Hotels typically have low operating margins. Depending on the market you analyze, the margin runs anywhere between 6% to 14%. Competition in the hotel industry along with high operational expenses are often to be blamed for this. Consequently, hotels can neither raise prices nor bring down their expenses to improve margins.
Many times, the only way to do this is by streamlining your processes and increasing efficiency. Picking the right software tools is thus incredibly important for a hotel.
Categorize your functions
The first step in the process is to identify and categorize the profit and cost centers in your business. Profit centers are those business functions that bring money to your business while cost centers are those that cost money. For instance, marketing helps your hotel find new customers and is thus a profit center while accounting and janitorial services are cost centers.
Once you have categorized all functions, you may start discovering the best tools to accomplish every service. For profit centers, your objective is to pick a tool that can help you scale up and maximize revenues while for cost centers, you find the tool that can get the work done for the lowest price.
Take hotel booking software, for example. A software like AxisRooms comes with a holistic suite of services to improve distribution, efficiency and profitability that caters to hotels of all sizes. This is a better investment compared to an alternative that only offers limited features catering to a specific function like distribution or efficiency.
Choose your marketing models
Sales and marketing is inevitably the most important revenue driver for any business. The tools you pick to acquire customers can have a cascading impact on your overall profitability.
Marketing tools can typically be categorized into three types – research tools, operational tools and productivity improvement tools. While investing in the right operational tools can help you instantly scale your marketing efforts up, the efficacy of research and productivity tools are dependent on what you invest in and how you make use of these tools.
Take Instagram marketing, for example. The success of this channel depends on picking the right hashtags and posting the right kind of content that a prospective traveler will find appealing. The right hashtag tracking tools can help you identify the best hashtags to use for your content. However, your success with this strategy depends to a great extent on how frequently you use this tool or how you use this in conjunction with brand monitoring applications.
Another challenge that hotel businesses face is that the channels that work for one hotel or target group may not necessarily work for another hotel. For instance, a hotel in a tourist hotspot may look towards social media for promotion while a business hotel may want to invest in sales and email marketing. Investing in the right tools is critical.
So if you are looking at social media promotion, you may want to invest in tools that help you automate this process. Automation helps you scale your marketing efforts by reducing man hours and increasing operational volume.
On the other hand, a hotel that targets a business audience may seek repeat business and would thus want to invest in email marketing. The success with this strategy is directly proportional to scale – at a conversion rate of 1%, a mailing list with 100,000 subscribers will fetch several times more bookings than a mailing list with just 1000 subscribers. The focus, in this case, is as much on signing up new subscribers to your newslettter as it is with marketing to them over email.
Streamlining operations
Regardless of how big or small your business is, the average guest deals with several departments within their stay. This includes speaking to your support team for booking, your customer relationship team for check-ins, the janitorial for issues with the room and F&B team for dining options.
Keeping tab on all these different conversations can be quite cumbersome even for a small hotel. It is important to streamline communications so that it is easy to analyze customer satisfaction and the reasons for the lack of it.
The first step in the process is to offer every guest a single point of contact. Dialing in one number for all issues can make it easy for your administration to analyze the points of friction in your operations while making it easy for your guest to deal with the issues they face. Having a single point of contact also makes it easy to automate your operational workflow. For instance, you may integrate your CRM with a janitorial management app that helps you coordinate with the janitorial team.
From a customer’s perspective, it smoothens the experience without the need to talk to different teams while making use of third party integrations and webhooks to connect to different apps in the backend. The CRM tool you make use of must come with the ability to integrate with third party apps. This way, a one-time integration with various niche apps can facilitate hassle-free customer experience in the long term.
A lot of upstart hotels consider software tools as a cost that needs to be optimized. What often goes unreported is the opportunity cost of investing in the right tools, albeit at a higher cost. Using the right software tools can not only help you survive the first few years in the hotel industry, but can also assist in driving growth and scale over the long-term.