Don’t fall into the “build it and they will come” trap: case study

The challenge: Total hotel revenue underperformance despite significant renovations

First time hotel owners purchased a small independent boutique property that had been significantly underperforming the market in guestroom and restaurant revenues for many years. The property had a prime location within a destination resort market and the new owners made significant investments renovating and repositioning the property to a 4-star product and service level, but revenues continued to be anemic throughout 2019 and into 2020.

Capital expenditures continued into 2020 and the small ownership group, who also operated the property, began to realize that a more sophisticated strategy must be needed to achieve their desired results of profitability.

Ownership eventually embraced the idea of bringing in a commercial strategy consultant to help figure out why the property’s revenues struggled to improve despite how much they invested into renovations and increased staffing levels within operations.

The strategy pivot: Hotel revenue and marketing audit findings

The hospitality consultant was initially hired to complete a full revenue and marketing strategy audit and analysis, including an on-site property visit during COVID-19, and the engagement was to only last a month. This audit and analysis quickly surfaced numerous opportunities for a property that had tremendous potential and just needed the professional guidance to get there.

Key findings from the initial revenue and marketing audit included:

1. Untapped revenue generating partnerships and distribution.
2. Overlooked mapping and connectivity issues throughout the distribution ecosystem.
3. Poor and inconsistent content throughout the online storefront.
4. Several key benchmarks and KPIs within marketing and revenue were lacking.
5. Hesitation to fully embrace dynamic pricing and a struggle to properly price the wide range of room types.
6. Rigid hotel policy details and tone of messaging.
7. An outdated website and booking engine that resulted in weak SEO performance, visitor engagement, and low conversion rates.

A detailed presentation was given to the owners reviewing all key opportunities, why these needed capitalized upon, and how they could be capitalized upon. Additionally, revenue upside estimates anticipated from the capitalization of these opportunities were presented. The client requested the commercial strategy consultant to extend their services to capitalize upon the opportunities presented and to teach them along the way.

The results: Hotel revenue increase

Immediate financial results were realized and continue to grow from the capitalization of the seven key opportunities identified, including the development and launch of a new custom website and booking engine.

1. Guestroom revenues increased 50% year over year for July-December 2020 through both occupancy and average rate. January -February 2021 increased over 300% year over year.
2. Q1 2021 guestroom revenues are projected to increase over 100% compared to Q1 2019, the previous best performing year.
3. Guestroom revenue trends over the past seven months are comparable to the market’s top tier properties performance in 2019.
4. Despite restaurant occupancy limits due to COVID-19, this revenue center was still able to maintain comparable revenues and improve profit margins.
5. Direct website event RFP volume increased over 800% Dec 2020-Feb 2021 compared to Dec 2019-Feb 2020.

This project took place during the COVID-19 pandemic and illustrates how critical dynamic revenue and marketing strategies are to the financial health of a property no matter what the current industry landscape is or how much owners may have invested into repositioning a property.

While the location and type of property was ideal for notable regional drive market business, it never would have realized this level of success without the various significant strategy shifts shared. The independent owners timed the new revenue and marketing consultant partnership perfectly to successfully navigate through 2020 and lay the roadmap for 2021 and parts of 2022.

About the author

Submitted by Strategic Solution Partners.