With the hotel business still in recovery, there's more to consider this budget season than just balancing expenses and revenue
Hotels have been on a rollercoaster ride since March 2020. Dealing with closures, reopenings, rising costs and ever-shifting regulations has been a tough task — and we’re in awe of how our partners in the hospitality sector have rallied.
Now, as they emerge from uncertainty, hotels are having to plan ahead, building lessons learned and new trends into their forecasts and strategies.
Taking demand drivers into account
To plan a hotel budget for 2022, you need to take into account the demand drivers that have emerged over the last few years. Customers expect brands to have a strong digital presence, technologies that enhance their experiences and sustainable practices across their operations. Investing in these areas is key to increasing customer loyalty and confidence, and driving revenue as a result.
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The impact of inflation on hotel budgets
Another significant factor to consider when planning an annual budget is the impact of inflation.
This is a global issue. In the UK, for example, the Office for National Statistics recently reported that the Consumer Prices Index (CPI) rose by 10.1% in the 12 months to July 2022, up from 9.4% in June. In the US, meanwhile, the annual inflation rate in the US slowed to 8.5% in July — which is cold comfort after it hit a 40-year high of 9.1% in June.
Higher rates result in empty hotel rooms
Inflation has made the expenses associated with hotel operations higher, pushing room rates skyward. This has kept holiday-makers and business travelers alike at home, and the result is empty hotel rooms.
According to a new report from the Global Business Travel Association, we should not expect spending on business travel to return to pre-pandemic levels until 2026. The report attributes this stalled recovery to a number of factors — including "persistent inflation, high energy prices, severe supply chain challenges and labor shortages."
Navigating the budget process
A realistic take on the situation is that recovery is on the horizon — it might just take a little longer than hotel managers had anticipated. This could make running a hospitality business a little more complicated in the immediate future, but a savvy hotel team should be able to navigate the budgeting process with a minimum of headaches.
Read on for five new items you should build into your hotel’s budget as you plan for the next year.
1. A strong digital presence
People spend a large part of their days on their devices, whether it’s working, checking their email or scrolling through social media. It’s why brands spend so many of their marketing dollars on building a strong digital presence that attracts new customers and keeps their existing ones engaged.
As you prepare your hotel budget forecast, this means allocating funds to enhance the website experience, craft inspiring social media accounts, build partnerships with digital travel magazines and write impactful emails that arrive in inboxes at the right time. Here, investing in a marketing automation platform can help make these efforts more effective.
Building guest personas
The biggest thing to consider as you build your marketing strategy is who makes up your target market. Building guest personas based on their travel habits, browsing behavior and available spend will help you be more targeted in your approach — which will make you more efficient with your hotel budget.
Many of our hospitality partners use PressReader’s consumption analytics to learn more about their clients’ reading habits which can in turn shed light into their overall hobbies, interests and behaviors.
2. Consumer-first technologies
You’ve likely heard the adage that all companies are becoming tech companies, and the same is true for hotels. Your customers expect a technology offering that’s both easy and safe to use, and that requires time and resources to get right.
Do you have a mobile app that allows users to book rooms at your property? Is it integrated with your hotel loyalty points program? Can they order room service or book a massage on it? Are they able to check out through it, as well? These are functionalities that are quickly becoming table stakes for hotels around the world.
Partner with software service providers
“We developed our own resort mobile app which allows our guests to interact with us during the stay in many ways such as ordering in-room dining, sending housekeeping requests, viewing the spa menu and calendar of activities, seeing a map of the resort and more. We get very positive feedback from our guests about it.” – Laura Cazeaux, Cluster Director of Marketing & Communications at 7Pines Resort Ibiza
Another investment you can consider here is partnering with software service providers like a digital newsstand that gives travelers free access to more than 7,000 newspapers and magazines from around the world in over 70 different languages.
At 7Pines, guests can connect to PressReader directly through the hotel app’s main navigation bar, allowing them to browse content online or download entire issues using the PressReader app. This kind of feature ensures that travelers never lose touch with news from home.
In a time of soaring inflation and worker shortages, this type of amenity puts the power of choice in your guests’ hands, so hotel staff are freed up from the labor involved in selecting, purchasing, and distributing publications to rooms.
3. The tools for a modern tech stack
A business is really only as good as the tools and software it chooses to invest in. To remain competitive in the hotel industry, you need a modern tech stack that facilitates internal communication, data collection and analysis, and in-depth reporting on that data.
Because of the massive impact COVID-19 has had on the hospitality sector, you can’t really rely on historical data as you plan for 2022. Instead, you need to adopt data-rich solutions that can accurately forecast changes in the market and support your decision-making.
As you make your budget projections, you need to account for more than just the platform itself. You should also consider the amount of time and resources that you’ll be spending on identifying and implementing the right tool for you and your team.
4. Sustainable products and activities
Another big priority for travelers is sustainability. Consumers are increasingly voting with their wallets and choosing brands that do more for the planet. For hoteliers, this means replacing some of the line items on their budget — and adding some others.
For example:
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Mainstream cosmetics and toiletries partners can be replaced with brands that are local to your hotel and that use sustainable practices to develop their products.
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Adding a composting system for your food waste can reduce the amount of scraps that end up in the landfill. The bonus? Composted material is great for keeping your garden healthy if you grow your own produce or flowers on-site.
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Instead of offering print newspapers and magazines that need to be shipped to your location, you can partner with a digital newsstand that gives your customers access to thousands of publications from their own devices.
Sustainability can save you money
The good thing about some sustainable practices — like washing your towels less often — is that they ultimately save hotels money on detergent and water in the long run. That means you’ll have more money available in your budget to put towards other important items.
5. Reopening considerations
As we emerge from the pandemic, there are also a number of returning costs that are worth considering in your 2022 budget. If you were operating with a reduced staff, you’ll need to hire new people to join your team.
Remember: you’ll be competing with a lot of other businesses looking for employees, so you may have to invest more in hiring than you have in the past.
The management expenses related to any services that are coming back online — like your sauna or full-service dining — will also have to be accounted for in your budget. In addition, you’ll also need to invest in communicating any and all changes to your employees and your customers.
The future is uncertain — but exciting
As the hospitality industry continues to evolve and adapt, it’s exciting to see hotels make customer-focused changes that elevate their offerings and meet customers where they are.
We’ll have to wait and see what other budget items pop up over the next year.
For now, if you’re planning your budget for 2022, download PressReader’s hotel budget template to account for all the items in this post.
