Hotel Expenses: 10 Clever Ways To Control Costs

Bryan Michalis
Bryan Michalis
Updated
April 25, 2024
/
Published
April 25, 2024
Hotel Expenses: 10 Clever Ways To Control Costs

If ballooning hospitality expenses have you reconsidering your hotel’s operating costs, you’re not alone. CBRE's latest Hotel State of the Union report predicts profit growth for hotels, but underscores that the growth will be slow and minimal. Shrinking margins due to inflation and rising hotel expenses may have you looking for ways to reduce your hotel operating costs and keep more profits.

There’s much more to revenue management than filling rooms day in and day out. Your operating budget includes fixed and variable costs—understanding how to manage both types of expenses is key to increasing hotel profitability and keeping guests happy.

Let’s dive into the basics of budget management and how hotel technology can streamline your hotel operations.

But First: A Breakdown of Hotel Expenses

Whether you have a series of dashboards or you’re wrangling spreadsheets, your first step for implementing hotel cost-saving strategies is assessing your finances. Break your expenses into fixed and variable costs for a more comprehensive picture.

Some of these expenses might fit into either bucket at times. However, breaking them into categories helps you visualize opportunities for optimization you can refine as you go.

Infographic Fixed vs Variable Hotel Expense

10 Ways To Better Manage Hotel Expenses & Maximize Profits

Infographic: 10 Ways to Better Manage Hotel Expenses and Maximize Profits

As consumers become more aware of their spending, hoteliers must find innovative ways to control operating costs and attract guests. Using hotel technology to make small tweaks to your operations can have a big impact on the guest journey—and your bottom line. Here are ten ways to spend smarter.

1. Streamline Your Check-in and Checkout Processes

Reduce the front-desk staff workload by allowing guests to tackle some of the administrative aspects of check-in and checkout themselves.

     
  • Mobile check-in & check-out enables guests to self-serve by checking in and out on their phones at a time that is convenient for them, completely eliminating a trip to the front desk.
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  • Tablet registration allows guests to fill out registration forms on a tablet, freeing up your team to focus on interacting with guests and personalizing their experience.

2. Schedule Smarter (and Boost Retention)

With 82% of hotels facing staff shortages, finding ways to retain the ones you do have is essential for managing expenses. Optimizing staff scheduling according to demand will help reduce labor costs. Even better, smarter staff management will keep them engaged and productive, two known factors that boost retention.

3. Cross Train Staff

Cross-training staff where appropriate is another avenue for maintaining staff productivity and improving collaboration. For example, train front desk staff in reservations and concierge services to build a more efficient workforce. Be sure to also establish resources for the actual training process and expand responsibilities gradually to reduce burnout.

4. Empower Housekeeping with Tech

A clean hotel and a fast turnover rate impress guests but add pressure on housekeeping to work harder. Forge a line of communication between housekeeping and the front desk by sending them automatic check-out alerts so they can plan and prioritize accordingly.

You can also incentivize your team with higher compensation without impacting the bottom line.

The staff at Cape Codder Resort & Spa enjoyed a 90% bump in tips after implementing Canary’s digital tipping technology. By giving cashless guests a streamlined way to reward good service, you boost take-home pay while elevating convenience.

5. Prevent Costly Fraud and Chargebacks

Hotels lose between 1% and 5% of revenue due to chargebacks and fraud. This amounts to between $2 and $10 billion a year. Old-fashioned paper credit card forms are not PCI-compliant and pose a greater financial liability. Modern and compliant payment technology can help reduce profits lost to fraud and chargebacks while also giving guests a fast and secure way to pay.

6. Opt For Platforms Instead Of Point Solutions

Many hotels have bloated tech stacks because they’ve added specific pieces of (expensive) technology over time. Legacy systems can be clunky and result in siloed information. Modern hotel technology platforms bring hotel operations and guest services under one roof so everyone accesses the information they need at a glance.

7. Automate Communications and Marketing

Automating guest messaging provides instant answers to guests’ most frequently asked questions. The benefits are twofold: your guests will get immediate responses, and your staff will have more time to focus on delivering more personalized, one-on-one service. In addition to messaging, you can use technology to automate review collection and upsell opportunities, boosting profits with very little effort.

8. Improve Utility Efficiency with AI

One benefit of using AI in hospitality is that it allows you to optimize resources to focus on the highest-priority tasks, like predictive maintenance. With smart technology, you can monitor the health of your equipment and predict future utility expenses. You can also reduce your energy bills by automating lighting and climate controls.

9. Use Guest Feedback to Increase Online Visibility

High ratings are essential to attracting guests. An Expedia study found that guests will pay 35% more to stay at a hotel with a 4.4 rating versus one with a 3.9 rating. Leveraging guest feedback is a vital part of your hotel reputation management strategy. Optimize your hotel website and implement a way to encourage guests to leave real-time feedback you can use to refine your processes and boost profits. Robust reputation management software can help boost five-star reviews online using AI messaging.

10. Assess Essential Key Performance Indicators Regularly

Each time you evaluate your key performance indicators, or KPIs, you spot patterns and can better forecast hotel rates. Tracking key hotel KPIs like occupancy rates and average daily rates provides a compass for your hotel’s financial health.

For example, Revenue per Available Room (RevPAR) can fluctuate by season, and analyzing this data throughout the year can help determine whether your pricing, upsell and other key experience strategies are performing well.

You might also use your Average Length of Stay (ALOS) to inform your staffing schedules and inventory budgets.

4 Factors That Affect Your Hotel Expenses

Infographic: 4 Factors that Impact Hotel Expenses

As you look for ways to improve your processes and reduce your operating costs, it’s important to consider how seasonality, market competition and changing consumer preferences impact your bottom line.

1. Seasonality

Every hotel experiences fluctuating demand throughout the year. For some, peak demand falls during the summer months, while others might experience a boom during the winter or fall. Your busy and slow seasons greatly impact your profits and expenses, underscoring the need for year-round revenue management forecasting.

2. Market Competition

Knowing how you stack up against the competition is part of successful hotel management, as it informs what you need to do and how much you need to spend to compete with other venues. Compare your customer reviews, online ratings, room rates and location against others to identify areas where you need to allocate more (or less) of your budget to compete.

3. Changing Consumer Preferences

As more guests prioritize digital experiences and sustainability during travel, hotels can no longer afford to ignore these preferences. In fact, Booking.com reports that 80% of travelers consider a hotel’s sustainability when choosing where to stay, so hotels that highlight their sustainability attract more customers and save money. And when it comes to hotel amenities, technology is paramount. Guests love tech features such as mobile reservations, contactless check-in and check-out and voice-activated technology for lights and air conditioning.

4. Economic Conditions

Every region is feeling the pinch of global inflation and increased hotel operating costs. At the same time, guests are getting pickier about where to spend their hard-earned dollars. The economy affects all things, from rising consumables and staffing shortages to guest preferences and spending habits.

4 Revenue Management Tips To Offset Expenses

Infographic: 4 Revenue Management Tips to Offset Expenses

A vital element of every hotel is maximizing revenue to counterbalance operating costs. Here are several ways to implement better revenue management.

1. Use technology to upsell and cross-sell. Comprehensive hotel technology automates guest recommendations based on their profile, such as family-friendly attractions for guests with children or a local wine-tasting event for a sophisticated getaway.

2. Use data to segment. Corporate travelers have different needs than families. Segment your guests according to preferences, demographics and booking behavior, so you can offer relevant packages to multiple types of guests.

3. Use dynamic pricing strategies. Hotels use dynamic pricing to help set room rates. Seasonal fluctuations in demand, historical booking patterns, and market competitiveness are all factors you can use to guide pricing strategy.

4. Use data to forecast demand. Past occupancy trends, booking patterns and market demand shape accurate forecasting. With the right software, you can toggle between dates, market segments and past booking windows to map demand, analyze trends and make informed predictions.

Proactive Hotel Expense Management Takes You Far

Hotel operating costs are always challenging, but rising costs across the board render cost-saving strategies essential. Luckily, there is a way to exceed guest expectations while controlling hotel expenses—knowing what’s contributing to your expenses is the first step. From there, you can manage costs and increase operational efficiency. To learn how Canary can help you work smarter, schedule a demo today.

Learn How Canary Can Help Your Properties Thrive

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