HotelsMag June 2023 | Page 69

67 % to 65 %, but the overall effect on RevPAR was positive , growing from $ 210 to $ 220 .

monolithic , and they should change over time to reflect the dynamics of the industry . We all know that guest preferences and behaviors change over time : what they valued yesterday may not be what drives their booking decisions and loyalty today . This has been further exacerbated during and after the pandemic .

Costs should reflect these changes . Cost control is not a matter of blindly slashing budgets , but conscientiously analyzing data to find the optimal spending strategy that will deliver the greatest value both to guests and owners . There needs to be a reason behind every dollar that is spent , and the all too common “ this has always been in our budget ” explanation doesn ’ t cut it anymore .

To illustrate the value of looking beyond the rooms top line , let ’ s look at a hypothetical example :

The subject hotel is a 100-room property and its March 2023 results . Compared to the same month of the previous year , the subject hotel was able to increase its average daily rate from $ 313.40 to $ 338.50 . Occupancy , on the other hand , dropped from

These rooms top-line results only show part of the story . First , the subject hotel has revenue streams other than rooms that are not contemplated in the three metrics above . To fully understand the top-line performance , we need to ask what the total revenue per available room ( TRevPAR ) was in the two time periods . It could be that rate increased because the customer segments staying at the hotel changed from the previous year . For example , decreasing business guests ( who typically pay a lower rate ) and increasing leisure individuals ( who typically pay a higher rate ). This change in demand segments can have a meaningful impact on the hotel ’ s TRevPAR : Do leisure guests spend the same , more , or less on the ancillary departments than business guests ? If the difference is sufficiently material , the hotel could be in a position whereby RevPAR increases , but TRevPAR declines .

Second , ADR , occupancy percentage and RevPAR tell you nothing about the subject hotel ’ s expenses . Since the increase in RevPAR was driven by rate , one would think that , with other conditions remaining the same , the hotel has become more profitable . However , other conditions rarely remain the same in the hotel industry . For example , changes in the distribution strategy can create higher commissions costs that negatively impact flow through ; the implementation of a “ housekeeping on request ” strategy can decrease cleaning costs and help grow profitability if the hotel faces longer lengths of stay ; changes in sustainability initiatives can help drive utility costs down . Without further data , it is impossible to extrapolate the results experienced in RevPAR to consequences on profits .

The great thing about running a business in the 21st century is that there is more data to access . Not only are hoteliers able to track their own numbers , but they can also tap into benchmarking providers to help understand trends in the context of wider market data , while focused competitive sets can extract actionable insights every month .

Today , more than ever , hotel owners and managers need to remain flexible to deal with the fast-paced changes in the industry and quality data that shows both revenue and expenses is a fundamental input to make optimal decisions . Profit is not for the passive observers , but for the planners that have a thorough grasp on the numbers and the stories behind them .

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