9/7/2023 0 Comments Cashflow ideasThe answer to which approach is best for a property relates to whether your hotel needs to maintain a short-term cash flow, in which case a partial or staggered renovation is probably the best choice. It is vital, therefore, that pricing should reflect how guests currently perceive their property, how this compares to their competitor set, how a partial shutdown (and subsequent building works) will impact a guest’s stay and what is the desired reputation for the hotel after the property is reopened. A hotel’s online reputation will be impacted both during renovations (think complaints from guests about noise or availability of rooms) and post renovations (guests may or may not like the new rooms or could potentially stage a reputation revolt if they get an unrenovated room). However, major hotel building works should be undertaken when a property needs to be upgraded in order to maintain its revenues and defend its fair market share.įor hotels evaluating major upgrades through this period of lower demand, two approaches must be considered: whether to partially shutdown the property, staggering building works and trade-through, or to undertake a full closure. Refreshing a hotel is costly and can result in a whole or partial closure of the business. There is never an easy time to renovate a hotel. When hotels begin to effectively target their most valuable customers, the additional revenues generated will translate into greater cash flow for the business. To assess who may be your most valuable guest, incorporating data from all transaction systems will provide a holistic picture of guest behavior and their overall value, inclusive of ancillary spending.īy understanding where customers are likely to spend their money, hoteliers can make informed and data-driven decisions about which guests should receive a last available room or be offered discounted restaurant or spa promotions that will help drive demand. The right business may just end up being the highest paying, but it also might include additional considerations like length of stay, long-term loyalty, ancillary spend and likelihood to return. To help identify the right business mix for a property, hoteliers should utilise an accurate unconstrained demand forecast. Revenue management can support the ongoing financial stability of a hotel, even when faced with disrupted market conditions. While securing any paying guests might be attractive for hoteliers desperate to attract business in a soft market, this often results in a mix of business that limits ongoing revenue, reduces ancillary spend and thus drives down profit opportunities for a hotel. Hotels can all too easily fall into the habit of selling out rooms to lower-rated business through a “first come, first served” approach. Not all business is worth the same value and a full hotel is not necessarily a profitable hotel. Target the right business to generate cash flow Estimating future project successes before outlaying capital investment will help any hotel group in the fortunate position to be considering acquisitions to make decisions likely to increase the group’s long-term cash flow and value. Accurate forecasting data, market research and analysis also allow hoteliers to execute realistic feasibility studies for all future opportunities. Data collection and comparisons between properties by brand or by region allow hoteliers to determine how to best price their properties within different markets. Setting and centralising revenue management standards across a hotel group also improves overall portfolio performance. Consider cash flow and hotel portfolio performance From giving the hotel greater day-to-day liquidity to enable meeting of operating costs, to having money in the bank generating interest and leveraging return on capital, the increased RMS derived revenue and expected business performance insights should not be overlooked. This higher rate of cash flow, combined with detailed forecasts which enable expense management, has a number of benefits critical to operating through the COVID-19 era of low occupancy and business disruptions. The additional revenue generated by the proper use of a sophisticated, strategic revenue management system (RMS) directly flows into the amount of cash available. Increase the cash held within your business and benefit Long recognised as a vital means of boosting a hotel’s bottom line, revenue management is now playing a central role in protecting, forecasting, and strengthening a hotel’s cash flow and overall financial position by driving the top-line and ultimately the cash position of the asset. Everyone knows “cash is king” when it comes to operating a business, but in a disrupted market, with historically low levels of demand, for many hoteliers this statement has taken on extra significance.
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