Hotel Owners Get Creative In Search Of Revenue Growth

Hotel Owners Get Creative In Search Of Revenue Growth

Hotel

The Mayflower Hotel in Washington, D.C. (Photo via NREI)

June 2016

The performance of the hotel industry has been shaky in 2016, forcing owners and investors to get creative when it comes to finding ways to squeeze every last dollar out of their properties.

With revenue per room growth stalled, the focus has shifted to total revenue growth. NREI recently outlined a few of the ways major hotel brands are maximizing their profits:

Rightsizing: NREI cites the example of Marriott, which purchased — and then “rightsized” — the Mayflower Hotel in Washington, D.C. Marriott launched a $6 million renovation, focusing on increasing the available meeting space and making the hotel’s restaurant and bar more appealing. By identifying a few key opportunities with a chance for good return on investment, Marriott was able to make the hotel more profitable.

Beverly Hills Marriott

The entrance to the renovated Marriott Beverly Hills Hotel. (Photo via Marriott)

Repositioning: Savvy investors are targeting hotels that hit a lot of things on their checklist but need to be reinvigorated. The Marriott Beverly Hills Hotel was one such case, receiving a complete “gutting and reskinning” after it was purchased for $21 million. The reason? Marriott saw an opportunity given that the next closest hotel was more than 6 miles away. NREI also described the example of an island hotel that moved away from single and double occupancy rooms in favor of group rooms, resulting in year-to-year revenue growth of 19 percent.

Creating more hotel space: Some hotels that are overloaded with amenities — think pools, restaurants and gyms — are turning those areas into boutique villas or residence lots. These do more to grow revenue.

Adding residences: Speaking of residence lots, some hotels are considering the positive effects of adding branded residences. These residences increase spending by more permanent guests. However, there is risk involved. Hotels will feel the burn of revenue losses if the residences do not sell.

Supply concerns are weighing on the hotel industry. Until revenue per room rates start to rise again, hotel owners and investors will need to continue finding creative ways to bring in money.

Archives