ancillary/other revenue such as meeting space, room service, mini-bar, restaurants etc, a massive share in terms of our 2 billion EUR turnover. The average hotel has 2 POS (points of sales), eg a restaurant and a bar,?there are hotels with 3 or 4 POS?and when you look at resorts even 6 POS; we are currently at close to 800-1000 POS which makes us put a lot of focus and attention to F&B components. We look at not only pricing but also menu engineering, it helps us define our shifts and operations and not only the revenue component but profitability and cost optimization. We have been optimizing meeting space for years by?applying dynamic pricing for meeting rooms.''

Christopher Cooper , CCO Christopher Cooper Consultants:

''In luxury properties such as the Savoy London, ancillary services booked online could represent 30-35% of the business: such as booking breakfast, afternoon tea, gifts and purchasing items.?The ancillary services online market is growing with lots of new providers. The key in selling ancillary services is Automation.?''

Maximising total revenue?and wallet spend for each guest goes hand in hand with personalisation,?retention efforts and capturing guest feedback at every step of the way

Direct Bookings & Guest journey

?Hotels have started to look at the Direct channel as a relationship-building opportunity that can make it easier to earn repeat business as Consumers turn to direct channels to enjoy a more personalised booking experience and more flexibility. Hotels have taken the focus on direct marketing to convert the growing growing demand.

?Hotels realised that communicating the added value is important and are using contextualised geo-targeted campaigns in their direct channel to introduce incentives and direct bookings benefits anticipating what consumers are looking for and are aligned with the consumers booking intent becomes a key conversion strategy.

Hicham Benyebdri , Co-Founder, Userguest

Fernando Vives , CCO, nh Hotel Group:

''We’ve always had a healthy share of direct business which is more than 50% of what we sell, pushing for the branded website even though we are channel agnostic, we are present on whatever channel the consumer feels comfortable booking.?On B2C there are three ways you drive sales on your website, first is how you get the traffic to your website, second?ADR which is in the hands of the revenue management team,?and third is conversion.??We look at how we impact across the entire?customer journey (when consumers are searching, booking, checking in) and of course automation and technology is the crucial key to success. The customer can chose their room as they do on a plane, see different room types and supplements, we have communication during the process when they check in online. The approach is also how can we improve the customer experience and enjoy more, and continue to increase the margin,''

Joe Pettigrew , CCO, Starwood Capital Group:

"Direct bookings have increased post pandemic across the board, the biggest driver of this is international travel. The revenge travel has opened up great opportunities around ancillary services for guests to really treat themselves after the pandemic.

What we care about most is predicting forward looking demand and have a system that allows for revenue managers to put pricing and tactics together".

Lionel B. , Co-Founder, AGO Hotels :

"The focus for improving operational efficiency and guest experience is the guest journey, making sure it's digitised as much as possible, it's cost effective, simple and easy to navigate and can be done seamlessly from any device.?"

Changing KPIs?

Paul Harnedy FIH , Exec VP, Cedar Capital Partners :

Rooms are still the biggest driver of profitability in the hotel industry with REVPAR , ADR and Occupancy remain the big three to look at whenever reviewing a P&L schedule but more and more pertinent for the type of multi faceted business run by Cedar Capital Court is TREVPAR - with spa, golf, leisure and good quality F&B outlets - it’s important to understand the whole spend. The way ancillary is approached in the properties and TREVPAR,- absolutely head and shoulders above its competitor set. Technology plays a huge part across the board, more and more in terms of control of usage, energy and utilities, with RMS continuing to be the no.1 system.

Lionel B. , Co-Founder, Ago Hotels

''Historically as hoteliers we’ve always looked at ADR and RevpAR, which are good indicators to understand and manage performance, however as our model is a profit share model they become less relevant and the real focus is on the profitability of the asset. ''

''What we see today with inflation is a very heavy hit on the operational aspect of the P&L. Even though we may see growth back to 2019 on revenue, that is impacted by a higher cost. The KPIs we take focus on is to measure operational efficiency and that they deliver what's bankable ie. EBIDTA. What We are looking at is Profit per room sold and Profit per Square Meter. Most investors in the sector come from real estate, they buy and sell real estate and they don't do it on room basis but rather on a square meter basis. The focus is on profitability and efficiency that affects the bottom line.

Richard Metcalfe , CEO, Edgbaston Park Hotels:

"We've seen very strong results since covid, and what is critical for us is having the agility to be prepared to react in any circumstance. We are keeping a very close eye on indicators from a macro economic perspective that perhaps wouldn't have been on such a close radar?for us in the past, such as interest rates and how they affect mortgage rates, the impact that these have on the guests and team.?

Operational Priorities

Dimitris Manikis , EMEA President, Wyndham Hotels & Resorts :?:

The labour shortage is the most challenging for us, the human element and?to bring?people back is our number one priority.?

Peter Hales , MD, Mitchels & Taylor :

The biggest challenge this year is utilities, we're now breaking it down in each area to look at profitability by department, understanding the energy consumption at granular level and the top 10 items that use energy, installing timers and sensors etc

Neil Kirk , CCO, London & Regional Properties :

"At operational level our key priority is to address continuity of staffing levels to improve service.

A lot of the focus is also going into the direct channel, leveraging Google Hotel Ads and understanding what is driving consumers to the hotel website to grow the direct channel business".

Stephen Harron FIH , COO, RBH :

"We work on various forecast models, we have to be flexible and adapt to changes, our owners have been able to survive covid, now the pressure is that cost base is rising greatly, they've taken loans to help them through covid, and now they have interest rates coming up; Interest payment rates are growing massively, facing 200-300k increases in some cases which is very difficult, so at RBH we are modelling cashflows and different ways to manage payments, helping them squeeze every penny out of the asset.

Richard Metcalfe , CEO, Edgbaston Park Hotel & Conference Centre :

''We're looking for technology to understand how our guests feel, and technology that allows us to have a clear focus on priorities and directly supports and enhances the guest experience . We're making sustainability a real?fundamental part of the business and the changes needed at the core of the business and our industry.''

Sustainability?

Sustainability is evaluated using non-financial factors (ESG) at the environmental, social and governance levels, and these factors are increasingly being used by investors who are beginning to prioritise investments in sustainable assets and incorporate sustainability within their portfolios through equity strategies. They look at these factors to identify material risks and growth opportunities.

Hotels have to start incorporating environmental sustainability into their business culture as soon as possible in the next 3 years to meet the objectives of the 2030 Agenda for sustainable development

Taking advantage of basic sustainability indicators, measures must be taken

1. To improve resilience to climate change
2. To measure and reduce the use of energy, water and greenhouse gas emissions
3. As well as to identify and reduce waste

How far can hotels take their Sustainability Strategy and integrate it into their business model?

We learn from one of the most awarded Net Zero Carbon Strategy Road Map in UK delivered by?Robert Godwin?Managing Director of?Lamington Group

Dimitris Manikis , EMEA President Wyndham Hotels & Resorts :?

"Sustainability for us is all about education, we are trying to educate our franchise owners, why it is important and why they need to care more. Sustainability is a must,?we need to make sure we leave this world in a better place for our kids.''

Marcel Hendrickx Horeca Sustainability Solutions & Open Revenue Consulting

With Energy Costs more than double in less than a year, and Food waste being the third largest producer of CO2 worldwide with 1.6 tones per year (bigger than the airlines) , Circular Economy and Renewable Energy are the??answer to the hospitality energy crisis.

Affordable compact Technology?such as the Biodigestor is available for hotels?to produce their own GREEN electricity and GREEN biogas, free, recyclable, locally storable energy with industry wide ROIs in less than 18 months.

?On behalf of FunnelTV The Travel Tech Channel and Open Revenue Consulting Thank you all for your incredible support and contribution!

Happy New Year from all the crew Enzo Aita Federica Salvatori , Diego Fernández Pérez De Ponga , Jean Aita , Cristina Blaj & Open Revenue Consulting !

Watch all the Hospitality Marketplace episodes here: