The supply chain crisis and inflation are exacerbating what is already a poor recovery for hotel owners and operators. Although hotels offer nightly rentals, allowing rooms to be re-priced on a dynamic basis, other income-producing outlets are tighter—a problem when inflation rises.
The supply chain crisis and inflation have exacerbated what is already a poor recovery for hotel owners and operators.
Although hotels offer nightly rentals, allowing rooms to be re-priced on a dynamic basis, other income-producing outlets are tighter—a problem when inflation rises.
“While we can push room rate limits, there are fixed parts of our business — like parking, resort fees and retail — that you can’t re-price,” said Chris Silk, COO of Asset Management RevPAR International.
Concurrent supply chain issues affecting OS&E, FF&E, and hourly wage hikes are impacting core operating performance.
It creates a budget planning problem as well.
“Looking at the 2022 budgets, it is quite clear that inflation is impacting our business model,” said Andrea Gregg, Senior General Manager, Head of Global Hotel Asset Management, JLL Hotels & Hospitality. “On a per-room occupied basis, we expect rates in 2022 to increase by 8% to 11.5% for guestroom linen and 6% to 8% for amenities during 2019,” the list goes on.
Although the rooftop may appear to be stacked against hoteliers, there are steps that can be taken to address the problems. For example, Cylke recommends asking suppliers what is readily available, adjusting portion options and publishing dynamic pricing to deal with rising food and beverage costs. He admitted that the last step “is not the industry standard”, “but it is something we should probably look at frequently.”
As the industry recovers, food and beverage expenditures are increasing. On a US per available room basis, for example, total food and beverage costs, including labor, cost of sales, and other expenses, rose to $27.65 in September 2021, up from $11.80 at the same time a year earlier, but $24.42 less than It was in September 2019, according to HotStats data.
Greg sees the need to renew rates on a larger scale. “Strategic incremental revenue growth can be achieved by implementing unconventional variable pricing for parking, food and beverage and retail outlets,” she said.
In its ability to manage assets, to keep costs low, JLL is returning amenities and services on a rolling basis to its properties that have been discontinued during the pandemic, such as in-room coffee makers and spa treatments, and revamping its budgeting process, Gregg said. .
“This is an exceptional opportunity for the industry to operate on zero budgets [which start from zero, instead of the prior year’s numbers, in order to dig deep in evaluating needs] So we can focus on the services that guests really appreciate. We are cooperating more with hotels because many things need to be rethought.”
Cylke advises hotels to secure multiple sellers for a product rather than just one. “Updating seller lists twice a year is a good idea to make sure you still get the best prices because some items experience price changes daily,” he said.
supply chain headache
Dealing with the supply chain issue is more complex. Darlene Henk, president and CEO of Audit Logistics, said the shortages are due to a combination of issues.
Henke said factory closures across Asia last year coincided with increased worldwide demand for large items, such as exercise equipment and furniture, as more people work from home, leading to massive deliveries. Meanwhile, labor shortage prevents cargo from being unloaded at ports.
Henke advises hoteliers to prepare for delays. Our advice is to keep moving forward [on renovations or new builds] But you have to adjust the schedules. She said what used to take 18-20 weeks will now take 32-38 weeks
Cylke added, “There needs to be communication and understanding of realistic schedules. Interior designers, FF&E producers and the like need to communicate with project managers and asset managers on realistic delivery schedules, and then the project and asset manager needs to improve scheduling so that work does not interfere with business “.
To alleviate inflation and supply concerns, Greg advises hotels to manage costs carefully. “Every cent you save is very important. Understanding the flow of every dollar is key to maximizing hotel profits,” she said.
HotStats It provides a unique P&L measurement service for hoteliers from all over the world that enables monthly comparison of hotel performance against competitors. It is distinguished by the fact that it maintains over 500 key performance metrics covering 70 areas of hotel revenue, cost, profit and statistics, providing much deeper insight into hotel operation than any other tool. HotStats database includes millions of hotel rooms worldwide. For more information, visit www.hotstats.com.
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