Maximizing revenue and controlling costs remain top priorities as hoteliers continue their struggle to drive rate and occupancy.

With 2010 settling in as yet another challenging year for driving profitability, hoteliers continue reexamining cost structures to uncover savings opportunities and tap into new sales and marketing programs to better hit budget targets. Together, finding new ways to better manage costs and maximize revenue streams can make a big difference on the bottom line, save jobs and set a more positive tone in the workplace.

HOTELS talked to several independent hoteliers, asset managers and brand operators to discuss ideas they have implemented that positively impacted operations and the bottom line. Here are three case studies from hoteliers who found and implemented programs that truly make a difference.

Turnaround Strategy

Trans Inns Management, a Detroit-based management firm, early in 2009 was awarded contracts for eight mid-market hotels totaling 2,000 rooms and 500 jobs to stabilize, manage and reposition the portfolio. “By taking a long-term view on preserving the assets’ value, the lender will recognize a higher profit by holding and repositioning the assets until the markets recover. In the meantime, the lender is generating revenue,” says Daniel Vosotas, president and CEO of Trans Inns.

In the first 10 months, Trans Inns cut expenses by 25%, predominantly by reorganizing the labor structure. For example, it increased productivity by consolidating hours in areas such as laundry and cross-trained all associates.

Unfortunately, tough times sometimes call for tough measures. Among the other initiatives implemented by Trans Inns:

• Using hotel managers to cover additional hourly tasks such as working front desk shifts, inspecting rooms and driving the shuttle bus. This not only significantly lowered labor expenses, it also raised service levels by having managers on the front line. Managers gained more firsthand feedback, which has helped them focus their efforts, and it increased the number of sales leads obtained while covering shifts.
  At certain hotels, Trans Inns was able to eliminate one full-time front desk employee, which resulted in an annual savings of US$22,900 per hotel. In addition, talented hourly front desk associates have been assigned added tasks that normally would be completed by managers, like invoicing and revenue reporting. These tasks are easily handled during slower times at the desk, particularly during the night audit shift, and give managers time to cover front desk shifts.

• Management consolidated hourly positions in laundry and reduced wages by four hours per day, resulting in annual savings of US$14,600. With lower occupancy levels, there is increased downtime in laundry while waiting for dirty linens to be dropped. In addition, smaller loads often resulted in higher laundry supply costs.
  To increase efficiencies in this department, housekeeping supervisors strip checked-out rooms in the morning and start initial loads of laundry, allowing laundry attendants to immediately start folding linens. While waiting for linens to be dropped throughout the day, the laundry attendants also act as house persons, with responsibility for cleaning the lobby.

• Trans Inns also eliminated optional in-room guest amenities and had them available at the front desk on a request basis. Hotels stopped leaving newspapers at guestroom doors, instead making them available at the front desk. They also cut back on body lotion, decaf coffee and second pens and notepads in guestrooms. Guest supplies per occupied room expenses were reduced by an average of US$0.10.

• Management renegotiated or eliminated contracts, including waste removal, pest elimination and landscaping. At certain hotels, eliminating landscaping contracts and having maintenance crews chip in resulted in an annual savings of US$19,300. The same crews also complete carpet and window cleaning, saving US$4,000.

• The breakfast buffet was replaced with a cook-to-order system during the last 30 minutes of service to reduce waste. “Big groups with five in a room were killing us on the breakfast buffet,” says Mike Damitio, vice president of acquisitions and development. “By going to cook-to-order, we cut enough waste to cover the necessary man-hours and satisfied guests by giving them what they want.”

• The hotels increased recycling efforts to reduce office supplies. They reused key packets and recycled ink and toner cartridges and paper. As a result, operating supplies were reduced by an average of US$1,500 per year.

Buy-in of the entire staff was a vital part of adopting cost savings without negatively affecting guest service, Damitio adds. “We asked each department head to develop their own list of ways to trim expenses,” he says. “This approach left them feeling empowered and more committed to the success of the plan. Once the list of ideas was developed, daily morning meetings were held with all team members to ensure they were well informed of events in the hotel.”

Management also focused on improving guest satisfaction scores and embracing disgruntled team members, according to Damitio. “We’ve consolidated the marketing plan and continue to recognize operating efficiencies. Our next phase is repositioning the assets with extensive renovations, which will create additional value for the lender,” he says.

When the original loans were made on these hotels in 2006 and the brands issued their property improvement plans (PIPs), the hotels were already under stress and the PIPs were not satisfied. Trans Inns renegotiated the PIPs and then satisfied the basic needs of the hotels, such as fixing broken washing machines. “Now we are getting back to the PIPs,” Vosotas says. “A capital infusion helps a lot to show the new regime means business.”

Staying True To Story

Nisbet Plantation, a 36-key independent luxury resort on the Caribbean island of Nevis, is faring better than most by staying true to its luxury brand and its long-term customer relationship marketing program developed by its marketing agency, Madigan Pratt & Associates.

Late in 2008, the hotel was contending with the decline in travel demand, and air service to the island had become virtually extinct as a result of the closure of the island’s largest hotel for repairs. But instead of resorting to marketing on price and deep rate reductions, Nisbet General Manager Jamie Holmes implemented a cost-effective strategy focused on product, price, place and promotion—and the customer experience. As a result, the resort continues to attract guests while maintaining strong average daily rates. “The market in St. Kitts and Nevis is off 30%, and our business is off 5% to 7%, and we are already halfway back to our high-water mark,” Holmes says.

Holmes says ADR is sitting at US$310 (down from US$324 the previous year) and that his December numbers were better than in 2008. “January looks to be off about 5%, but February and March look good,” he says. “My reservations agents can book without coming to me every day. We give them the authority and parameters for booking. If they need to enhance a meal plan or offer some value added versus a rate reduction, they don’t have to call me. I want them to sell and then report.”

Holmes leads weekly calls with his sales agents, marketing team and the owners to talk about the next week, month and three months to see what is working, what packages are attracting interest and what to consider next. “We need to make sure the offerings are interesting, easy to sell and that we have what customers are asking for,” Holmes says. “Whatever value-add they want, we will have it.”

Nisbet Plantation is also aggressive on the database marketing side, capturing information for nearly 10 years now and using blogs, Facebook and other Web sites to integrate package deals. Holmes says the database work, along with e-mail newsletters and promotions, help create loyalty, with repeat visit rates ranging from 20% to 45% over the past 10 years.

The hotel uses a booking mechanism that creates and sends a four-color HTML confirmation e-mail after booking, another one just before arrival suggesting pre-booking activities, a third e-mail to thank guests post-stay and yet another one nine months later to trigger the next reservation. Holmes says that 99% of those e-mails are successfully delivered and that guests tell him they appreciate the e-mail system.

To keep guests happy while on property, when the hotel had US$500,000 to invest 18 months ago, the leadership team decided it could get the most bang for its buck by investing in the beach experience. New beach chairs, a renovated beachside restaurant and other touch-ups made a difference. Holmes increased the number of staff servicing the beach experience, improved outdoor entertainment and hired a painter full-time to keep the 50-year-old hotel looking fresh. The hotel added scooter and water sport rental programs and, after its split with the vendors, nets US$400 a month.

On the cost side, the hotel changed as many lights to fluorescent bulbs as possible and put an on-off switch on its three coffee machines that were running 24 hours a day. Including other green practices, the hotel cut its energy bill in one year from US$162,000 to US$102,000.

Changing Cultures

Hospitality Ventures, Atlanta, a privately owned hotel ownership and management firm, continues to succeed and grow its portfolio by proving it can consistently increase market share while simultaneously reducing operating costs.

From January through November of 2009, 13 of the 20 hotels in the Hospitality Ventures portfolio grew RevPAR by a cumulative average of 10.1 points, occupancy by 8.3 points and ADR by 2 points. Roger Miller, vice president of sales and marketing, attributes the growth to the company’s culture of sales and marketing, revenue management and e-commerce specialization. Key strategies include:

• Maintaining or attracting experienced revenue-driven general managers, directors of sales and marketing and sales managers;

• Thorough and consistent utilization, monitoring and inspection of hotels’ automated sales systems by property general managers, sales teams and appropriate corporate staff;

• Providing all hotels with the maximum in market intelligence and competitive intelligence products, programs and services (keep your sales team selling—not in research and development);

• Developing a strong lead-generation program for each hotel based on corporate office participation in strategic market segment associations and annual conferences;

• Assisting and ensuring all hotels use brand resources, support and tools, and participating in all appropriate chain or brand programs;

• On a scheduled basis, providing structured, corporate office sales and marketing visits focused on auditing, reviewing and fine-tuning all aspects of sales and marketing, e-commerce and revenue management plans;

• Providing all hotels with a brand revenue management and e-commerce specialist.