In the competitive hospitality industry, cost control is vital. It ensures survival and profitability. Hotels must control costs while keeping excellent guest services. It's tough, but it can be done with the right strategies and tools. This article will guide you on hotel cost management. It will cover ways to analyse expenses, streamline operations, and use technology to boost profits.
Table of contents
Getting started: analyse and control costs
Common hotel expenses
Top ways to control costs
Best practices for reducing hotel expenses
Table of contents
Getting started: analyse and control costs
Common hotel expenses
Top ways to control costs
Best practices for reducing hotel expenses
Getting started: analyse and control costs
To control costs effectively, a hotel must first understand its current spending patterns. First, conduct a thorough financial assessment. It must examine all revenue and expense streams, including departmental budgets, guest services, and maintenance costs. This analysis will help hotel managers make better decisions. It will enable them to use data to adjust their strategies and meet profit goals.
Consider key performance indicators (KPIs) such as Cost per Available Room (CPAR), Cost per Occupied Room (CPOR), and Total Operating Expenses (TOE). These KPIs show how well your pricing strategy works and how you use resources. By reviewing these metrics in tandem with expenses, hotels can identify areas where cost reductions may have the least impact on guest experience or revenue.
Consider key performance indicators (KPIs) such as Cost per Available Room (CPAR), Cost per Occupied Room (CPOR), and Total Operating Expenses (TOE). These KPIs show how well your pricing strategy works and how you use resources. By reviewing these metrics in tandem with expenses, hotels can identify areas where cost reductions may have the least impact on guest experience or revenue.
Common hotel expenses
Hotels face a variety of expenses that can vary significantly based on size, location, and market positioning. Here’s a breakdown of the most common hotel expense categories and their typical impacts on the budget:
- Labour costs. This is often the single largest expense category, representing up to 50% of a hotel’s operating costs. Labour includes wages, benefits, training, and overtime. All must be carefully managed to avoid overspending, especially during low occupancy.
- Utilities and energy. Energy consumption accounts for a substantial share of hotel expenses, with costs associated with heating, cooling, lighting, and water usage. A report from Energy Star notes that implementing energy-efficient practices can reduce these costs by 10–15%.
- Maintenance and repairs. Routine maintenance is essential to maintain guest satisfaction and operational efficiency. Emergency repairs can be costly. So, a proactive maintenance plan is crucial to prevent breakdowns.
- Food and Beverage (F&B). Managing F&B inventory can be challenging due to spoilage and waste, particularly in hotels with on-site restaurants and bars. Cost-effective F&B management is crucial to avoid wastage and manage food costs effectively.
- Technology and software. Investing in technology, from property management systems to housekeeping software, adds to operational costs but also brings long-term efficiency. The key is selecting technology that aligns with the hotel’s revenue goals and delivers measurable ROI.
Top ways to control costs
1. Optimising labour costs
Labour costs are a significant part of hotel expenses, but strategic management and technology can help optimize them.
- Smart scheduling. Use scheduling software that adjusts staff schedules based on occupancy projections. This lets hotels avoid overstaffing in slow times. It ensures enough staff during peak times. A report from HFTP suggests that labour scheduling tools can help reduce labour costs by 5–10%.
- Housekeeping automation. Housekeeping technology like Hoop’s housekeeping module enables efficient task management, reducing the need for excess staffing. Hoop improves housekeeping with real-time room updates and automated tasks. It boosts productivity and cuts labour costs.
2. Utility and energy management
Utility costs can be optimized by implementing energy-efficient systems and encouraging sustainable practices.
- Energy Management Systems (EMS). EMS tools track and control energy use in hotels. They monitor real-time energy use and optimize it based on room occupancy. For instance, motion-sensor lighting and smart thermostats help reduce energy costs by adjusting settings when rooms are unoccupied. These systems can lead to a 15% reduction in energy costs, according to Energy Star.
- Eco-friendly initiatives. Implementing green initiatives, such as water-saving fixtures, low-energy lighting, and recycling programs, not only reduce utility costs but also attract eco-conscious guests. Many hotels find that sustainable practices improve brand reputation and lead to long-term savings.
3. Technology investment for operational efficiency
Technology may seem a costly investment. But it boosts returns by streamlining operations and improving guest satisfaction.
- Revenue management software. Effective revenue management tools have dynamic pricing. They let hotels adjust rates based on demand, season, and competitor prices. This maximizes RevPAR by capturing the optimal rate for each room. Studies show that hotels with automated revenue management systems see RevPAR rise by up to 20%.
- Housekeeping and inventory management. Hoop’s housekeeping module is an all-in-one solution that assists hotels in inventory management by tracking supplies and preventing waste. The platform's audit feature lets managers monitor stock and automate ordering. This prevents overstocking or stockouts.
4. Procurement and inventory management
Effective procurement and inventory management prevent wastage and ensure that hotels only purchase what they need.
- Bulk purchasing agreements. Bulk-purchasing contracts with suppliers can cut costs and stabilize prices. Long-term supplier relationships can also lead to negotiated discounts, reducing overall procurement costs.
- Inventory control systems. Inventory tracking software lets hotels monitor stock levels in real-time. It helps them avoid over-purchasing. Inventory systems track usage trends. They help management decide on replenishment. A study by the Institute of Supply Chain Management found that hotels using inventory management software reduced waste and spoilage by 15% on average.
Best practices for reducing hotel expenses
1. Prioritising preventive maintenance
Preventive maintenance is essential for reducing long-term repair costs. Regular inspections and servicing can prevent major repairs, says FacilitiesNet. This can cut maintenance costs by 20–30%.
- Scheduled inspections. Routine checks on critical equipment (e.g., HVAC, elevators, plumbing) can find issues early. This reduces the risk of costly emergency repairs.
- Hoop Task Manager for maintenance. Hoop's task manager can be programmed with maintenance schedules and reminders. This ensures essential tasks are done on time and helps avoid equipment failures.
2. Leveraging data for cost control
Data-driven decision-making lets hotels find inefficiencies, track performance, and adjust based on insights.
- Benchmarking expenses. Hotels can compare their expense ratios to industry averages to spot areas for improvement. Regular benchmarking can cut operating costs. It sets clear targets and helps managers measure performance.
- Expense analysis. Breaking down expenses by department provides a clearer picture of where costs can be reduced without impacting guest experience. Hoop’s reporting tools allow managers to segment expenses and evaluate spending patterns across departments.
3. Enhancing staff productivity
Investing in staff training and productivity tools boosts efficiency and cuts labour costs.
- Training programmes. Well-trained staff are more efficient and contribute to a positive guest experience. Offering ongoing training on best practices helps staff deliver higher service standards, ultimately contributing to guest retention and cost savings.
- Employee incentive programmes. Productivity incentives can motivate staff to perform more efficiently. HFTP's survey found that hotels with employee incentives had 15% higher productivity. This led to smoother operations and lower labour costs.
Conclusion
Controlling costs in a hotel requires a strategic approach that goes beyond simple expense cuts. By optimizing operations, investing in technology like Hoop’s housekeeping and task management tools, and making data-driven decisions, hoteliers can improve operational efficiency while maintaining a high standard of guest service. With the right cost-control strategies, hotels can boost profits, be resilient, and create great guest experiences.
