Every hotelier is running a business to earn more profit. Hence The profitability of the hotel depends on the revenue minus cost.
The hotel’s revenue management wishes to have balance booking whole the year. So they can get same profit every season.
In fact, It is a very crucial that distribution of Balance is the most important factor in in the distribution of hotel rooms.
Having regular reservations along seasons is very important. So without unstable moments, is the dream of any hotel revenue management.
It’s very common to undergo low occupancy from Monday to Friday. Low occupancy can also be at low seasons at times then fewer travelers come to beach or mountain destinations.
These are common situations that should handle by means of good product management and product distribution. Hoteliers should use creative measures that do not lead to product devaluation.
A straight forward, logic-based, sensible argument — ‘Hotel room night demand in India is strong’.
That is a practical position. All indicators lead us to find merit in it. However, while practical refers to something that is easy to accept.
Practicable means ‘something that can actually be achieved’; something that is workable, attainable, or feasible.
It is practical to assume that rooms will sell, and revenue will be earned. However, it is not always practicable that profits will be had.
The clinical prognosis of the challenges is in order. When conducted, it will become evident that a few different strategies should have been employed, or can now be focused on, if one truly means business.
For those planning their next (or first) hotel, building the right product is critical. A poorly researched hotel project that either lacks proper market intel, is incorrectly positioned.
Getting a proper and detailed feasibility study before spending vast sums of money is imperative. A quality job would entail thorough scrutiny of the past, present, and future of demand-supply dynamics in a micro-market.
It would draw inferences from socio-economic as well as geo-political factors that could impact success.
The projections would err on the side of caution, while ensuring that heed was paid to the fundamentals of the project, including the promoter’s cost of borrowing and equity return expectations.
A well-structured feasibility study will aid in sound planning, avoiding all the pitfalls of an ad hoc and erratic business decision.
The right choice in branding and management is also consequential to the success of hotels.
Most hotel developments in India operate under the management contract arrangement with a reputable hospitality brand.
Over 55 hotel companies of varying brand repute and management expertise presently operate across India in a chain scale format.
Honing into the right choice for your asset, and then ensuring that a balanced and equitable management contract is executed, are principal matters.
From brand recall to management proficiency, and from distribution muscle to attracting the right talent, the operator has a multipronged role to play in this equation. Hotel management contracts are unique, detailed and often confusing. Both, first-time owners, as well as seasoned hoteliers, need a trusted advisor when negotiating and signing these long-term and complicated agreements. No two contracts are similar, and no two hotel projects are the same. Equally important is the fact that each hotel owner has a different set of expectations from their operator. The ability to identify these needs while negotiating a hotel management contract is extremely important.
Hotels in mature markets across the world have long been successfully utilizing the professional expertise of qualified asset management and revenue management firms.
While the brand and management entity brings a significant level of virtuosity to the profit-generating potential of hotels, they do not promise these returns.
Savvy investors have thus frequently found merit in appointing a team of experts that is focused on optimizing the returns from the business.
The asset manager’s task is to unlock the true potential of a hotel by assisting the unit operations team to challenge the status quo.
By using market intelligence, logical assessment, and industry best practices, they offer a perspective about ways and means of balancing the day-to-day challenges of operations.
. Asset managers usually link most of their compensation to the successful achievement of the owner’s goals, thereby aligning their performance to their remuneration.
Similarly, many hotel owners seek a strategic and operational level of revenue management support from firms that offer a series of activities specially customized for increasing hotel revenue.
Revenue management consulting firms assist hotels with a full deck of analytical and intuitive inputs on managing rates, content and digital sales platforms.
From business mix optimization and pricing strategies to online channel and content management.
Owners benefit from the expertise of an entire team of revenue management experts and data scientists.
Every investment has two paths to delivering profits — the return ON capital employed and the return OF capital employed.
In the context of hotel investment, simply put, the profit-after-tax earned by the hotel by way of an annuity is the asset’s return on capital.
However, a sale of the asset for, say, twice its original acquisition or development cost constitutes a return of capital.
A sound, profit-generating hotel investment would be one that permits an ongoing return on capital that is higher than the promoter’s cost of capital.
While also putting to advantage the opportunity to exit the investment when a meaningful multiple on the original investment becomes available.
Rather rare are the circumstances when both returns on and of capital employed work in an investor’s favor.
It becomes important, therefore, that hotel owners get a valuation of their asset done on a frequent (probably once a year) basis. So that they are adequately in the know of just how hard that capital of theirs has been working.
Knowing when to exit an investment is possibly even more important than knowing what investment one should enter.
Running hotel businesses in profit is the desire of every hotelier.
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