How to Become a Better Hotel Operator in 2024

For longtime readers of the Hospitality Data Insider newsletter, I think you’ll agree this is one of the best issues yet. Below, we explore critical topics that will make you a better hotel operator, from the role of commercial leaders in your budgeting process to automation strategies that will help everyone on your team be more productive.

Don’t overlook the section on profitability trends; there’s some great data that will help you better understand how your flowthrough stacks up against industry averages, particularly in the F&B department.

How Commercial Strategy Fits into the Budgeting Process

In the transformative period of budget planning, hoteliers should adopt dynamic forecasting for a fluid and adaptive approach to static budgets, according to an article in Hospitality Net by Amy Infante-Still , Founder & CEO at GitGo (full article).?

The article emphasizes a holistic perspective, highlighting the importance of understanding where profits originate to adapt strategies accordingly. A key best practice is investing in technology for data-driven decision-making, treating centralized platforms as essential coworkers to support every decision with comprehensive data. The article also underscores the significance of commercial alignment, agile budgeting, and the synergy between sales and marketing teams.?

Similarly, in an article on the Otelier blog, Jason Freed highlights a key trend shaping hotel commercial strategy: The increasing reliance on data-driven decision-making (full article). Hotels are leveraging big data and analytics to gain insights into guest preferences, booking patterns, and market trends, optimizing pricing strategies, personalizing marketing efforts, and enhancing the overall guest experience.?

The adoption of AI, the implementation of better metrics for measuring performance, the adoption of revenue management strategies in other departments, and the strengthening of the luxury segment through data are identified as significant trends that shaped hotel commercial strategy in 2023.

More on the Importance of Automation and AI in 2024

Hotels are increasingly turning to Artificial Intelligence to deliver unique and personalized guest experiences, according to an article by 仲量联行 (full article). The author emphasizes the role of AI in building comprehensive guest profiles to enhance guest satisfaction and loyalty. Ross Beardsell, JLL's hotel asset management expert, highlights the potential of AI in understanding guest preferences, such as fitness routines, dining preferences, and technology requirements, to optimize hotel offerings and increase yield.

JLL explores the role of AI and generative AI as game-changers for the industry, citing their 2023 Global Real Estate Technology Survey that indicates increased technology budgets across the real estate sector.

Similarly, MDO's Freed wrote in HOTEL MANAGEMENT Magazine that automation will cement itself as a change agent in hotel operations in 2024 (full article). Freed suggests hoteliers think about their daily routines and all the ways technology is making them more efficient today – and then think about what tasks they perform everyday that could be automated to increase productivity.?

Technology is reshaping various aspects of hotel operations, Freed says, with key areas including housekeeping and maintenance through the use of smart devices and sensors, digital night audits for streamlined reporting, and data analytics for informed decision-making.

How Automation Can Work for You

Are you signed up for MDO's upcoming webinar, titled "Simple Steps to Digital Adoption & Automation in Hotel Operations," on November 9? Experts from MDO & MCR Hotels will be discussing simple steps to streamline your hotel back office. We'll discuss how to: automate processes, drive savings, improve sustainability, and provide security & compliance. Register today!

Are You Experiencing Profit Shrinkage?

The latest U.S. hotel industry profit-and-loss data from STR reveals the impact of normalizing demand and declining occupancy on profitability (full article). The data for October highlights the fact that U.S. hotel demand has decreased for the third consecutive month, affecting total revenue growth, which has lingered at 4% or below over the past five months compared to the previous year. Profit margins, which were strong during the pandemic due to lower operating expenses, are now shrinking as demand and occupancy levels decrease, reaching their lowest levels since January.

Hoteliers are battling to control the rise in expenses, with average operating costs per available room $6 higher than in 2019, with 53% of that increase coming from labor. Labor costs are still rising but at a slower pace, mirroring the slower growth in demand for U.S. hotels. Labor costs per available room through year-to-date August are only $1.15 higher than the same period in 2019.?

Similarly, an article by Robert Mandelbaum and Ed Stacy of CBRE Hotels published in Hotel-Online (full article) explores the impact of changes in hotel food and beverage (F&B) offerings on financial performance. The? two cite a CBRE study, based on the analysis of operating statements from 2,500 U.S. hotels, which reveals a 50.2% increase in F&B revenues per occupied room from 2021 to 2022. However, in 2023, F&B revenue growth slowed to 11.3%, particularly affecting luxury hotels.

The article also delves into expense trends, noting an 82.3% increase in total F&B department expenses in 2022, primarily driven by a significant rise (85.9%) in labor costs due to increased wage rates. Despite the expense surge, F&B department profits saw a healthy 145.2% increase in 2022, attributed to revenue increases and enhanced operating efficiencies, with profit margins rising from 21.3% to 25.8%. However, in 2023, profit gains decelerated to 14.2%, with luxury and resort hotels experiencing minimal growth.?

Learn how MDO can centralize data across your hospitality enterprise to help you run a smarter business. Request a demo.