How Can Hotels Increase Revenue Without Putting More Heads in Beds?
We asked industry friends at Cendyn, Duetto, Hitlist, HotelFlex, HTNG, SevenRooms, Travel Tripper, and Volara for their ideas
By Alex Shashou, President & co-founder of ALICE
The rise of the sharing economy and the digital revolution are leading to new ways of thinking about what a hotel can be. By leveraging hotel assets, people and services in innovative ways, hotels have unprecedented opportunity to open new revenue streams, improve loyalty, and grow their customer base.
"Ninety-nine percent of what we have done for 50 years has been based on the guy coming from outside of town. A traveler, from a different city, from a different country, which I think is interesting, but not too smart. Because we missed a population which is 100 times greater and better and easier: The guy living next door. The local inhabitants. They live around the hotel, or they go to an office around the hotel, and 90 percent of them never dared coming into the property, because they're fearful that we're going to be asking, 'What's your room number?' They don't need a room, but they may need a service." Sebastien Bazin, Accor CEO
And it's not only Accor that is moving towards what the brand calls "augmented hospitality." In South London, Bermondsey Square Hotel is offering its services to neighborhood Airbnb hosts and guests. Participants in the SquAIR program - offered within a one mile radius of the hotel - can take advantage of the hotel's concierge, housekeeping, and maintenance services, key management, luggage storage, and a reliable point of contact. Even less formally, the concept of hotel-as-community-hub is familiar to anyone who has spent time in any of the Ace Hotels, which, as Ian Schrager likes to say, "activate" the lobby with its bars that hosts community nightly socializing activities. Indeed, for years, boutique hotels have led the charge in this regard, serving as hotspots for nightlife and entertainment. Take The NoMad Hotel here in New York, which knocked out two of their worst bedrooms to make a stage for a 40-person magic show that has been sold out for three years.
Other industries have also been augmenting their core offering and using community to help them grow revenue, improve loyalty, and draw new customers to the brand. As brick and mortar retail has been increasingly imperiled by e-commerce, "experiential retail" has become a buzzword. The idea is exemplified by Apple stores, which are some of the busiest and also highest-grossing stores in any city - with their Genius bars, group classes, in-house entertainment series, and sales people that double as educators. IKEA, meanwhile, has become just as much a destination for meatballs as it has for hard-to-assemble furniture. Educational outfits like General Assembly have used coworking space and networking events to help them sell classes. Some restaurants that are idle during the day are realizing they can monetize their underused space for coworking space, and, finally, exercise brands like CrossFit and SoulCycle have become empires by wielding community as a competitive advantage.
By thinking beyond the physical boundaries of the hotel and broadening the definition of a hotel guest, there are now exciting opportunities for hoteliers to tap new revenue streams and engender loyalty. "What can I offer [local residents] by way of service?," Accor's CEO Sebastien Bazin asks. "Food and beverage? Dry cleaning? Key service? Leave their luggage? Recover a rental car? Drop it off? When you enter that universe, you say, 'My God, I have everything that the digital world wants.' I have John Paul [concierge services] where I can interact with them. [We're] changing, radically, your mindset, and entering revenue that can grow 20 to 30 percent a year."
Accor's reimaging of what a hotel can be is a clear response to the competitive pressures of the sharing economy, both in terms of its value proposition as well as its business model. Airbnb has, since its humble air mattress beginnings, laid claim to the "authentic" and "community-oriented" guest experience, something the company has doubled-down on with itsBelong Anywhere campaign and its expanding activities business, Airbnb Experiences. The company's rapid growth is in many ways attributable to travelers' growing appetite for authentic, experiential travel, and AccorLocal and similar initiatives are a way to ground hotel in their communities and meet this shift in traveler demands. So too, this reimagining of the hotel is also a response to Airbnb's asset light and labor light business model. As Bazin describes, the AccorLocal program is an attempt to turn a potential liability (a large amount of capital locked in physical assets and labor) into a strength (multi-purpose community hub), through the leveraging of underutilized assets that is the foundation of the sharing economy: "Throughout these assets and addresses I'm already open 24/7 and I have 240,000 people," he explains.
A less obvious, yet equally important driver of AccorLocal and similar programs, is the concept of the digital platform, which makes this "hotel as a platform" model possible. In the 2016 book, Platform Revolution, a "platform" is defined as a business model that "uses technology to connect people, organizations, and resources in an interactive ecosystem in which amazing amounts of value can be created and exchanged." With their many different interactions, players, and services, hotelsalready act as a platform, before even considering external stakeholders in the way AccorLocal does. This makes hotels ideal candidates for platform technology that facilitates the exchange of information and services internally, as well as permits the integration of external tools, channels, and vendors that successfully opening up the hotel requires. With a solid technology foundation in place, the hotel-as-platform becomes both immediately possible and sensible. Indeed, the hotel-as-platform approach is paying off for the hotel brand, with Accor posting record operating profit for recent period in which financial information is available. As travel publication Skift puts its, Accor "is taking bold steps to bring the traditional hotel company into the future," and, says Bazin, "We're entering a new adventure where there's boldness, innovation, and risk taking."
For the hotel industry, the platform approach - the idea of unifying systems across departments and allowing for the integration of external tools, channels, and vendors - provides an opportunity to leverage technology holistically to bring every person and every department together. Running a hotel is tough enough without having to deal with closed technologies that don't work together and don't let you build on top of one another. Indeed, introducing an app, like the one that serves the AccorLocal program, to a hotel's technology lineup would add prohibitive complexity to a hotel's operations without a platform underpinning. Read more how platform technology can transform hotel operations.
While AccorLocal provides a useful starting off point for opening new revenue streams and growing a customer base, there are many ways hotels can start to think about repositioning their assets and services and taking advantage of community. To start the conversation, we asked our industry friends Cendyn, Duetto, Hitlist, HotelFlex, HTNG, SevenRooms, Travel Tripper, and Volara for their ideas for ways in which hotels can look beyond lodging and RevPAR to fulfill their hotel-as-platform potential:
Local membership services: gyms and beyond
The idea of unbundling hotel services and making them available to those not staying at the hotel might be new in the 'west', but when I lived in the Middle East it was common for expats to buy subscriptions to hotel's gyms, since there weren't as many standalone sports clubs.
If locals are becoming hoteliers through Airbnb and the like, why shouldn't hotels become offer local services offers as well?Repurposing underutilized space and services may be what hotels need to do to stay relevant in a world where they no longer have a monopoly on the accommodation market.
Gillian Morris, CEO, Hitlist
From conference rooms to parking spaces - everything is for rent
I saw a new product a couple of months ago that was invented by an MIT grad working at Amazon.
He created at device that could be installed on or near any commercial or residential parking garage to allow the owner to rent their unused parking space(s).
Amazon Spaces is now in pilot with apartment building garages surrounding the Amazon campus. Hoteliers already have several options to generate revenue on unused parking spaces, but Amazon Spaces is a solution that may help smaller hotels generate revenue with garages that are not compatible with similar booking apps like Spot Hero, ParkWiz and SpotOn.
Armand Rabinowitz,Senior Director of Strategy and Workgroups, HTNG
Flex your check-in
Hotels at their core are time-based assets with hoteliers in the business of maximising the amount of time each room is sold for.
However, due to guest arrival and departure times hotel rooms sit empty for large quantities of the day. The average hotel room actually sits empty for 7 hours between the previous guest departing and the next guest arriving, costing the hotel considerable lost potential revenue. Over the last couple of years, hoteliers have been plugging these gaps with day-use bookings - selling the room for a couple of hours to new guests. However, a much more profitable technique is to plug these gaps by upselling existing guests with early check-ins and late check-outs.
Currently, hotels will wait for guests to request early check-ins or late check-outs. However, if guests are specifically targeted with the offer hotels can generate considerable incremental revenue. In our experience at HotelFlex, hotels can expect 20% of guests to convert each paying on average 15% on top of their room rate for earlier check-in flexibility. And, because the room doesn't need to be re-cleaned, any revenue generated is pure profit and goes straight to the hotel's bottom line.
MaxShepherd-Cross, CEO, HotelFlex
Leverage contextual relevance in a frictionless way
Below are some ways hotels are generating more revenue, without hosting more guests:
- Appending special offers to contextually-relevant interactions. For example, when a guests asks Alexa or Google Assistant about the pool, hotels are sharing special offers for the pool bar. When a guest asks about places for dinner, hotels are sharing special offers for the hotel restaurant.
- Scheduling prepended or appended promotions at specific times during the stay. For example, Volara enables the hotel to schedule promotions through Alexa or Google Assistant to share information about Sunday Brunch beginning at 12pm on Saturday... or share information about the spa whenever its forecast to rain... or highlight any special events happening at the property upon check-in.
- Offering special "Alexa rates" for bookings of voice-enabled rooms can increase ADR.
The frictionless nature of voice means that guests actually use it. The personal and natural interactions facilitated by Volara's software means that promotions feel more like helpful suggestions and lead to higher conversion rates compared to other media.
David Berger, CEO, Volara
Personalize the upsell with new-age CRM
The concept of a hotel as a centerpoint for excellent services (not just sleeping rooms) is very on point with the cultural trends of rethinking spaces, community hubs and desire for "the experience." Food, drink, spa, pool and meeting space are just a few of the services housed inside hotels, but only now are smart hoteliers truly turning their properties inside out to discover the additional revenue opportunities that can come when they leverage their existing assets or services to create more revenue. With a true hotel CRM, hoteliers can tap into the opportunity to upsell ancillary services like these onto existing room night bookings. Hotels can also leverage a hotel CRM to utilize their database of guests to sell goods and services outside of room nights, like high-end goods from a gift shop, to yoga classes in the spa, restaurant offers to a day at the pool. All based around past guest behaviors and indicated likes kept in a hotel CRM that can be segmented for marketing offers.
Michael Bennett, SVP Global Marketing, Cendyn
Embrace an Open Pricing philosophy
Bringing in more guests comes with its own acquisition costs, either in commissions to online travel agencies or in money out of the hotel's marketing budget. But pricing strategy is the lever completely within a hotel's control that has the greatest potential for making more money without selling more room nights.
The most important thing hotel revenue managers can do is to find the price for every booking date and room type that will make the property the most money. Don't estimate demand and just sell out your rooms for too low a rate to hit your forecast. Instead, measure the conversion and pick-up when you change your prices. If you can yield rates higher and still get people to book them, that's your most important indicator of demand.
An Open Pricing philosophy lets hotels price their rooms more flexibly, setting rates for any booking date, distribution channel, room type or customer segment independently, not according to static discounts off a "best available" rate.
Such an approach helps hotels grow revenue while addressing the complex picture in digital distribution, where acquisition costs are rising and OTAs' are innovating new ways to sell hotels' room nights online.
Marco Benvenuti, Chief Marketing and Strategy Officer, Duetto
The tides are changing in the hospitality industry. Dining, and other food and beverage programs, are becoming truly unique experiences for guests, and they are more than willing to pay for it. It's a primary driver for what people are looking for when they travel, and how they look to spend their money as a local.
Hotels have a competitive advantage in this area, as they can strategically use F&B programs to attract and engage loyal guests at home and on the road, while increasing revenue and building long term guest relationships.
The hotels at the forefront today are designing highly attractive programs, strategically integrating the resulting guest data across their hotel portfolio to create highly personalized experiences.
For example, welcoming hotel guests at the restaurant with special tables, tagging reservations with a guests' loyalty status, or customizing in-room amenities based on past F&B purchases – even customizing hotel stay packages with F&B offerings. The common factor across the industry leaders is the use of technology to share and leverage guest data across the hotel and F&B outlets to create exceptional guest experiences.
Joel Montaniel, CEO, SevenRooms
Get more from your loyalty program
Technologies that allow for integrated loyalty bookings and smart upsells are an easy way to strengthen revenue streams from your most loyal guests. This is especially true for hotels with a significant percentage of repeat bookings, like gaming and leisure properties. These types of hotels usually run in-house loyalty programs that allow guests to take advantage of comped rooms, upgrades, spa treatments, restaurant discounts, etc.
By integrating the loyalty program into the direct booking process, customers no longer have to call for deals, they can book their loyalty offers directly online. This affords the hotel an opportunity to understand what type of trip the guest is looking for at the time of booking, and delight the guest upon arrival with customized upsells and offers.
Gautam Lulla, President, Travel Tripper
The fantastic ideas above are just the tip of the iceberg when it comes to looking beyond lodging for revenue opportunities. As a society, we have never been closer to one another - anyone can sign up to do almost any job. Hotels looking to become a hub within their communities could leverage this familiarity much further. Since starting ALICE five years ago, we have seen all sorts of interesting ideas from our hotel partners looking to leverage their resources uniquely. We have seen GMs of ours offer their housekeeping services to nearby Airbnb rentals, we have seen locals paying for hotels to collect and store their packages during the day, and we have seen rooms being sold by the hour.
If you are willing to look past RevPAR to concepts such as revenue per available minute, or even the addition of a new metric: revenue per local, then the opportunities are boundless.This is a world where you and your hotel staff can get as creative as you want.
Alex Shashou, President, ALICE
The AccorLocal program is still evolving - after being piloted in Paris in 2016, it was rolled out to Accor hotels throughout France in 2017, with plans to expand it worldwide this year and next. Because it's intended to be customized to each property based upon local needs and hoteliers' relationships with local businesses, we're sure to see many different permutations of the program. For hoteliers, that means offering their guests a variety of local services and experiences, such as fitness classes via local boutique gyms, food deliveries from nearby restaurants, or pay-by-the-hour car rental services through partnerships with local dealers. Meanwhile, local residents will be able to use the program to take advantage of their local hotels' offerings, be it in the form of visits to the spa, fitness facilities, or co-working spaces, or by having access to takeaway breakfasts, printers, ironing rooms, and parking - all without having to book a room. Ultimately, Accor CEO Sebastien Bazin saysAccor will get into "zillions" of services, among them "having hotels assist locals with simple tasks and solving everyday solutions like holding packages or keys or recommending the best services nearby."
Alex ShashouMore from Alex Shashou
ALICE is the all-in-one solution that enables hotel staff to do the most impactful work without all the guesses. Since the company was founded in 2013, ALICE has gained significant traction in the industry, working with more than 2,500 hotels and tens of thousands of hotel staff across many of the world's leading brands, including Marriott International, Hilton Hotels & Resorts, and Hyatt Hotels Corporation. ALICE is the 2019 Forbes Travel Guide Brand Official Staff Technology Platform, an Inc. Best Workplaces of 2019, a Top 10 Best Places to Work in Hotel Tech by Hotel Tech Report in 2021, winner of Best Concierge Software, a Top 10 Hotelier's Choice technology, and Finalist for Preventative Maintenance Software, Housekeeping, and Staff Collaboration Tools, at the 2021 HotelTechAwards. For more information, visit https://www.aliceplatform.com.