By Christian Boerger, CRME, CHBA, CHDM, Executive Director of Strategy, TCRM, and member of HSMAI’s Revenue Optimization Advisory Board
New year, new initiatives? In 2020, hotels were forced to find creative ways to generate revenue beyond selling rooms. From creating ghost kitchens to renting out event space to retailers, and from hosting vaccination clinics to transforming rooms into workspaces, there’s no shortage of innovative things that members of HSMAI’s Revenue Optimization Advisory Board (ROAB) have tried that could last well beyond the pandemic.
Need inspiration for transforming your own hotel revenue operation? Here are a few of the most popular ideas that ROAB members shared on a recent call:
While many hotels have always relied on restaurants as a reliable source of income, in many destinations, in-hotel restaurants are floundering. So, what would be a better use of that space? While the kitchen itself may still be in demand from guests wanting to get room service, the dining areas can be rented out to other businesses looking for a new, short-term space. The same can be said of large meetings spaces, which may or may not be in demand.
“Because things are so volatile in a brick-and-mortar space, retailers don’t want to get into five- or 10-year agreements in a shopping center,” one ROAB member said. “They want to get into something that has a lower long-term liability. We’ve been able to do that with quite a bit of success, especially if they’re selling local goods or services.
“It’s something that’s easy enough to convert after a year or two,” the member continued. “These are short-term contracts, so there’s not a lot of costs, and it gives the owner some stability and cashflow, rather than having a space that you don’t know if you’re going to fill.”
Another plus to having retail in your hotel? It keeps people cycling through the building, and even if they are not staying there, it keeps brand awareness alive. Additionally, hotels can have their own retail offerings as a source of additional revenue, either in the property itself or online, as several ROAB members mentioned selling their own products over the past year.
“The number of products and services that we had in our hotels that we were able to retail successfully was surprising to us,” one ROAB member said. “We sold everything from the obvious, like gift cards, to the surprising, like people wanting to buy our bedding. People wanted to recreate as much of our experiences as they could.”
As we know by now, hybrid and virtual events will be a key part of the future. The pandemic has given the whole world the chance to test out online meetings and events and figure out what does and does not work about them.
Even though many couples chose to celebrate their weddings during the pandemic, oftentimes that meant that cherished family members or friends couldn’t be in attendance. But even in normal times, elderly relatives or guests who are on a tight budget are unable to attend festivities. One ROAB member thinks that this could be an opportunity for hotels that host weddings in the future.
“I’ve been to enough weddings where Grandma has had to FaceTime in because she doesn’t travel anymore,” the member said. “I think post-pandemic, this is an opportunity for an enhanced virtual experience. You could have some sort of add-on service you can sell for an improved virtual experience for Grandma. Put her on an iPad and send her around the room on a Segway to chat to people, or something along those lines.”
One ROAB member said that he has been particularly impressed with the way hotels have pivoted to creatively capture group business both in-person and virtually. “There was a lot of heavy lifting that had to happen quickly to completely redesign what a group experience would be like at a hotel,” the member said. “They had to find a way to allow customers to socially distance and participate both virtually and on-property. There’s still work to be done, but those that did it were very successful.”
Business meetings also may look different with hybrid components, but ROAB members said they remain hopeful that people will want to come back. “I think people are really yearning to connect,” one member said. “People have a passionate desire to connect with each other and explore the world around them, and they’re really missing that.”
In 2020, more than 50 percent of U.S. hotel rooms were unsold, a trend that we do not want to carry into the future. While many hotels were able to combat this easily converting rooms into college housing or senior living communities, those sorts of uses may or may not be feasible in the future. What is clear is that customers currently have a preference for residential stays as opposed to traditional hotel rooms, a trend that is not likely to go away anytime soon.
“I think a trend that will continue to stay in the upscale and luxury brands will be a shared-ownership approach to the residential units,” one ROAB member said. “Things used to be closer to 20 percent residential and 80 percent hotel, but now there is a much higher proportion of residential for sale. It goes with the trend of Airbnb and people wanting more self-sufficiency and less contact.”
Another ROAB member added: “In the short-term rental space, we’ve seen houses do better than even apartments, so that people can maintain social distancing. It’s interesting to think about how we can use our spaces differently and fit the customers’ needs.”