The Economics of Hotels
Operating a hotel is not a passive business. Advanced planning must be completed by the hotel operators to anticipate the economics of hotels. Hotel owners need to react to trends and use their hotel in the most efficient way to maximize the profits of the hotel. Sometimes this might include additional forms of income other than room rentals, such as selling guest passes.
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Occupancy Rates
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Knowing the percentage of rooms that are occupied at any time of the year is important for hotel owners. Hotel owners can track this information over a number of years and determine trends. This will help them determine when to offer discounted rooms to increase the occupancy rate, as a room at a reduced rate obviously produces income, when an empty room does not. This also can help the hotel owner determine when to offer specials for large groups such as conventions and tourist groups. When occupancy is high they might not want to rent a large block of rooms at a discount, but when occupancy is low, it offers deals to those groups to increase occupancy.
Labor Cost
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Management needs to monitor the cost of labor in comparison to the money that the hotel is generating. During slower times of the year or month, they won't need as large a cleaning staff or front desk staff because of the reduction in the amount of work for those individuals. Reducing your expenses during slow periods of the year reduces the impact of the reduced business.
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Catering Facility and Convention Opportunities
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If a hotel has numerous meeting rooms that are not used on a regular basis, it should seek to use these to generate income. When customers staying at the hotel are not reserving the conference rooms, contact local businesses in the area and make them aware of the opportunity to use your conference rooms at a reduced rate. Having these companies use your conference rooms will expose them to your hotel and possibly encourage them to use your hotel when out of town clients or employees come into town for overnight stays.
Maintenance Costs
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Maintenance is a cost that should not be a last minute expense. Hotel operators should anticipate regular maintenance costs and budget them into their economics for the year. These can range from minor repairs such as repainting a wall, or major electrical repairs or roof repairs. Budgeting for these repairs and having a fund set aside for them will reduce the risk of an unexpected decline in net revenue for the hotel.
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References
- Photo Credit hotel image by pearlguy from Fotolia.com
