A short guide to profitability – 6 ways to reduce the pressure of rising costs


There is no way to avoid the subject of inflation if you read or watch the news. With COVID-19, and now the Russian-Ukrainian conflict, we have seen a massive increase in the cost of products and services. It all started with soaring energy and gas prices. Soon after, other goods and services followed suit. And the predictions are not very optimistic – The World Bank estimates that prices will remain historically high until 2024.

For hoteliers, soaring prices are one of the biggest challenges this year. In February 2022, the utility prices were 35% higher in nominal terms, compared to 2019, reaching EUR 8 in PAR. World food prices are at an all-time high. Construction materials prices rose even before the conflict, making cost-effective planning even more difficult in terms of room upgrades or new builds. If not well managed, these costs have the potential to create major disruptions in budget allocation, which can affect overall hotel performance.

So what can you do to balance the situation? Here are some cost-effective suggestions that can help you reduce the pressure of rising costs:

Review all your costs and revenues and see if there is anything that can be streamlined or eliminated.

Before adopting profitable measures, make sure you have a clear overview of your expenses, but also your income, by looking at measures such as RevPAR, ADR, ALOS, ReRTI, etc. Are there any categories that cost more than budgeted? Is your RevPAR high enough and what can you do to improve it? Having the numbers in front of you and asking yourself and your team these questions is the first step to a profitable strategy.

Prioritize investments.

Whether big or small, now is a great time to organize your projects according to their priority. When deciding what to do next on your plate, be sure to consider things like resources required (human, material, digital, etc.), budget needed, timeline, and other hurdles that may slow the project down. .

Reduce your energy consumption by measuring your consumption and adopting an energy efficiency policy.

A hotel can cut up to 20% of its energy costs if it correctly implements an energy efficiency policy. First, start by measuring the current consumption. Are there some areas where you think you can reduce it?

No expensive upgrades are required at first. By making sure you perform regular maintenance on your drains and fix leaky traps quickly, you can already save money. Other things to consider? Installing room thermostats, switching to LED lights and implementing a smart lighting system with sensors will also make a huge difference to your monthly consumption.

Perform system maintenance in time.

Do not postpone maintenance work even if your systems seem to be working perfectly. Sometimes you may face hidden issues which, if left unresolved, can turn into major challenges and cost much more in the future. Keep your maintenance appointments in a calendar to make sure you can schedule them on time.

Invest in training and onboarding your staff to reduce attrition.

Attrition is a big problem in the industry. Once you’ve onboarded someone, you want to make sure their manager knows how to motivate them and keep them engaged. A good manager can make a huge difference – recent Gallup research shows that managers matter 70% employee engagement variance – and therefore, can have a significant impact on the reduction of turnover.

Use technology to automate processes where necessary.

Contactless solutions are no longer an option in managing your daily operations. Whether it’s internal processes or direct communication with your customers, these solutions can help you reduce the time your staff spend on certain tasks, helping them focus on creating a great customer experience. From smart room keys to online reputation management software – it will all prove indispensable once you start using it.

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