How will hotel properties make profits this year?

Howard Feiertag

Generally, we look to the chief in charge of operations of a hotel or resort property, the general manager, for profitability. All agreed. But where does it all start? It always starts at the top, meaning, of course, with revenue generated by sales. It has to come in at the top to fall to the bottom line. Once all the costs are paid, the bottom line (or profit) is what is left. The more we take in and the less we pay, the larger the profit.

So we need to look at what we take in at the top and make sure it covers the costs, and more. We all know that costs of property operations continue to increase. There is absolutely nothing (except, maybe, gas for your car and other uses) that costs less these days. Just think about it, debt service, leases, rentals, taxes, utilities, maintenance, supplies, advertising, franchise fees, management fees, contractual services, repairs, benefits, and the list goes on.

This year, we may even be hit with minimum-wage increases, and in all probability this may very well result in many other wages being increased. So, with all this in mind, it tells us that we just better be in the business of doing a better job in hotel sales.

According to TravelClick, we can expect about a 4.5-percent ADR increase over last year, which is good. We just need to be sure that our sales teams understand that, in booking groups, we need to work on getting better rates. Sales staffers need to get better at negotiating deals to make sure that the properties represented maintain the expected increase in ADR. It appears that ADR from group bookings have always lagged behind transient travel. That, of course, brings the total ADR a couple of percentage points down for a property. Sales departments should be geared to secure better group rates this year.

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Here is where the general managers need to include some training opportunities during the usual weekly sales meeting. The sales performance of the staff must be monitored to see what works and what doesn’t. We need to look at the procedures being followed in getting prospects to make the buy decision. Are there objections from prospects? How are they being handled? Many real objections are not rate-related, but perhaps many objections come forward as rates; but are they real?

Sales staffers need to understand the business of overcoming objections. Quite often, we feel that because of a group booking, we must offer a rate lower than published rates. Why? We must reduce the effort of offering discounts right at the beginning of an inquiry. There is no reason for this. We may want to offer valued benefits other than rate discounts.