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Hotel Profitability: A Holistic Approach to Sustainable Success

The Journey from RevPAR to NOI

"Tipping the Balance on Profit" has established itself as a holistic framework for optimising hotel profitability, encompassing strategic cost management, data-driven personalisation, environmental responsibility, and informed decision-making.

“We must remember that the conversion of the GOP largely depends on Revenue Management and Cost Management working together. Cost management involves many more players than revenue management to improve margins” Young Ngoc Nguyen

Minor Hotels Europe & Americas' ALONSO ESCRIVA DE ROMANI ARSUAGA "Effective cost management is the foundation of hotel profitability. Efficiency has always been part of our strategic plan and is one of the key initiatives we closely monitor." While revenue generation remains crucial, it is careful expense control that can truly drive net results. From labour and food costs to utilities and waste, each cost centre requires a highly focused approach.

According to Liselott Piper Bond from Pandox: "To achieve this, we have a complete picture in one place, in real-time and very transparent for the organisation. It is a very intense collaboration and a highly motivating process, not just for me, but also for the team members and general managers. All hotel team members have access to the current and valid data they need to perform their daily tasks without having to wait for any reports. They can engage with real figures and plans."

As the hotel industry continues to navigate the complexities of the post-pandemic landscape, hotel owners and operators face a critical challenge: shifting their focus from gross revenue growth to net operating income (NOI) profitability. The relentless pursuit of RevPAR (revenue per available room) has long been the North Star of the industry, but the time has come to redefine the path to sustainable success.

Last week, we celebrated online the second edition of the Asset Growth Summit by Open Revenue Consulting under the theme "Tipping the Balance on Profit." We had the presence of leading professionals in the sector to share the most advanced practices and strategies in the industry to increase profit margins:

Alonso Escriva de Romani Arsuaga , Chief Strategy Officer , Minor Hotels Europe & Americas, the unified portfolio of eight brands – Anantara Hotels, Resorts & Spas, Avani Hotels & Resorts, Elewana Collection, NH Hotels & Resorts, NH Collection Hotels & Resorts, nhow Hotels & Resorts, Oaks Hotels, Resorts & Suites, and Tivoli Hotels & Resorts.

Liselott Piper , Performance Manager at Pandox, an asset owner with one of the largest hotel portfolios in Europe, comprising over 157 hotels. Pandox develops and leases hotel properties to operators and is committed to the profitability of its assets, the well-being of its staff, and the planet.

We also featured technology and consulting firms that are trends setter in the hotel profitability space:

d2o the first hotel Profit Management technology platform originating from Norway, committed to hotel profitability and sustainability for over 20 years, with clients including Pandox, Radisson Hotel Group, Strawberry Hotel Group? and other international brands.

THE PLEDGE on Food Waste, the first global food waste management program awarded by the UN for its comprehensive reduction of carbon footprint and food costs, supports the goals of the 2030 Agenda to achieve a 50% reduction in landfill waste.?

Open Revenue Consulting , a hotel profitability consultancy focused on enhancing profit margins and asset value, represented by Cristina Blaj as the Founder and CEO.

Hotstats , the intelligent operational benchmarking platform, represented by its Director of Hotel Intelligence, Juan Gallardo , who provided insights into the regional performance landscape for the first two quarters of the year.?

Anna Alonso , Sales Engineer at Shiji Group , highlighted the role of enterprise technology for hotel chains and independent hotels in transforming guest experiences to maximise revenue and generate quality personalisation.

"Tipping the Balance on Profit" has established itself as a holistic framework for optimising hotel profitability, encompassing strategic cost management, data-driven personalization, environmental responsibility, and informed decision-making based on data.?

“We must remember that the conversion of the GOP largely depends on Revenue Management and Cost Management working together. Cost management involves many more players than revenue management to improve margins,” emphasised Cristina from Open Revenue Consulting.

By adopting this multifaceted approach, hoteliers can unlock new avenues for growth, enhance their competitive edge, and prepare their businesses for the future.

Mastering the Art of Cost Control

Effective cost management is the foundation of hotel profitability. As Alonso from Minor Hotels Europe & Americas pointed out: "Efficiency has always been part of our strategic plan and is one of the key initiatives we closely monitor." While revenue generation remains crucial, it is careful expense control that can truly drive net results. From labour and food costs to utilities and waste, each cost centre requires a highly focused approach.

According to Liselott from Pandox: "To achieve this, we have a complete picture in one place, in real-time and very transparent for the organisation. It is a very intense collaboration and a highly motivating process, not just for me, but also for the team members and general managers. All hotel team members have access to the current and valid data they need to perform their daily tasks without having to wait for any reports. They can engage with real figures and plans."

By implementing adaptive resource management techniques, hoteliers can align staff and other resources with daily demand forecasts, ensuring that the right people are in the right places at the right times. This not only improves operational efficiency but also reduces unnecessary labour costs. Similarly, real-time monitoring and optimization of utilities consumption can lead to significant savings while contributing to sustainability goals.

Integrating these cost-saving measures into daily operations is a key factor for hotel profitability. However, the true power of this approach lies in its ability to provide hoteliers with a comprehensive and real-time view of their hotel's performance, enabling data-driven decision-making and course correction as needed.

The Importance of LIVE Forecasting by Profit Center

To achieve this vision, we need to understand the daily demand of the business to plan accordingly. Thus, accurate daily profit centre forecasting becomes the engine of our operational planning.

Based on this daily forecast, we set productivity targets that dictate how we manage the main cost items: labour resources, food costs, and supplies to allocate the right resources.

"Having this systemic approach allows us to achieve greater operational excellence where we can set very clear goals and communicate them internally easily. Therefore, we have a very intense collaboration with the entire team; it is not just the general manager's task," argues Liselott from Pandox.

The Relationship Between Food Waste, Climate Change, and Food Costs

The UN has noted that if food waste were classified as a country, it would be the third-largest greenhouse gas emitter, behind the United States and China.

In a recent webinar with the President of AEDH, Manuel Vegas, we highlighted the case of Magic Costa Blanca in its efforts to combat food waste.?

Magic Costa Blanca initiated its commitment to combat food waste over a year ago at its first hotel, Magic Cristal Park. This establishment, which operates year-round, has 453 rooms and manages between 2,500 and over 4,000 covers daily in peak season.

During this time, they have implemented an effective program, THE PLEDGE on Food Waste, which has allowed them to reduce daily waste from 352 kg by more than 42% in the first four months. They have managed to decrease food waste per cover from 139 g to 97 g. This has resulted in an impressive saving of over 180,000 kg of CO2, equivalent to driving 1.5 million km. Additionally, they have avoided wasting 172,000 kg of food, generating economic savings of over 273,000 EUR from May last year to September this year.

Memorable milestone for Marriott Hotels UK, Ireland and the Nordics! In the first six months of the year, 53 managed Marriott hotels across the region?reduced food waste by an impressive 25% - the equivalent of 486 tonnes of CO2e was prevented.and have achieved The PLEDGE on Food Waste Certification in all the properties.

Sustainability: The Profitable Path to Environmental Management

In today's world, increasingly aware of climate change, sustainability is no longer just a buzzword but a crucial consideration for hotel owners and operators.?

But as Alonso from Minor Hotel Europe & Americas pointed out: "We need to be prepared and have well-measured data in our portfolio."

By implementing initiatives to reduce energy consumption, water use, and waste, hoteliers can not only decrease their environmental impact but also achieve significant cost savings. Investments in energy-efficient technologies and smart building management systems have paid off in terms of both carbon footprint and bottom-line results.

According to Liselott from Pandox: "Sustainability is not only an ethical commitment but also a smart strategy that can increase our long-term profitability. By integrating sustainability into our business model, we create added value that attracts an increasingly conscious and demanding audience."

This improved brand reputation has translated into increased bookings and loyalty, which in turn further strengthens profitability.

?"By using this systematic approach, I see we can create a much higher operational excellence where we can set goals very clearly, and also communicate them in an easy way. So the Heads of Departments can take part in this, communicate with their team and see that we really develop these numbers over time together. "

Data-Driven Strategic Decisions and Benchmarking

Leveraging robust data analytics tools is crucial for hoteliers seeking to optimise their profitability. By understanding their hotel's performance in relation to industry peers and historical trends, they can gain valuable insights to inform strategic decision-making.

Benchmarking allows hoteliers to set realistic goals, track progress, and identify areas of opportunity. Armed with these data-driven insights, they can make more informed decisions about resource allocation, pricing strategies, and operational improvements, all with the ultimate goal of enhancing their profit margins.

Juan Gallardo from Hotstats notes, "As long as we keep labor costs under control, we should be able to protect the margin."

Personalisation: The Key to Unlocking Loyalty and Maximizing Revenue per Guest

In today's guest experience-driven hotel landscape, guest expectations have evolved beyond simply providing a comfortable room and amenities. As Lisette from Pandox pointed out: "We have a very intense collaboration with the entire team; it's not just the general manager's task." Travellers seek personalised experiences that make them feel genuinely valued and understood.

"By leveraging technology to create a comprehensive and unique profile of each guest, hoteliers can anticipate their guests' needs and preferences, delivering tailored offers and experiences that drive loyalty and increase revenue," emphasises Anna from Shiji.

From remembering a guest's favourite room type to suggesting relevant upselling and cross-selling opportunities, this data-driven approach has been a powerful tool in the profitability toolkit.

Moreover, this level of personalisation positively impacts the hotel's online reputation, as guests feel heard and appreciated, leading to greater pricing power and a stronger market position. By seamlessly integrating guest feedback and proactively addressing issues, hoteliers can build lasting relationships with their customers, further enhancing profitability.

Unlocking Direct Conversion

In our previous sessions we talked about how important? a symbiotic relationship between Revenue and Marketing is to deliver incremental revenue and retain customers to avoid? unnecessary revenue and profit leakage and at the Independent Hotel Show London we centred on the opportunity to increase CONVERSION in the DIRECT channel.

Big thank you to the star of the show Kalpdrum (Kalp) R. Head of Digital Customer Acquisition at Strand Palace and The Lensbury Resort L+R for the insightful conversation on where #Ecommerce is headed and the critical role of the collaboration between Revenue & Marketing to #Unlock #Direct #Conversion !

We uncovered :

?? Key conversion challenges for independent hoteliers

?? How critical an attractive pricing strategy factoring in #Search Data not just OTB data synced up with the #Marketing Strategy in real time

?? The value of hashtag#Segmentation based on Demographics, Booking Patterns, Spending Habits to identify the low hanging fruits using a #Lead -time strategy

?? How important is Protecting the #Brand and

?? Promoting the #Direct channel benefits through Value add experiences, social proof and boosting periods in need

?? The major #KPIs beyond #Conversion and #Cost of Acquisition to Measure, Optimise and Track Performance

?? Little can be done without #Technology #AI and #Automation ! #RevMarketingAutomation by Userguest has been once more the GameChanger technology endorsed to fully unlock these benefits!

Cultivating a Culture of Agility and Adaptability

In the ever-changing hotel landscape, hoteliers must cultivate a mindset of agility and adaptability to maintain their competitive edge and profitability. As guest preferences and market dynamics evolve, the ability to quickly pivot strategies, operations, and even business models is paramount.

Hotel leaders play a crucial role in fostering this culture of agility, empowering their teams, aligning incentives, and instilling a sense of ownership and accountability across departments. By embracing a mindset of continuous improvement and innovation, hoteliers can capitalize on emerging opportunities, mitigate risks, and stay ahead of the curve.

“As hoteliers, we must embrace a more holistic approach to hotel performance management, one that prioritises profitability alongside revenue growth. By mastering cost control, leveraging technology for personalised guest experiences, incorporating sustainable practices, and utilising data-driven insights, we can unlock a new era of hotel success: one that ensures long-term viability and financial stability,” states Cristina from Open Revenue Consulting.

If you missed the event, you can watch it here .

If you enjoyed this article and want to know more, please contact Cristina Blaj , Founder and CEO of Open Revenue Consulting: [email protected]