Revenue strategies are something every hotel has – whether people realise it or not. At heart lies how the business – for that is what it is – seeks to make its money and turn in a tidy profit. Of course, there are some very obviously important issues to consider. One is how much money needs to be invested in a new hotel at the outset to help it meet the needs of the target market.
For instance, does it have to simply be neat, clean and homely for budget travellers, or should it go upmarket and appeal to the higher end of the market with all kinds of opulence?
The relationship of marketing and revenue strategies
These choices will be linked to the levels of staffing and what they will offer and, ultimately, the prices charged. The marketing strategy and revenue strategy are necessarily closely related, for those who will spend big money for a plush room will not be looking to a budget hotel to supply it, while those with less to spend will not be willing to blow what money they have on a five-star stay knowing it will constrict their holiday spending on other things. Bearing this in mind, pricing and markets will also apply to the various other features in a hotel, be they the food on offer, the spa facilities (if there are some) and any other extras that are available.
Consider your demographics
The demographics of a hotel’s guests are not always uniform, but quite apart from the obvious one of wealth levels – which will distinguish budget travellers from those seeking something plush – there are also considerations such as age profile and the kind of activities available locally. The latter, of course, will depend on location, such as whether the hotel is by the sea, out in the countryside or even near a winter sports resort. Aiming at one of these demographics means providing facilities appropriate to them, but the revenue strategy should also be geared up this way. For example, suppose part of the strategy is to try to get people to book early. If that is available online it should work well for a younger, tech-savvy demographic, but less so for older people. Therefore, it may be wise to focus on more traditional means of marketing a hotel and making bookings, such as by phone, to ensure the attraction of discounts reaches an older target audience that spends less time online.
Using special offers such as early booking discounts is something that can form a very effective part of a revenue strategy. One of the great advantages of this is that once the customer has made an online booking, their details can be used to help target them with further offers, for all kinds of extras. For example, the hire of equipment for outdoor activities may prove popular. However, be sure you have correctly segmented the guest list; if your hotel is being occupied by a wide range of ages, it is unlikely the over-60s will want to go whitewater rafting, so keep it relevant. Revenue strategies can also consider a range of other carefully targeted offers. This includes cut-price group bookings, or special discounts for families, such as allowing the kids to go free. The key issue is to make sure these follow the loss-leader principle, by ensuring that the overall spend of these families or groups is sufficient to prevent their stay not being profitable for the hotel. Indeed, it should generate more profit by claiming a greater market share through successfully targeted price competition.
Return on investment
What all these measures amount to is a strategy that aims to create the best return on investment (ROI) possible. That means, for instance, that the amount spent on decorating and furnishing a hotel is appropriate to the price range of the accommodation on offer. A hotel that offers extras such as the hire of equipment for group activities will gain a greater return on a policy that offers discounts for early group bookings. It will also gain from the simple fact that if groups come, that amounts to a multiple response to each piece of marketing with a greater return than that which attracts individuals. And establishing an excellent website featuring a booking system with discounts for those paying online will work best with younger demographics.
While the above steps will help generate more ROI, it is important to keep the strategy under review. The success – or otherwise – of each aspect of the strategy needs to be reviewed to see if it is fit for purpose. Check if the marketing is getting through to the target demographics. Take on board customer feedback. Study the data on early bookings and look at what the ultimate return is from those who book early, or who come in groups. As long as your strategy remains innovative and can be tweaked when required, revenues should remain healthy.