Dealing with operating costs is a necessary part of doing business in any industry. You can’t negotiate that away.
However, you don’t need to just accept high operating costs and low profit margins as a given.
Clever cost management allows you to minimize typical hotel operating expenses and keep more of your revenue. That increases your profitability and sets you up for long-term success.
Modern hotel technology can make an enormous difference here, so let’s look at the main costs your property faces and how tech can help you manage them.
In short, typical operating expenses are what it costs to keep your hotel running. This includes everything you spend on maintaining your property, paying staff and providing services.
Since that’s a broad definition, let’s take a closer look at how you can break down and analyze the different types of expenditures. First off, there are two important categories: fixed and variable costs.
Fixed costs are the same every month, regardless of demand or your level of occupancy. Often, they also represent sizable sums and can't easily be reduced.
Examples of fixed operating costs at a hotel:
Variable costs on the other hand change depending on your occupancy. It's also quite easy to optimize them.
Examples of variable operating costs at a hotel include:
From the list above, you can see that every department has cost-saving potential. For quick wins, look at reducing your variable costs first since optimizing fixed costs often requires a large investment of time and money.
There are many approaches to reducing expenses such as training staff, refurbishments, updating workflows, and implementing innovative technology. While all are viable options, we'll focus on the cost-reducing power of tech tools in the next section. Let’s now look at which solutions can save you money and even improve your guest experience at the same time.
Guest management platforms — like the one offered by Canary Technologies — saves time and costs by streamlining the entire guest journey with mobile-friendly tech tools — from pre-arrival through checkout.
An industry-leading guest management platform will offer a few key guest-facing technology products, including:
As you can see, leveraging technology to reshape your guest journey creates the chance to decrease costs in several ways. Streamlined operations save you time and reduce labor costs. At the same time, they enable you to provide a better, more personalized guest experience and increase ancillary revenue.
The PMS is the heart of your hotel operation. A modern property management system that’s intuitive and highly customizable can help you save significant amounts of cash simply by making your property easier to managemen. That's especially true for most of today's cloud-based platforms. On top of their operational benefits, modern PMS solutions don't charge set-up fees or maintenance costs. You'll only pay a monthly flat rate for your package. Finally, having a powerful PMS creates the base for a solid tech stack that helps you drive more revenue and further streamline operations.
Where and how you sell your rooms has a significant impact on your profitability. Use the following tools to optimize your distribution and keep more of your revenue.
In short, these tools help your reservations and revenue management department save valuable time, offer rooms at the optimal rates and generate more bookings. And even your front-of-house teams benefit because they can better plan their operations.
Implementing the following options requires a higher investment than the steps above but the ROI is worth it.
Today, technology offers many opportunities to reduce typical hotel operating expenses. The right tech tools can be especially effective in addressing the biggest cost factors hotels have to deal with — labor and resource use. Apart from that, many of solutions also create new opportunities to generate revenue and delight your guests.
Yes, it requires an initial investment of time and money to research and implement these solutions. However, a smart approach will improve your property's profitability in the long run.
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