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Like it or not, your hotel is in the middle of a race with the competition — although the current hotel climate may feel more like an obstacle course.
NB: This is an article from HotStats
Wouldn’t it be nice if, during this ongoing marathon, you could peek across at competitors, note their positions and analyze the techniques, equipment and other factors propelling them forward?
That’s the magic of hotel benchmarking. It reveals the financial performance of the whole field, breaks down the factors contributing to each hotel’s position and highlights how your hotel can improve its financial standing.
Ready to learn how to benchmark your hotel against competitors and push your hotel decisions forward? Here’s how to benchmark your hotel against the competition effectively.
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How to Benchmark Your Hotel Properly
If you’re wondering how to benchmark your hotel against the competition, there are a few simple steps to consider. Here’s a breakdown of how to benchmark your hotel and create a swifter path to profit:
Benchmarking your hotel begins by choosing the right competitive set. Location matters, but there are a host of other variables — such as room count, number of food and beverage (F&B) outlets, meeting space — that should be taken into consideration when deciding what hotels to include in your comp set. You wouldn’t measure the performance of a Jaguar versus a Hyundai, would you? Sure, they both do the same thing (drive), but the delivery of experience is vastly different. It’s the same with hotels.
The first step in benchmarking your hotel is to examine its current position. The deeper you dive into metrics, the more areas that reveal inefficiencies in your hotel operation will pop up. For instance, you may find your competitors have significantly lower F&B costs. Perhaps your labor expenses are higher than the competition’s, or your average daily room rate is lower.
With a hard look at the competition’s operational metrics, hoteliers can see exactly where the hotel is dragging behind the pack. And they can start digging in to ways to plug the holes in the operation.
3. Use Deeper KPIs to Jump Ahead
Most hoteliers are familiar with RevPAR as a competitive benchmarking KPI. Unfortunately, RevPAR only reveals one piece of a hotel’s true financial standing. That’s because it only accounts for the money coming into an operation through room sales. It doesn’t begin to address additional moneymaking sources or how much money is spent along the way.
Instead, hoteliers can use stronger KPIs to anchor the hotel’s benchmarking strategy. Here are a few examples of more complete hotel KPIs:
General expenses and labor costs
Departmental revenue as a % of total revenue
By measuring these deeper KPIs, hoteliers and investors can see the weak spots in an operation, spot advantages and make decisions that churn out higher profit.
4. Chart a Course Toward Higher Returns
When a hotel’s inefficiencies are clear, it’s time to set up goals that bridge the gap between your hotel and the competition. That takes identifying the areas that the hotel needs to focus on in order to boost financial performance. For instance, if profit from the F&B department is lagging, hoteliers may want to zoom in on key operational metrics, such as:
Food costs as a % of F&B revenue
F&B revenue as a % of total revenue
When hoteliers identify the areas where the hotel is falling behind financially, they can use hotel benchmarking to hyperfocus on those operations that need attention. That will simplify decisions and help hoteliers trim departments for higher financial gains.
5. Let a Holistic Approach Guide Your Hotel Benchmarking Plan
It’s good to kick off your hotel benchmarking efforts by beefing up those KPIs that are lagging most. But to secure long-term profit, hotel benchmarking takes a holistic approach.
For example, imagine you find out your hotel’s F&B revenue is miles behind the competition’s. That doesn’t necessarily mean it will be profitable to pour money into the operation. After all, if your F&B department has lower expenses, it might already be in a more profitable position than competitors.
Instead, it’s best to let profit guide the whole hotel benchmarking effort. When it comes time to make investments, cuts or other decisions, be sure to watch how those moves are affecting profit and overall operational performance.
6. Measure Success with Competitive Benchmarking Reports
With thorough competitive benchmarking reports, hoteliers receive month-by-month data comparing a hotel’s deep financial metrics to those of competitors. These resources reach far below top-line figures into the operations driving hotels. They essentially make benchmarking and measuring results easy.
Owners can tap into this data, see exactly where the hotel stands and identify what’s holding the hotel back. Here are a few important ways these benchmarking resources help:
Analyze all revenue: You can compare your revenue mix and returns against those of competitors. This helps reveal market demand and indicates what revenue streams are worth cutting off.
Track departmental performance: You can track a competitor set’s financial performance by department. That reveals opportunities in your hotel’s performance plan so you can make better decisions more quickly.
Measure overall profitability: By using meaningful metrics to stack a hotel up against competitors, it’s easy to see the hotel’s true profitability. With a clear view of profit, it’s easy to make investments and hotel decisions that turn into higher returns.
See what’s missing: Whenever you compare a hotel to its competition honestly, it will reveal the strengths and weaknesses of the whole operation. Owners can use that deep data to see which departments need to be cut, propped up or tweaked for higher profit.
With a combination of hotel benchmarking data, important KPIs and a holistic approach to hotel performance, hoteliers and investors will have everything it takes to boost operations, widen their hotel’s stride and race ahead of the field toward higher returns.
Read more articles from HotStats
The post 6 Tips for Benchmarking Your Way to Success appeared first on Revenue Hub.
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