of various services and eliminating nonessential ones . Evaluating non-hourly associates and management positions for effectiveness can yield substantial GOP gains . Consider average hourly wages in some U . S . cities approaching $ 20 per hour : Each associate costs $ 40,000 , just in wages , to the bottom line .
➁ GUEST AMENITIES : COVID has receded and amenity creep is making a comeback . Though brands often dictate amenities offered in guestrooms , asset managers can seek brand guidance for available amenity options and evaluate if a more optimal size / brand is available . Asset managers should review all amenities that are offered and determine if an item makes a difference to the guest experience . Try eliminating an item , such as lotion or an extra set of towels . Test what works and review results ; ensure the hotel participates in towel re-use , linen changing and other green programs . Most guests will participate and the savings can add up quickly .
➂ SERVICE CONTRACTS : Eliminate automatic renewal clauses . Hotels typically use outside vendors to provide services like laundry , elevator repair and cable TV . Many of these contracts are renewed automatically without re-bidding or seeking a reduction in the fee . All contracts should be reviewed and rebid annually . Insist upon a blind or sealed bid process and a minimum of three vendors invited to bid . Finally , review bids obtained by the management company and exercise approvals rights outlined in the hotel management agreement .
➃ MAXIMIZING F & B PROFIT : Food and beverage operations offer numerous opportunities to enhance GOP . Initiating a menu audit and regularly comparing prices to competitors can help identify areas for price adjustments . A small increase in prices for entrées or beverages can yield significant profit gains . Periodically reviewing food purchases to ensure the best prices are obtained is essential . Leveraging buying co-ops or brand purchasing platforms can assist in securing favorable prices , but careful evaluation is necessary , as brand platforms may not always offer the best prices . Semi-annual performance reviews of purchasing programs should be conducted .
➄ CONTROLLING DISTRIBUTION COSTS : Growing distribution expenses can erode hotel profitability . Asset managers should urge brands to leverage their negotiating power with online travel agencies ( OTAs ) to lower commission structures further . Exploring strategies to drive direct bookings and reduce reliance on OTA commissions is crucial . Regularly reviewing distribution costs and annually assessing commission margins with brands can identify potential savings .
➅ OPTIMIZING MARKETING EXPENSES : Hotels typically allocate a significant portion of total revenue to sales and marketing expenses . Asset managers should review any additional marketing program fees beyond distribution , labor and national fees to assess their return on investment . Marketing programs evolve rapidly , and it is important to ensure ongoing success . Programs that were once effective may no longer yield desired results . Regular evaluation of marketing initiatives will help allocate resources more effectively .
➆ EFFECTIVE PROPERTY OPERATIONS & MAINTENANCE : Asset managers can collaborate with operators to implement energy-saving measures , such as re-lamping buildings with energy-efficient lighting like compact fluorescent lights ( CFLs ) or low-emitting diodes ( LEDs ). Although the initial investment may be substantial , long-term savings are significant . Operators should explore potential rebates and incentives for reduced electrical consumption from local and state utility companies . Reviewing and optimizing the property ' s preventive maintenance program ensures equipment operates at peak efficiency , reducing unnecessary expenses caused by malfunctioning machinery or wasteful resource consumption . Finally , monthly data on maintenance performed should be provided by the operator .
These strategies provide a starting point for asset managers to maximize GOP and achieve superior financial performance for hotels . They aren ’ t exhaustive and continued exploration of cost-saving opportunities and revenue enhancement is essential .
The hotel industry is a unique blend of real estate investment and complex operational management . Asset managers who prioritize diligent oversight and consider hiring in-house experts or engaging external firms to assist in these endeavors can make the crucial difference between good and exceptional results . By embracing proactive measures and fostering collaborative relationships with operators and brands , asset managers can navigate economic challenges and position their hotels for sustained success .
John Paulsen , senior vice president at hotelAVE
Jul / Aug 2023 hotelsmag . com 53