Optimising only your room revenue is not enough anymore in today’s volatile and fast-paced hotel market. Departments which used to play only a supporting role by generating ancillary revenue now generate significant percentages of some hotels’ revenue.
This is why total hotel revenue optimisation (THRO) is becoming increasingly important. This means using revenue management techniques in all revenue-generating operations such as F&B, spa, and recreation.
What is total hotel revenue optimisation?
THRO means shifting your focus away from a rooms-centred approach and optimising every revenue-generating department at your hotel. You also begin looking at bottom-line metrics more often, instead of focusing only on top-line measures. That leaves you with a more complete picture when you analyse your profitability because it takes distribution, acquisition, and operating costs into account.
If you’re thinking that this concept isn’t entirely new, you’re right. It’s been around for a while. But the challenges of the past year have put THRO in the spotlight again since it offers hoteliers the chance to boost average guest spend and profitability.
At first glance, THRO might seem hard to apply. After all, some departments have high cost ratios by default, so measuring revenue and profitability aren’t the best indicators of their success. But that’s where THRO’s holistic approach offers you an accurate overview of which levers you can pull to optimise your business.
Starting out with total hotel revenue optimisation at your hotel
First, decide who will lead your THRO initiative. Your revenue manager is the obvious choice since they have experience with revenue optimisation and can guide the team.
Next, get staff from each revenue-generating department involved and train them on elements like setting, tracking, and measuring KPIs. Skipping this can result in fuzzy goals, incorrect tracking and the inability to properly measure your success.
Now, collect and examine actual performance data, so you can shape your strategies. Pick the most relevant insights to find the areas where you have the biggest opportunity for improvement.
Optimising your hotel’s F&B revenue
Restaurant revenue optimisation gained importance due to the many new restrictions around seating capacity and overall F&B operations.
Today, the key is to look at the seats in your restaurant like a hotel room, and find ways to serve it to more guests. Evaluate your seating vs table occupancy during the day, see specifications of each setting as an attribute, and work with your kitchen and service team to optimise your offering and better promote your most profitable menu items.
Optimising your spa revenue
Spas are also full of opportunities for using THRO. First, get an overview of your wellness department’s services, their fixed and variable costs. Then look at each treatment’s profitability and the demand for it. This will show you which services you should promote more and which ones should stay on the back burner.
Just like with F&B, it’s a good idea to market your spa offering to local and domestic guests these days. As some countries are embracing travel bubbles and permitting internal travel, your domestic and regional guests are your best bet at driving more revenue in this department for now.
Optimising your rooms & housekeeping revenue
Yes, THRO seeks to look at departments other than rooms. Still, there’s a lot of potential in your housekeeping and rooms departments. Guests expect more customisation options and are willing to pay for room attributes they value. This is a fantastic opportunity for you since it opens the door to several revenue-generating initiatives.
The most important thing when applying THRO is to find a balance between offering your guests value and driving your property’s profitability. Think about the unique services or add-ons you can provide and how you could package them to make them interesting for your guests. The more you centre their experience in your communication, the more likely you are to boost revenue throughout your property.
Now that you’ve got some of these ideas in your mind, it’s time to get to work with THRO at your hotel. Since this article only touches the surface of these principles, you may still have some questions.
Which department will you start with?
About the author
The article below summarises the insights given in Oaky’s Fundamentals of Upselling class by Marta Varela, Revenue Management Educator and Business Revenue Management Director at Parques Reunidos. To grasp the full concept of total revenue management in upselling follow the full course.
For a free detailed guide on how to implement THRO in your F&B, spa, and rooms departments, check out Oaky’s eBook on Total Revenue Management full of ideas you can immediately implement at your hotel.