The hotel industry won't emerge from the financial chasm caused by COVID-19 overnight, but recent data already points to a rebound. Benchmarking could help quicken the pace of recovery.
As the hotel industry continues to thrash its way through the pandemic, hotel benchmarking has the power to not only keep hotels afloat, but also help lift the sector to solid financial ground once again.
How Hotel Benchmarking Is Reviving the Hotel Industry
It's no secret that the pandemic broadsided the hotel industry. Consider U.S. hotels, which recorded a gross operating profit per available room (GOPPAR) of $-9.87 in the third quarter, a 110% decrease from the same period a year ago, according to data from HotStats.
Benchmarking can accelerate profitable change and help recovery move from a crawl to a steady climb. Here's how hotel benchmarking could continue to help revive the hotel industry:
1. Spot Shifting Demand
COVID-19 didn't just dry up hotel revenue. It disrupted the whole hotel industry. Anytime an industry is shaken up, demand for some services fizzles out, but new demand springs from their ashes.
As hoteliers search for those pockets of new demand, hotel benchmarking can help. Keep an eye on revenue per department and track it on a monthly basis. If it's climbing month to month, it may be a new opportunity that will stick.
2. Solidify a Financial Baseline
With the pandemic tossing hotel operations into the financial abyss, many hoteliers are still wondering if they've hit bottom. Hotel benchmarking can help hoteliers establish a financial floor, dig in and start climbing.
That all starts by establishing a baseline. For instance, by using hotel benchmarking to determine a break-even point, hoteliers will know their basic occupancy needs in order to be profit-neutral. From there, they can be confident enough to jump into investments and grow.
3. Reset Costs
When times are good, it's easy to ignore expenses and get into spending grooves. However, when revenue is scarce, it forces hoteliers to pore over the books.
Hotel benchmarking puts hotel expenses front and center. With that, you get the blueprints you need to sculpt a profit-focused hotel operation.
Just remember, the deeper hoteliers dig into the whole hotel, the easier it will be to trim those costs that are eating into the hotel's bottom line. That means it's a good idea to look at both broad hotel costs and operational expenses by department.
4. Hire Strategically
COVID-19 has forced hoteliers to drain their labor force. Early in the pandemic the leisure and hospitality industry cut more than 7 million jobs. Now, as the hotel industry claws its way back, it's a chance to start fresh. With hotel benchmarking, hoteliers can hire strategically.
Hoteliers don't have to hire employees back to the same positions of the pre-COVID world. Instead, they can use benchmarking to examine new demand, departmental costs and each department's profitability. By investing more in the areas where profit opportunities are greatest and trimming less profitable areas, hoteliers can use hotel benchmarking to guide a smarter hiring plan.
5. Prepare for More Revenue
With COVID-19 clogging cash flow, hotels have been forced to trim departments. However, just cutting departments randomly is a recipe for less profit in the future.
Instead, savvy hoteliers can use hotel benchmarking to identify the most profitable cuts and carve lean operations. By noticing glut and comparing profit to that of competitors, hoteliers can make adjustments now that will go even further as revenue picks up.
The good news? When done right, you'll set the table for a profit explosion when revenue returns. As hotels keep churning forward, supercharged operations will turn revenue into profit.
6. Identify Opportunities for Growth
As the hotel industry works its way back, a look inward is uncovering new opportunities for growth that may not have been obvious before. For instance, hotel buffets have taken a massive hit during the pandemic, and many prominent buffets across the country have shut down entirely. However, that doesn't mean all food and beverage (F&B) offerings are dead. In fact, the need for social distancing could spark new F&B opportunities in takeaway and room-service options.
With data lighting the path, that same search for new growth can be carried throughout all of the hotel's operations.
Hotel benchmarking can reveal these new areas of demand throughout all of the hotel's offerings. The hoteliers who identify these new trends first will be able to widen their hotel revenue streams and boost profit.
Take a Broad Approach to Hotel Benchmarking
Hotel benchmarking could give hoteliers the tools to dig out of current financial holes faster than competitors can. Still, in order to effectively use hotel benchmarking to sustain profit, it takes a holistic plan and complete hotel metrics.
When hoteliers consider big-picture numbers as well as deep metrics, they'll have the tools it takes to climb out of the pandemic chasm and come out stronger than ever.