PROFITABILITY WILL GROW AS HOTELIERS OFFSET INCREASED COSTS WITH ADR INCREASES , OPERATIONAL EFFICIENCIES AND RETENTION TACTICS .
Contributed by SUSAN FURBAY , HVS
High staff turnover has always been one of the biggest management challenges faced by owners and operators in the hospitality industry . But now , as the nation is experiencing record levels of inflationary growth , rising wages and labor shortages , the hospitality industry is encountering extreme difficulty finding workers . So , how are hotel owners and operators managing rising labor costs and inflationary risk to drive their bottom line during these unprecedented times ?
INVESTMENT
DRIVING GOP
DURING INFLATIONARY GROWTH , RISING LABOR COSTS
AGGRESSIVE REVENUE MANAGEMENT Unlike other real estate classes , such as office and residential buildings , where profitability is tied to multiyear leases , hotels can reprice rooms daily , allowing inflationary risk to be passed to their customers . By adjusting room rates daily according to the projected labor expenses , hotel operators have more control over their profitability . Carefully reviewing the total revenue potential between group bookings early in the booking window and transient guests paying higher rates is another way to ensure higher revenue potential .
Unlike during past crises , such as the 2008 / 09 recession , the hospitality industry has successfully maintained its price point in general during the ongoing pandemic , rather than discounting deeply to create more volume . This trend has allowed average daily rate ( ADR ) levels , especially for select-service hotels in certain markets , to remain at or exceed 2019 levels . Hoteliers maintained strict pricing discipline with a firm belief that these unprecedented , extenuating circumstances will eventually pass .
Furthermore , strategic revenue management has forced operators to adjust distribution and marketing approaches to appeal to new traveler segments and re-price inventory without suitable historical data . This strategy has been well received , as more people are eager to spend savings on travel and are less price sensitive than they may have been in the past . To take