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Tired of crunching numbers every month, only to find costs skyrocketing? We get it. There is the dilemma of balancing rising expenses without passing the burden onto guests, and the need to fulfill guests' rising expectations.
Finding this happy medium can be a challenge, but it’s one you can overcome if you leverage the latest strategies to reduce hotel costs without sacrificing service quality. We’ll show you how to do this below.
Before you start slashing, take a moment to pause. Cutting hotel expenses without due diligence can come at a cost. Hospitality competition and guest expectations are high, so you’ll need to choose smart ways to save.
Cutting pastries at breakfast looks good on your balance sheet until guests complain about the lack of choice and find another venue to satisfy their morning cravings.
Aside from losing potential business, blind cost cuts can also affect other areas of your business. Imagine reducing the hours of coverage for your concierge only to find longer lines of guests at the front desk. The subsequent wait times harm the guest experience and force other team members to pick up the slack. The result: it's now more expensive to provide a subpar service.
So what can you do instead? Identify what we like to call smart savings: hotel cost-saving opportunities that help your balance sheet and the guest experience.
When identifying potential savings, start by assessing your hotel expenses. Most hotel costs can be divided into fixed and variable costs. From there, you can find areas to reduce costs across departments.
Ultimately, tackling cost savings hinges on efficiency. Let’s break down ways to reduce hotel expenses most efficiently by department.
1. Create a digital-first check-in experience. Eliminate paper-based registration cards and the added inventory expense by subbing paper for technology. Tablet Registration speeds up the process for everyone and preserves resources. Mobile Check-In, or self-check-in options like kiosks, free up already-understaffed front desks to focus on the unpredictable needs hotel teams routinely face and get more done. (Time equals money, of course, but streamlined processes also save real dollars.)
Mr. C. Coconut Grove saved up to 1,000 sheets of paper per month and cut ink usage by 50% by modernizing their front desk operations and check-in processes. Read more in this case study.
2. Save time responding to guests. AI messaging custom-built for hotels can support your staff in responding to guest requests while ensuring the messages that need a human touch are seen by your team. You gain valuable time savings for your team and your guests get a faster response. Even better, you can strategically offer upsells to your guests at just the right time, boosting your bottom line with little effort.
3. Reduce chargebacks and fraud with digital authorizations. Fifty-five percent of credit card fraud happens in the hospitality industry and every chargeback erodes hotel revenue by 1% to 5%. When considering the direct hit to your expenses, the time-consuming settlement process, and the reputational damage, you have a cost center of its own. Canary's Digital Authorizations solution protects guests' credit card details, reduces fraud and chargebacks by up to 90% and helps hoteliers win them when they occur.
Learn how to proactively protect your bottom line and your reputation against chargebacks and fraud in our e-book, Shielding Your Hotel’s Revenue: Mastering the Art of Fraud & Chargeback Defense.
4. Stop printing costly, unsustainable menus. QR codes put menus on guest’s phones. Use it to advertise in-room dining options or allow guests to make a reservation at one of your F&B venues with one scan, increasing guest spend. You’ll save money on printing services and every change you make to the menu will update in real-time across all locations.
5. Replace paper contracts. Reduce the time and resources your team spends contracting for meetings and events. With digital contracting your guests benefit from an efficient, seamless, up-to-date experience.
6. Lower your commission payments. Channel analysis is a revenue management tactic in which you rank your channels by performance. Evaluate your reservation channels by removing high-priced, low-volume channels and optimizing those that generate the highest profit and ensure the most visibility for your site. Commissions vary, and with fewer sites to compare prices on, guests can search for a good deal faster.
7. Focus marketing so returning guests book directly. Skift estimated in 2023 hotels would spend roughly $47 billion on OTAs and $75 billion on all indirect distribution. Third-party reservation sites charge a hefty commission per booking, sometimes as high as 15% to 30%. Keep profits in-house by offering guests a 10% discount if they book direct.
8. Utilize time-saving tools. AI-powered revenue management tools promise to reduce the resources needed to run analytics, make decisions and perform tasks, such as updating rates across channels. This creates the capacity to apply this manpower elsewhere, perhaps with a direct customer focus.
9. Reduce housekeeping’s minutes per room. Small adjustments make a big difference. According to Hotel Mogel, 20 to 30 minutes per room in a hotel that fills 3,000 room nights a month requires 1,000–1,500 hours of labor. At an hourly wage of $20 per hour, that’s a monthly cost of $20,000 to $30,000. Shaving just two minutes per room could save that same hotel $2,000 per month. How? By using housekeeping technology to track tasks and turnovers by room type, you can uncover ways to staff appropriately and speed up housekeeping duties based on factors such as length of stay.
10. Let guests request housekeeping services as needed. Encourage guests to reuse towels when appropriate or opt out of daily housekeeping. Simple in-room signs can make this easy, optimizing your housekeeping schedule and preserving resources for greater sustainability.
11. Reduce average utility bills with smart room technology. By introducing AI-driven room technology, you can trigger energy use by occupancy levels. Use this software to turn on or off AC systems or lights when rooms are empty, and enable smart notifications on appliances to provide timely updates before they become costly repairs.
12. Consolidate your vendor spend. It can be costly to replace in-room furnishings like curry-stained kettles and broken glassware. If you’re part of a chain, explore the exclusive rates that chains tend to have negotiated with suppliers that adhere to their brand standards. Chain-approved vendors and negotiated rates often extend to technology, too. As an independent hotel, find specialized hospitality suppliers that offer anything from key cards to hospitality TV sets. Specialized suppliers can also advise you on energy-efficient upgrades such as lightbulbs and windows.
13. Cross-train staff. Schedule shifts that match the fluctuating demand for staff throughout the day with trained staff, like a restaurant team member cross-trained to do check-ins who can step up when the need arises. Scheduling software can make it easy to match your staff’s availability with your ever-changing needs.
Feeling inspired already? Before you dive in, there’s one more thing to consider.
Any cost-saving strategy you use should be able to be applied long-term with only minimal adjustments. Of course, this depends on your specific hotel, so thoughtfully consider how you’ll implement expense cuts before implementing any strategy.
Keep the following points top of mind as you work with your teams to brainstorm cost-saving opportunities:
1. Cost analysis and reporting: After implementation, use reports and analytics to get a clear picture of the level of improvement in cost and performance. For example, you might track your previous and current spend on commissions or how much your paper order has decreased over time. Regular reporting will reveal the new benchmark you must meet, as well as additional opportunities for saving.
2. Consistency is key: Some methods may be more or less effective depending on the season and your hotel’s occupancy. For example, saved minutes per room in housekeeping can impact your bottom line more during busy seasons. That doesn’t mean it’s ineffective during lower occupancy seasons, just that the effect is amplified by volume. When strategies are successful, stay the course, but be aware of the anomalies.
3. Choose hospitality-focused suppliers: Where possible, work with vendors that specialize and cater to the hospitality industry, from technology suppliers to product vendors. Hotels have unique challenges and opportunities compared to other businesses, and their industry experiences are bound to align with your goals and changes in your environment.
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