Hotel profits and budgeting

5 Ways To Boost Profits For Your Small Hotel

No matter what type of business you run, achieving a sustainable profit is certain to be your primary objective. The nature of your business will influence how you strive to achieve this aim, as there are some industries in which attempting to increase your margins is challenging in the extreme.

Take the independent hotel sector, for example, where brands are forced to operate with minimal resources while striking the delicate balance between cutting costs and maintaining a positive consumer experience.

In this article, we’ll take a look at viable ways in which small hotels can look to reduce costs and boost their profitability without making unnecessary compromises.


#1 – Perform an Energy Assessment


If you are truly going to reduce costs without impacting on the customer experience, you should start by reviewing that apply to operations. Take energy costs, for example, which despite being central to the functionality of your hotel can be effectively negotiated and slashed without guests even noting.

Energy is an increasingly pressing example too, with April having seen suppliers announce price increases across the board (including hikes of 10% in some instances).

So, why not perform an energy audit on your hotel and identify any areas or time periods where you are overspending on heating, lighting or energy consumption? This will not help you to create a more cost-effective energy strategy that reduces your expenditure, but it may even provide leverage with which you can secure a better deal or negotiate with alternative suppliers.

It is also interesting to note than an estimated 65% of all energy upgrades are associated with lighting. You can therefore reduce long-term costs considerably by installing LED fittings in your hotel, as they are more energy efficient and last for up-to 10 times longer than standard lights.


#2 – Offer Discounts for Extended Stays

Trendy hotel

As a general rule, it is accepted that hoteliers spend approximately five to eight times more on acquiring new guests than retaining existing customers.

This is because retaining existing guests negates your initial outreach costs, so investing in targeted promotions that are aimed at returning customers can increase profitability and help to maximise the ROI on your marketing spend.

One of your best options is to offer discounts for extended stays, as this targets returning customers who have enjoyed their experience and wish to book for an extra night or two. By slashing prices for extended stays by up to 50%, you can increase turnover and drive higher, long-term profits while also reducing your marketing expenditure.

This is particularly effective if you are not fully booked, as it also helps to maximise turnover during quieter times.


#3 – Develop Personal Rapport With Your Guests

Room Service

UK customers are increasingly sceptical of brands, particularly through saturated social channels. In fact, 40% of Brits now actively ignore social posts or paid adverts published by brands, citing a lack of trust and the overly intrusive nature of this content as reasons for their cynicism.

In this respect, smaller hotels have a distinct advantage over big brands and international chains, and this is something that applies to SMEs in a host of alternative markets.

To leverage this nature advantage and optimise their turnover (while also increasingly customer retention), small hoteliers should focus on creating a customer-centric experience that relies on personal interaction and the delivery of outstanding service. Referring to guests by the first name makes a significant difference, for example, as does offering creative room service options and taking the time to check in on customers during their stay.

This underlines their importance to the business and makes them increasingly likely to book in the future, increasing the long-term profitability of your business without the need to spend huge sums of money.


#4 – Partner With Local Tourist Firms to Enhance Your Value Proposition


When it comes to pricing your proposition as a small hotelier, the cost to the customer must always reflect the value proposition on offer. So, if you are able to creatively enhance your value proposition without significant expenditure, you can potentially increase your price points and improve your margins accordingly.

One of the best ways to achieve this is through the cultivation of commercial partnerships with local firms, particularly those that operate within the tourism sector. By networking with local attracting and tour providers, you can deliver discounted day trips to guests while also securing a higher rate of bookings throughout the year.

This translates into higher turnover, and improved profits if you can leverage these experiences to justify a price hike.

You can also forge partnerships with firms outside of the travel and tourism sector too, so long as you secure benefits that add value to the customer experience. You may decide to partner with local eateries and takeaways, for example, in a bid to offer discounted room service options to guests.

This not only reduces the cost burden placed on your kitchen, but it also offers greater choice and flexibility to guests when planning their meals. This can translate into higher profits, while it also creates a wow factor that appeals to new customers.


#5 – Create a Select Few Pet-friendly Rooms

Pet in Hotel

Ultimately, one of the best ways to become more profitable is to draw on guest feedback and respond directly to their comments. While this can create a number of ideas that may not be economically viable, it will also introduce some that make perfect sense.

There is a growing demand for pet-friendly rooms among travellers, particularly with pet-ownership rising throughout the Western world. The pet industry was worth a staggering $60.28 billion in the U.S. alone during 2015, and this highlights the amount that customers are willing to spend on their beloved, furry friends.

Given this, and the fact that so many travellers long to take their pets on domestic holidays with them, offering a select few, pet-friendly rooms can instantly increase your appeal and turnover without the need for huge expenditure. After all, very little is required to turn a standard room into one that is suitable for pets, while in some instances this can be done without any additional cost.

Additionally, such a move also helps you to reach an alternative segment of traveller, as well as providing an opportunity to place a higher premium on your rooms. This all adds up to a row of beans, and one that can significantly boost the profitability of your small hotel.


In Conclusion

As these five suggestions highlight, you can create a more cost-effective and profitable hotel with a handful of relatively simple measures. So even without huge financial resources, you can leverage your natural advantages as a small hotelier and compete in an increasingly busy marketplace.