How to Increase Hotel Revenue
Planning to expand your hotel and maximise profits? Find out more about increasing hotel revenue in this useful guide from Rangewell, hotel finance specialists.
After a difficult few years, the hotel industry is starting to recover, making now the perfect time to invest in your business
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Shifting your mindset from surviving to thriving is hard, especially when the COVID-19 pandemic brought with it such economic turmoil.
However, by diversifying revenue streams, investing in your hotel business and ensuring consistently positive online reviews, you can ensure your hotel business is strong in the face of any future threats to the hospitality industry.
So, let's explore some ways in which you can increase hotel revenue and build a strong foundation for future growth.
Hotel industry outlook
Before we get into the practical solutions you can apply to your hotel business to boost profits, it's important to take the time to fully understand the current market outlook. The UK hospitality industry felt the impact of the pandemic and subsequent government lockdowns more than most, with hotels, in particular, struggling as many UK and foreign tourists stopped travelling.
Surviving really is the word to describe how the last few years have been for hoteliers, as around 10% of hotels in London and the South East faced closure last year alone. The end of the government's furlough scheme in September 2021 meant many hotels were unable to remain open or operate at the same levels of staff.
Research by PwC predicts that the hotel industry won't fully recover from the effects of the pandemic until at least Q4 2022. And even then, consumer confidence around travelling is likely to take even longer to return. This could be good news for the hotels in the UK as the trend of 'staycations' and UK holidays is set to continue throughout 2022 and beyond.
Even with light at the end of the tunnel, hotel owners still need to be careful about spending and focus on diversifying revenue strategies to make sure their businesses are as robust as they can be. Traditionally, hotel expansion might mean building a new wing or even acquiring another property altogether; however, the definition has evolved, and there is a whole host of actions hoteliers can take to maximise income going forward.
Types of hotel expansion
Expanding a hotel doesn't have to mean adding square footage. However, that is one of the most common ways to grow your earning potential. Let's take a closer look at that as well as other means of boosting your hotel revenue.
Extend your property
If you are lucky enough to have land surrounding your hotel, then you may choose to extend the existing building. You could add more rooms or even make space for a new bar or restaurant, which would improve your offering in the eyes of potential guests.
While a property extension could open the doors to a significant revenue boost, there is a large upfront cost to consider. From securing planning permission to paying architects and other contractors, you will need the financial backing to make sure this project is a success.
You may want to consider hotel development finance to fund all or part of your extension, a specialist finance product that is designed to fund projects just like this. Don't forget that if construction work is part of your hotel expansion plan, you may need to close your entire premises or at least make sure current guests are not affected by the work, as this could spark disaster for your online reviews and ratings.
Renovate your current hotel rooms
In a world where Instagram is king, guests' expectations for room decor and aesthetics are higher than ever. If your hotel rooms are starting to show their age, then it might be time to invest in renovation and/or refurbishment to bring them in line with the current fashion.
You might choose to invest in an interior designer or use your own creativity and a Pinterest board to inspire the hotel improvements. If you run a boutique hotel, then you will have significantly more freedom around decor and aesthetics compared to larger chains. Guests are looking for special experiences, and the way your hotel room and communal areas look will make a huge impact on that.
Again, this is another activity that could completely transform your hotel and boost potential earnings. However, renovations require an upfront investment and can also mean temporary closure of all or part of your premises.
Work with Rangewell to find the right hotel finance to meet your needs. We help you to determine exactly how much you need to borrow and how to assemble an application that will attract lenders, then we search the whole of market for the hotel finance that will work for you - whatever your hotel expansion plans.
Add to your hotel portfolio
Perhaps you have decided now is the right time to invest in your hotel portfolio. Adding another hotel to your books is a great way to increase revenue and get a further foothold in a growing market. If you are planning to buy an existing hotel from another owner, you will need to make sure you have access to information such as occupancy rates and previous financial accounts, as this is all very important to lenders when it comes to issuing hotel commercial mortgages.
If your plan is to build a new hotel from the ground up or redevelop another property that's not currently operating as a hotel, then you will need to account for planning permission and property development costs. A project of this scale requires a comprehensive business plan covering everything from operational structure, hotel services, revenue streams, sales and marketing plans and more.
Before signing on the dotted line for your land or commercial property, speak to Rangewell about how property development finance can work for you and how best to fund your hotel development project.
Tips for boosting hotel revenue
Not all hoteliers will be in the position to expand their empires in 2022 or even in the next few years. However, there is still a lot you can do to grow your earning potential and reach new potential customers.
Invest in rebranding
Your hotel marketing matters now more than ever. With third-party websites like Hotels.com and Booking.com leading the way with guest bookings, you need to make sure you can stand out online.
When it comes to branding your hotel, ask yourself: who are your direct competitors? And what makes you different to them? Take the time to understand who your ideal guest is and what matters to them. This could be anything from being the cheapest in the market through to offering a luxury spa experience - it really depends on how you position yourself.
You might also find that tactics such as offering last minute and/or off-peak deals will increase occupancy rates during quiet periods. You should always aim to encourage all guests to leave positive reviews. Be sure to deal with any issues or concerns your guests may have as soon as possible, so they always check out happy and ready to recommend your hotel experience to their friends and family.
If rebranding and marketing, in general, seems confusing or outside of your expertise, then consider hiring an independent marketing consultant for some outside help. You can tap into a number of different short term finance solutions to fund this activity, speak to Rangewell about your specific goals, and we can assemble a financing plan tailored to you.
Invest in food and beverage options - and market them!
Whether your hotel has a small cafe or a fully functioning bar and restaurant, there is always significant earning potential from food and beverage. Even with the increased costs of ingredients and labour, there are still high-profit margins to be achieved if you can offer food and drinks to your guests.
Now is the perfect time to reassess your menus and determine whether they still live up to guest expectations. Ask your loyal customers what they love about your food and drinks and what could be improved. Consider food trends, such as the rise of veganism and a renewed interest in local produce, and be sure to incorporate these into your menus.
Remember: it's all fine and well to spend money on new menus, training kitchen staff and improving customer service, but if your guests don't know what's on offer, then you will struggle to get the footfall you need in your bar or restaurant. Make your food and beverage options clear in your marketing, and even consider offering guests a deal that incorporates dinner and drinks into their hotel stay.
Even upon arriving at the hotel, there is potential for guest bookings. Ensure your reception and support staff know what's on offer in the restaurant and encourage them to upsell reservations upon check-in.
If you are located in a popular tourist area, then you could look to market your bar and restaurants to the general public, as well as guests. Add a "Dining" section to your website and post regularly on social media about what's on the menu and how to book a table.
Upselling is one of the best ways to increase a guest's spend, even before they arrive at your hotel. Many hotel chains will offer guests the chance to upgrade their rooms last minute via email. This is a useful tactic if you have a number of premium rooms available.
Even once the guest arrives, it's worth having your reception staff offer room and service upgrades, as well as spa access and restaurant reservations. Never assume your guests know about everything your hotel has to offer. Give them the information they need both at check-in and in their rooms so they are well-equipped to make decisions about their stay.
Offer early and late check-in
Another affordable yet profitable way of boosting guest satisfaction is to offer early and late check-ins. Of course, this requires some operational support from the cleaning staff, but the potential for increased earnings is significant. Most third-party booking engines will allow you to propose add-ons to guests, so providing them with the opportunity to pay a small fee to arrive earlier or stay later will help support the cash flow of your hotel through small and regular payments.
Ask guests to leave reviews
Word of mouth is still one of the most powerful marketing tools for any hotelier. In fact, research shows that 80 per cent of guests will check between 6-12 reviews on TripAdvisor before booking their stay. Therefore, it's absolutely vital that you have a strategy in place to encourage positive reviews.
TripAdvisor, Booking.com, Google and Facebook are all common places where guests will leave reviews. Make sure you have ownership of all of your online profiles and create a protocol to deal with any negative feedback swiftly and efficiently so as to minimise the damage to your online reputation as quickly as possible.
Encourage direct bookings
While the majority of your reservations may come via booking engines, you should look to encourage direct bookings as a way of cutting marketing costs and boosting profitability. The likes of Booking.com typically take between 10-20% of your booking cost, so if you can encourage people to book on your website or via telephone, then you can save this - and even offer a small discount to guests who book direct.
When guests check out, give them your direct booking details and make sure they know to book with you directly in future. You should also ensure your website is operational and efficient for bookings, as ease of booking goes a long way for those used to using third-party booking engines to make hotel reservations.
Financing hotel expansion
Whatever your hotel expansion plans, you may need investment to help turn them into a reality. There are a number of types of hotel finance available to support you in your hotel growth plans.
At Rangewell, we don't just help you to secure finance - we're here to support you through the application process. It all starts with determining your goals and assessing your circumstances, so we can match your plans to the types of finance available to you. We also look at your existing finance arrangements and help you to work out whether refinancing is an option and how best to do this to incorporate your expansion plans and consolidate your debt at the same time.
Alongside traditional finance products like commercial mortgages and bridging loans, we will also assess your eligibility for newer, flexible products like Merchant Cash Advance and Tax Loans, both of which aim to improve cash flow for busy hotels.
So, with Rangewell by your side, you kick off your hotel expansion plans and increase your hotel revenue for the long term. Transform your hotel into an experience your target market will love and launch marketing campaigns that get your brand in front of potential guests all over the UK and beyond.
Get in touch with Rangewell today to learn more about hotel finance, and let's work together to transform your hotel for the better.