Corporate ConnectHotels & ResortsNews

How do we improve Hotel ROI?

“By thinking out-of-the box from design to operations,” suggests Ajay Mehtani, Senior Vice President Asset Management South Asia at HVS- Anarock as shares insightful strategies for the hospitality industry in this study:

As an industry there is a need to make hotels more viable. The pandemic has taught us to rethink in this direction and develop hotel assets that can drive higher ROI. It can only be done when we look at making changes from Design to Operations.

 Ideally, we should make changes to the industry status, compliance cost and interest cost, however, as these are policy matters, we cannot do much ourselves. Meanwhile, cost of construction, cost of operations i.e. the largest expenses related to utilities and manpower, are aspects that can be controlled by the hotel investors, brands and operating teams effectively.  

Below are a few recommendations and suggestions for hotels in this regard:   

Design and construction elements to improve space utilization

  • Improve GFA per room across all categories other than Economy / Budget which is already optimized to a large extent.
  • Move more areas to revenue generating and reduce non-productive areas – ratio enhancements to 85:15 or 90:10, respectively. 
  • Introduce a smaller more efficient guest arrival area with great ambience.
  • Kitchens can be aligned at one place to create efficiencies across multiple restaurants and banquets.
  • Inventory / Stores can be reduced with JIT (just in time) concept, especially in key cities where deliveries are a lot more predictable than years ago, or stores can be moved to a warehouse space for dry and engineering items instead of using prime real estate.
  • Common offices in BOH can be like co-working spaces and virtual desks. Few teams can work from home, while admin / finance / HR teams can work in rotation.
  • Senior management common offices / rooms or even un-utilized Board Rooms / PDR’s can be utilized as offices based on need to spend time in office.

Create spaces for ancillary revenue generation by improving ratio of revenue generation areas 

  • Create spaces for alternate sources of revenue within the same complex – de-risk with other asset classes like Serviced Residences, Co-Living, Commercial, Co-Working etc.
  • Hotels, especially in the Upscale and Midscale segments, can reduce restaurant spaces wherever they have many standalone outlets within walking distance or can look at leasing outlets. Drive-thru and Home Delivery can add revenues; appropriate changes to design should be made.
  • Design Banquet Halls in such a way that they can be outsourced easily and can be given to third-party company for use of space without any hinderance.
  • Make parking a source of income rather than underutilized space only during events & meetings – it can be managed and secured by third-party operators with design changes.
  • Create advert spaces within the hotel and on outside facades to use them as billboards for generating revenues.


Effective usage of technology while retaining the essence of service interaction in key areas

  • Technology should be the driver (Cloud) so that people can work from off-site on common areas i.e. shared services for Finance & Accounting, Procurement etc.
  • Front of the house tech to make all in-house interactions of guests over an app while at the hotel including room controls.

Energy cost optimization

  • Build energy infrastructure to cater to blocks of spaces without impacting the experience i.e. should be able to operate fewer floors and shut down other areas whenever not required to lower cost of cooling when areas are not in use etc.
  • Use wind and solar power wherever possible, directional use of day light, reflective material on building façade to reduce heating.
  • Use heat pumps, LED, newer technology to reduce energy consumption, recycle water and run operations at the lowest cost.
  • Create Rainwater Harvesting where you can harness water. 
  • Look at options of making DG sets, STP common to close by hotels in area where possible and share costs.

Operations
 

  • Creating workflows efficiencies / smaller but efficient spaces / cross-train associates with a single set of uniform (no change across the hotel) so that staff can be utilized across any area.
  • Encourage change management process for associates to be able to work across a horizontal structure rather than vertical hierarchical structure.  
  • Last but not the least, hotels should move to dynamic pricing for all large volume accounts and give discount as a percentage off on Bar rate like airlines rather than a fixed price to optimize revenues.
Related posts

Le Meridien Hyderabad has appointed Nitin Marriya as the new Hotel Manager

Le Meridien Hyderabad has appointed Nitin Marriya as the new Hotel Manager. Bringing with him over 18 years of multi-brand experience and…

Chef Asif Qureshis' Forgotten Home Recipes at The Sahib Room & Kipling Bar

The forgotten home recipes of Chef Asif Qureshi’ showcasing the classical grandeur of the Awadhi cuisine and beyond

Piramal Group appoints Kalpesh Kikani as CEO, Piramal Alternatives

Piramal Enterprises Ltd announced the appointment of Kalpesh Kikani as Chief Executive Officer (CEO) of its INR 11,000+ crore AUM Alternatives Business…

Pranjali Dhotre appointed General Manager ibis Pune Viman Nagar

ibis, a smart economy brand from the Accor stable, announces the appointment of  Pranjali Dhotre as the General Manager of ibis Pune Viman Nagar. Her…

Sita Lekshmi appointed new General Manager ibis Kochi City Centre

Ibis announced the appointment of Sita Lekshmi as the General Manager of ibis Kochi City Centre.

Know Your Leader: Nikhil Sharma's code for growth

Nikhil Sharma, Regional Director, Eurasia, Wyndham Hotels & Resorts, EMEA shares what keeps him going

IHG debuts its popular extended-stay brand, Staybridge Suites in India

IHG Hotels and Resorts debuts its extended-stay brand, Staybridge Suites Bengaluru Thanisandra.

Sayaji Hotels appoints Amit Gera as the new General Manager Operations

Sayaji Hotels has appointed Amit Gera as the new General Manager Operations. An alumnus of IHM Shimla Amit is a passionate hospitality…

Marriott appoints Anthony Capuano as new CEO and Stephanie Linnartz as President

Marriott International’s Board of Directors announced that Anthony “Tony” Capuano has been appointed Chief Executive Officer and has joined the company’s Board…

The luxury Leela Palace Jaipur debuts in Rajasthan

The Leela Palaces, Hotels and Resorts today unveiled The Leela Palace Jaipur.  The Leela Palace Jaipur has been branded after extensive refurbishment…