Maximize Your Hotel’s Profit with These Essential Cost-Saving Tips

While hotels are primarily in the business of keeping guests happy, profitability is equally important as guest satisfaction. One way for hotels to increase their revenue is by controlling operational expenses. Keep reading to discover more about hotel operating costs, why it’s important to keep them down, and ways that you can cut costs at your own properties.

What Are Hotel Operating Costs?

Hotel operating costs cover a wide range of different expenses, ranging from employee salaries to paying the rent. The common thread that connects these costs is that all of them have a direct impact on the ability for hotel management to run and grow the business. This is why it’s crucial for hotels to regularly evaluate and adjust their spending to keep these costs down. But to effectively control expenses, management teams need to have a thorough understanding of where they spend their money.

When it comes to hotel costs, there are two types:

1. Fixed — These expenses must be paid regardless of a hotel’s performance, and so present a smaller opportunity for cost cutting. Fixed costs include spending on mortgage or rent, property taxes, insurance, hotel management software fees, franchise fees, and maintenance.
2. Variable — Conversely, variable costs are apt to fluctuate based on how productive a hotel is, directly correlating with peak and slow periods. Since these expenses are directly impacted by outside influences, they represent a bigger opportunity for savings. Variable costs include employee wages, utilities, housekeeping supplies, food and beverage, amenities, and marketing.

Why Is It Important To Cut Hotel Operating Costs?

A recent study from Statista found that cost-related concerns — energy costs (80%), cost of staff (66%) and cost of inputs and services (53%) — were three of the top five challenges that hotel owners identified as being of most significant risk to the accommodation business. In a cost-conscious climate like this, reducing operating expenses can mean the difference between a profitable business and one that struggles to stay afloat. 

When hotels reduce costs, they benefit from:

Increased profits. 

While welcoming guests and providing an excellent customer experience is a source of satisfaction for many hoteliers, at the end of the day a hotel is first and foremost a business. And like any business, a hotel’s primary goal is to turn a profit. By keeping operating costs down, hotel owners are able to increase their net earnings.

A competitive edge in the market. 

Raising room prices isn’t always the best way to make more money. When hotels are able to reduce costs and maintain the quality of their services, they can then pass the savings along to guests in the form of better nightly rates. This makes it easier to compete with more pricey properties in the area and can result in higher occupancy rates.

Efficient operations.

Cost savings can come from streamlining cumbersome processes that were previously redundant, unnecessary, or too involved. By eliminating or improving these processes’ operational efficiency, hotels can spend less and improve guest services.

Controlling Hotel Expenses

For hotels that want to maximize profits by lowering their operating costs, it’s important to have a gameplan in place. Approaching cost cutting with a measured strategy can help teams ensure that they get the most out of their expense management efforts. Some steps that you can take to make this process as effective for your hotel as possible include:

• Categorizing all of your hotel’s expenses. Look at all your cost centers and the expenses they incur, then organize them into groups based on similarity.

• Analyzing costs. Next, identify which of these categories present the best opportunities for savings, and which areas are essential to preserving the quality of the services your hotel offers.

• Creating an action plan. Based on the conclusions you draw from the previous step, you can set appropriate cost reduction goals and come up with actionable steps that ensure the greatest chance of reaching them.

• Implementing your plan. Finally, put the plan into action, following the steps you laid out for yourself. Be sure to closely monitor your progress and make any adjustments needed along the way.

5 Cost-Saving Ideas for Hotels

So what can you do to cut back on operating expenses and maximize your hotel’s profit? These five ideas are a great place to start.

1. Prioritize energy savings — Did you know that “going green” at your hotel can help you save? According to the World Sustainable Hospitality Alliance, sustainable properties are 20% more resource efficient, representing a reduction in utility costs. Switching to LED bulbs, investing in Energy Star-certified appliances, and adopting energy-saving practices such as controlling lighting and optimizing room and water temperature can all help lower your hotel’s utility bills as well as its carbon footprint.

2. Concentrate on increasing staff efficiency — Whether it means encouraging cross-training for staff members so your existing team can be more effective during busy periods or enacting time-saving policies for your front desk, housekeeping, or facilities departments, looking for opportunities to boost efficiency can go a long way.

3. Invest in technology for automation — Automation of involved processes represents a significant opportunity for time savings. Take gratuity distribution for example, by investing in a system that automatically calculates and allocates tips and service charges, you can save your management team hours of inputting and verifying data from multiple sources.

Discover the Benefits of Automation in Gratuity Distribution >>>

4. Prevent revenue leakage with reconciliation software — Another way of increasing your hotel’s profits is to prevent loss of expected income. A poorly executed payment reconciliation process can result in revenue leakage, which will add up to big losses over time. Total Recon from Evention helps you reduce costly errors by providing you with transaction-level visibility so you can trace and resolve variances to safeguard your revenue.

5. Create a maintenance schedule — Repairs to, or replacement of, the appliances and systems that keep your hotel functioning can be costly, and the downtime can adversely affect guest experience. The best way to prevent these malfunctions from happening and extend the life of your IT and HVAC systems, washers, dryers, kitchen appliances, and beyond is to schedule routine maintenance.

Keep Your Hotel’s Earnings on Track With an Enhanced Reconciliation Process

When it comes to ensuring the profitability of your hotel, it’s crucial to have the right payment reconciliation tools on hand. As the hospitality and tourism industries continue to grow, so do the number of transactions that hotels process on a daily, monthly, and yearly basis. To keep up with this growth, streamline the reconciliation process, and prevent revenue leakage, more and more properties are turning to automation.

To learn more about how reconciliation software like Evention’s Total Recon can benefit your hotel, download your free copy of our eBook: Your Complete Guide To A Better Cash & Credit Card Reconciliation Process.