Pictured above: The Fed at The Langham, Boston; photo credit: Nina Choi
Executive vice president of hospitality Randy Shelly contributed his insights to Hotel Business Review on how hotel owners can drive revenue through creative strategies that maximize and monetize every square foot. Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com.
As the hotel industry rebounds and evolves—according to the Lodging Econometrics Pipeline Trend Report, the total U.S. construction pipeline of projects is up 9% year-over-year—owners are finding ways to become more efficient and modify their service models. Faced with increased cost of labor coupled with a decreased average of revenue per available room (RevPAR) that has yet to surpass pre-pandemic levels, owners are examining the effectiveness of their used—and unused—space, and how to reduce operating costs without sacrificing the guest experience. Hoteliers have gotten creative with their revenue management strategies—including MCR Hotels adjusting its pricing structure to a la carte, charging for services and amenities—and there is opportunity for owners to view their properties with a new lens that benefits both the guest and the hotel.
Hotels are activating as much space as possible, maximizing every square foot to ensure that guests have options for dining and activities, while also providing the hotel with additional revenue streams. Dead, open space is being converted into revenue generators that attract both guests and locals alike. Waiting area space in the lobby is being reconsidered and transformed into a bar or grab-and-go station; rooftops are being activated with a restaurant, bar, or pool; basement space is being transformed into a fitness center or spa.
Whatever amenity a space is being transformed into, it is important that flexibility be considered so revenue can be generated 24 hours a day, seven days a week, 365 days a year. For example, a room that typically hosts breakfast in the morning can be rented out in the afternoon and then used for happy hour in the evening; a thoughtfully-designed raw space with the right systems infrastructure can transform from a meeting space to a private dinner room to a yoga or meditation area.
Food and beverage continue to be a key part of the hotel experience that drives both revenue and guest satisfaction and engagement. One of the best levers to revitalize dead space, F&B offerings need to provide options and alternatives for guests and locals. There’s not a one-size-fits-all solution, so hotels should have multiple offerings that cater to a variety of needs.
There’s been an increased interest in updating and extending dining services, from expanding and updating existing kitchen capabilities to partnerships with local restaurants and markets. Flexibility of these spaces allows owners to keep their offerings fresh without having to renovate, providing opportunities for seasonal pop-ups, guest chefs, etc. Properties are getting creative by renting out kitchen space for events and takeout, creating their own versions of a ghost kitchen for revenue generation even in “off” hours.
Creating welcoming spaces through F&B, hotel lobbies are becoming a gathering place for anyone to enjoy the bar, restaurant, or café. With outdoor dining here to stay, creating outdoor dining options—that operate year-round—not only invites the local neighborhood, but also expands seating capacity.
By extending their customer base beyond the overnight guests and into the larger community, hotels are increasing their foot traffic, developing repeat business, and establishing brand loyalty from both visitors and locals.
Business + Bleisure
There’s a growing trend of hotels leveraging their Wi-Fi infrastructure, parking, and in-room dining amenities to rent out their rooms for business working hours—driving new revenue potential for the hotel while providing an enticing alternative to working from home. Properties are offering add-on services, work spaces, meeting spaces, and amenities (spa, fitness center, and classes) for extended-stay “bleisure” guests.
In a similar vein, underway hotel projects are looking to increase suite count by either converting common areas into additional suites or converting multiple rooms into one suite. For some hotels, occupancy of their suites is significantly higher than their standard rooms, and on top of that the clientele typically spend more within the hotel than the average guest.
These additional and enhanced suites, coupled with hotels’ existing infrastructure, creates opportunity for properties to capitalize on the current uptick in business and bleisure travel, generating revenue from rooms in new, creative ways.
Wellness + Resort Amenities
Wellness was a trend within the hospitality industry that was accelerated by the pandemic, with hotels investing in new service offerings. There are even new hotel brands grounded in wellness that have emerged with new construction and expansions plans. Wellness means something different to each person, so the opportunities for hotels to capitalize on services, offerings, and amenities are endless. Even in hotels that aren’t as focused on wellness, there’s been a shift from standard hotel fitness centers to leased agreements with outside vendors, including a membership guests can use.
While not put into practice yet, industry leaders who are part of the virtual think tank Hotel of Tomorrow developed a concept focused on creating a restorative resort experience that activates dead space. They proposed that under-utilized pool areas can be transformed with self-contained, mini-lodging units—in response to the popularity of “glamping.” The units are prefabricated and mobile, providing a private retreat big enough for up to a small group. Powered by solar energy and cooled and heated by geothermal technology, the units offer a biophilic environment in an often under-used area. The mini-lodging units create a new guest experience that capitalizes on indoor/outdoor spaces for retreat and restoration.
In addition to thinking through how to monetize all possible real estate, properties also need to evaluate how to reduce operating costs. There are many sustainable practices that have positive operational cost impacts—specifically helping to reduce energy costs—which in turn directly impact revenue management and profitability.
Beginning with the exterior of the hotel, owners can incorporate solar arrays on roofs and parking structures to make it self-sufficient and energy independent. There is also opportunity for green roofs, which increase natural building insulation that reduces heat load on the building, or blue roofs, which store and manage storm water run-off that can then be used as a source of energy. A hotel’s façade design can incorporate photovoltaic panels and glass to increase power generation potential. Technology can also play an important role, from geothermal technology to support all heating, cooling, and hot water needs, to technology that tracks, manages, and improves all aspects of the building’s energy consumption, including the use of occupancy sensor technology to minimize unnecessary energy use and power demand. Incorporating LED lighting and controls throughout the hotel can reduce the overall power demand.
There is an ever-present focus on providing as much contactless experiences for guests as possible, instilling guest confidence in cleanliness and safety. The most prevalent is smart room control. At a basic level, this includes improved and touchless HVAC controls and automated, contactless services (check-in, valet, concierge, etc.) which improves customer service and enhances safety and cleanliness while reducing operational costs. At an elevated level, hotels can integrate the Internet of Things (IoT) to support the customer experience, collecting data to understand the specific needs and wants of guests—including what they’re willing to spend on. This also shows hotels what amenities, services, or items guests don’t value as much, providing insight and allowing owners to make informed decisions on what can be reduced or eliminated. This creates an elevated, customized guest experience to drive satisfaction, increase sales, and reduce unnecessary costs.
Intentional, thoughtful design and construction is paramount for the above solutions to come to life in an effective, scalable way that achieves both the vision and intent of the owner while creating the ultimate experience for guests. And that starts with upfront collaboration. With all key stakeholders—including the owner, architect, and general contractor—involved from the outset, the team can effectively communicate and provide real-time design, constructability, and feasibility reviews, ensuring any challenges are identified and solved for before the project even begins. This ensures that the goal for the hotel is achieved—maximizing revenue generation while maintaining brand differentiation and the best guest experience.
Upfront collaboration accomplishes three key things: 1) it shortens the overall duration of the project, eliminating time lost—and the cost—from a redesign; 2) minimizes the impact of the ongoing work on hotel guests by identifying disturbances ahead of time and establishing solutions that address or eliminate them; 3) allows for input into certain means, methods, and materials, maximizing cost savings, durability, and longevity. Upfront collaboration ultimately reduces cost and drives revenue, providing the best value, and a strong start to the revenue generation and maximization process.
While it requires thoughtful, informed decisions and careful, deliberate strategies, creating new revenue stream opportunities allows hotel owners to continue to elevate their properties and establish deeper connections with their guests.