Table of Contents
- How Your Hotel Can Reduce Off-Market Inventory
- What is off-market inventory?
- What causes empty rooms?
- 8 tips for increasing cash flow and occupancy
- 1. Implement flexible leases for longer periods of time (3-12 months).
- 2. Transform rooms into workplaces.
- 3. Rent conference and hotel rooms to local businesses for online events
- 4. Create an effective preventive maintenance program (PM) to reduce the likelihood of asset failure
- 5. Dynamic pricing and flexible marketing strategies
- 6. Offer rooms to medical personnel
- 7. Optimize staff schedules
- 8. Reduce employee turnover
- Managing off-market inventory is crucial right now
Managing hotel vacancies has never been more important.
According to research conducted by McKinsey & Company, global occupancy rates were less than 15 percent of normal averages for luxury hotels and around 40 percent less for economy hotels in May. The reason for the disappointing numbers is, of course, COVID-19.
During this uncertain time, hotel leadership must set new booking goals—for both high and low seasons. Analysts predict it could take a minimum of 3 years for hospitality facilities to return to pre-COVID-19 revenue numbers. Translation: Thinking strategically when it comes to hotel inventory management is crucial.
Traditionally speaking, one of the most dependable ways savvy general managers have reduced costs is by reducing off-market inventory. Right now, hotels must handle vacancies in a manner that cuts expenses and reduces financial strain. In this article, we’ll address the reasons for vacancies and what hotels can do to reduce costs:
How Your Hotel Can Reduce Off-Market Inventory
What is off-market inventory?
Though it may come as a surprise to guests, hotels are often not fully booked throughout the year.
Off-market inventory refers to the number of hotel rooms that remain vacant most of the time; the rooms might not even be advertised. The purpose of unavailable rooms is to reduce associated maintenance costs.
Successful hotel inventory management strategies include repurposing those rooms whenever necessary, among others. While online travel agencies can sometimes help reduce off-market inventory, they aren’t necessarily a viable long-term strategy.
What causes empty rooms?
There are a number of factors that cause empty rooms, and they vary based on the period, season, location, and hotel reputation. In the current hospitality climate, travel bans alongside fears of economic instability have a huge impact as well. At the time of publication, many hotels, both big chains and small resorts, are mostly empty.
- Travel restrictions & unpredictability: As business and leisure travel is highly restricted at the moment, demand has plummeted. Most businesses are holding online Zoom meetings as an alternative to in-person gatherings. Additionally, the majority of trade shows, conferences, conventions, and other business events have been canceled. Travel bans and quarantine requirements have profoundly impacted the industry too.
- Guest fears and concerns: Unsurprisingly, many visitors are postponing plans to take time off as they are afraid for their health and safety. Again, the current economic uncertainty isn’t helping matters.
- Seasonal patterns: In most locations, there is a clearly defined high season; this is when properties make the majority of their revenue. During the rest of the year, many rooms often remain empty. These patterns can vary depending on weather, location, holidays, and special events.
- Failure to meet guest expectations: We live in a time when a happy customer might leave a 5-star review, but an unhappy guest will almost certainly leave a 1-star review. Bad reviews can be damaging to your establishment’s reputation, so ensuring that you’re always meeting and exceeding guest expectations is essential. Having an effective preventive maintenance (PM) program in place is crucial in order to prevent and resolve issues before they affect your customers.
8 tips for increasing cash flow and occupancy
The good news is there are several strategies that you can implement to reduce off-market inventory and high vacancy rates, such as the adaptive reuse of rooms and other unoccupied spaces, redefining your marketing plan, and maintaining flexibility with your rates. Let’s take a closer look:
1. Implement flexible leases for longer periods of time (3-12 months).
Consider flexible rates for long-term guests that would like to stay for a few weeks or even months at a time. Many folks prefer having the services, amenities, and facilities at their disposal that only hotels can provide. Airbnb may have become popular in recent years, but hotels still rank high in terms of dependability, service, and comfort.
2. Transform rooms into workplaces.
Repurposing rooms to convert them into temporary offices and coworking spaces can be a successful strategy in managing off-market inventory. Just make sure to stay flexible as you cater to different needs and work styles.
White-collar professionals are obviously fantastic potential clients, but also consider micro-business owners like yoga teachers, coaches, and consultants who might be interested in renting space for workshops. Assuming you provide outstanding customer service, and a comfortable room, these individuals might just become your best frequent customers.
3. Rent conference and hotel rooms to local businesses for online events
Another repurposing idea worth considering is renting space to local companies conducting online events. Associations that host annual conferences are scrambling to organize both online and offline events (depending on the state) for large numbers of individuals. If you have available space in the form of a rooftop, garden, or lobby area, consider hosting corporate events.
4. Create an effective preventive maintenance program (PM) to reduce the likelihood of asset failure
Implementing a solid preventive maintenance program is paramount to reducing the risk of unnecessary asset failure. Studies suggest that for every $1 spent on PM, facilities could save nearly $5 on expenses. One of the easiest ways to create, assign, and track word orders is via a Computerized Maintenance Management System (CMMS) or Facility Management System (FMS). Today’s newest software maintenance scheduling systems are smartphone compatible, user-friendly, and scalable.
Following manufacturers’ recommended maintenance guidelines prevents costly downtime, increases asset life cycles, and ensures guests remain comfortable during their stays in your hotel. Obviously, quickly resolving problems as they appear is important, but downtime prevention is crucial!
5. Dynamic pricing and flexible marketing strategies
During this unusual time, GMs should be continuously analyzing their rates in order to adapt to market demand. With travel bans in place, you can facilitate long-term stays by providing guests with discounts and other VIP incentives.
You should also be brainstorming new strategies on how to market your hotel. For example, you might want to reframe your target audience on a temporary basis. Instead of marketing to international guests, you may concentrate on advertising to locals—staycations are in vogue, after all. Furthermore, consider targeting the rather untapped demographic of digital nomads who need places to settle as they wait out travel bans.
6. Offer rooms to medical personnel
Our last tip may sound a bit strange, but it’s worth considering—offer your vacant hotel rooms to medical professionals who need a place to stay during essential travel. In April 2020, Hilton and American Express joined forces to offer up to 1 million rooms to medical professionals. Besides generating creative ways to reduce off-market inventory, you’ll want to look into more traditional ways for managing tight budgets:
7. Optimize staff schedules
Analyze booking schedules and adapt to demand in order to avoid being under or overstaffed. As a GM, you must balance the challenge of prioritizing flexibility to reduce costs, while maintaining excellent customer service at all times. Also, consider cross-training your employees in tasks they enjoy, so that they can offer help during busy times of the day. Doing so will keep both customer and employee satisfaction high.
8. Reduce employee turnover
A high employee turnover means that you’re losing on efficiency by continuously training staff. Additionally, happy employees are more productive and help businesses thrive.
Aim to make your hotel a desirable workplace by addressing employee concerns at all times. Further, make your employees feel safe and respected by rewarding their efforts to maintain a high standard of service during those difficult times.
Additionally, consider implementing a connected workforce platform like MaintainX to enhance team communication. Though it may seem like a small action, maintaining a centralized place where team members can share concerns, victories, and work-appropriate jokes throughout the day can significantly boost morale. Further, chat apps allow hotel workers and management to stay in touch while working on different floors.
Managing off-market inventory is crucial right now
Some of these strategies to manage off-market inventory and reduce costs are new, while others have been around a long time. Of course, not all of them will be applicable to everyone. However, we’re dealing with unprecedented challenges, which require unusual solutions. Hotels that act now, will be well-positioned to pull through these uncertain times.
We hope you have enjoyed reading this article and found a useful tip or two to implement within your facilities. If you’re looking for a facility management solution that allows you to:
- Create reactive and preventive maintenance work orders.
- Assign recurring work orders to both teams and individuals.
- Monitor progress by maintenance category, priority level, etc.
- Analyze maintenance costs for greater efficiency and savings.
- Hold text conversations with team members in real-time.