The hospitality industry faces an uncertain road to 2025. While recovery from the pandemic is underway, leisure travel trends remain unpredictable — especially for the lower end of the market. Hotels can improve their probability of success if they prioritize data-driven strategies and attract high-value group bookings to maximize revenue in this evolving market.
Investing in sales technology and upskilling teams will be crucial for navigating these uncertainties and achieving success. Planning the budget for your hotel is crucial for success as you look to 2025. Do you have the information and insight you need to plan for an effective commercial strategy?
Don’t worry, we’ve got you covered! In this guide, we’ll break down everything you need to know about budgeting with commercial sales strategy best practices in mind. Let’s dive in!
Understanding Your Hotel’s Performance
As you set your hotel’s budget, take steps to understand its year-to-date performance. These steps can help anticipate supply and demand, hotel room revenue, optimal distribution channels, and more. To get a head start, reference the following financial statements and key performance indicators.
1. Embracing Total Revenue Management
Total revenue management is a pivotal aspect of budgeting, where meticulous planning and strategizing can substantially impact your property’s financial outlook. This approach shifts the focus from mere room revenue to a holistic view, encompassing meeting space, room nights, F&B, and other revenue streams.
Analyze historical data, market trends, and the performance of various revenue streams to make informed decisions on allocating resources effectively. Leverage the metrics to optimize room rates, manage distribution channels, and enhance ancillary revenue sources accordingly.
Total revenue management ensures a more accurate representation of potential earnings and identifies opportunities to increase revenue and profitability across your entire hotel operation.
2. Evaluating Key Performance Indicators
During the annual budgeting season, occupancy rates, average daily rates, and revenue per available room as well as meeting share play a key role. Monitor these KPIs in real-time and compare them to previous years.
- Monitoring occupancy rates can show you how much demand there is for your rooms at any given time.
- Tracking daily rates can inform us of peak revenue periods, the impact of events on revenue, and the impact of pricing strategies.
- Calculating RevPAR demonstrates how well you’re filling your available rooms and at what rate.
- Monitoring meeting market share reveals when you are missing out on opportunities.
However, there may be gaps in this data that you’ll need to address.
Occupancy Rate
If your occupancy rates are low, identify the reason. Create a flexible budget that allows you to increase revenue through alternative means, like selling conference space or raising your ADR.
Average Daily Rate
If your average daily rate is low, but you’re seeing high demand, you may be charging too little. On the other hand, it could be a sign that you need to improve the quality of your rooms or amenities. Look to your comp set to compare, then address inconsistencies in your business processes. You may need to pivot your rate strategy to encourage demand and prevent revenue loss.
Revenue per Available Room
If your revenue per available room is low, dig into your pricing strategy and inventory management. You’ll need to address problem areas in your 2025 hotel budget.
Still, you may be making up for RevPAR losses with ancillary revenue. Before you alert revenue management teams, calculate your TRevPAR. TRevPar accounts for the total income generated by an account, including meeting space, F&B services, and amenities. You’ll get a clearer picture of the average revenue made per customer.
Meeting Market Share
If your meeting share is less than your fair share, deep dive into what you competitors are winning. Understand your lost business and create commercial strategies to winback these accounts.
Setting Commercial Goals
To ensure the success of your hotel, it’s important to set clear goals and targets for the upcoming year. One of the key objectives is to determine your revenue target based on the hotel’s current performance and market trends. This will enable the hotel to plan and allocate resources effectively to achieve the desired financial outcomes.
Next, identify areas where you can minimize expenses without compromising the quality of services. Setting cost reduction goals allows your hotel to optimize its operations and maximize profits.
Another crucial aspect of financial planning is establishing cash flow targets. These targets reserve funds for operational needs like salaries, investing in upgrades, and maintaining inventory levels.
With these goals in place, you can create a roadmap for success and stay on track toward achieving financial objectives.
Developing New Hotel Revenue Optimization Strategies
Boost your hotel or resort’s earnings in 2025 with these powerful revenue optimization methods.
1. Implementing a Dynamic Pricing Strategy
It’s no secret that occupancy is lagging due to slowed leisure travel this year. That’s why hoteliers are doubling down on group business to fill need periods. Optimizing prices with yield management strategies is important to maximize revenue during peak seasons. Hotels can use dynamic pricing to set different room rates based on demand and availability.
During peak seasons, your property can charge higher rates to ensure you can meet demand. Track historical occupancy data, competitive pricing, seasonal trends, and special events to determine the optimal room rates for high-demand periods. This hotel pricing strategy may help boost your occupancy rates.
2. Increasing Meetings and Events Revenue
Budget for tools that help increase total account revenue and win rates. Reference data like booking behavior and account preferences to upsell your amenities and build stronger rapport with group leads.
Get more revenue-boosting tips for selling meeting space.
3. Focusing on Smaller, Multi-Day Meetings
According to Knowland data, small groups of 200 or fewer attendees comprise 69.2% of meeting volume year-to-date. However, Knowland’s data also revealed that one-day events are decreasing in volume, which means revenue-driving multi-day events are back on the rise.
This is a strong opportunity to dominate the smaller, multi-day events in your market for space, room nights, and catering revenue.
Create attractive multi-day packages that incentivize attendees to stay longer. Consider adding discounted room rates, F&B packages, or special activities. Then, identify and target industry segments or associations that typically hold smaller, multi-day meetings. This could include professional development retreats, board meetings, or training sessions. A market segmentation tool can give you quick access to these trends.
Implementing Productivity Measures
To maintain a healthy sales forecast, review sales prospecting and RFP processes and identify opportunities for boosting productivity.
Investigate prospecting automation solutions that deliver qualified accounts directly to your seller’s inbox. It speeds new sales acquisition by putting accounts and contacts who have the desired booking behavior at the finger tips of your sales team. No more guesswork — just focused, targeted outreach.
Take this time to assess your sales team. In addition to providing data analytics and account-based selling tools, like Knowland, consider certifications that can help then up their sales game while at the same time provide the validation and adoption you need at the sales leader level. The Knowland Certification Program helps hotel sales professionals level up their skill sets and elevate their professional profile
As you consider staff schedules, using tools like our hotel sales calculator can help define selling-time expectations. By understanding how much time it takes each sales manager to reach a goal during hotel budgeting and forecasting, you can:
- Guide sellers by setting achievable goals and time commitments for success.
- Empower sales leaders to identify and support individual strengths, improving close rates.
- Help operations understand the cost of non-selling activities, optimizing revenue and scheduling.
Beat Your Revenue Goals with Knowland
Navigating the budget for your hotel requires a strategic approach that combines a thorough understanding of your current performance, clear financial goals, effective revenue optimization strategies, and stringent productivity measures. By implementing these strategies and best practices, hoteliers can set realistic budgets to drive growth in the upcoming year.
Request a demo to learn how Knowland helps revenue leaders in the hospitality industry achieve their goals.