Two years removed from the pandemic; travel is back in a big way. Hotels everywhere are preparing for what is sure to be a record-breaking summer of travel, but they’re doing so with one hand tied behind their back, thanks to the recent labor shortages.
With wages rising and the supply of workers decreasing, hotels are struggling to stay afloat during these unprecedented times. Hotel operating costs have a direct impact on a property’s bottom line. So, it’s no surprise that labor shortages and rising costs are taking their toll. To find out the real impact of rising labor costs on hotels and their guests, continue reading below.
How operating costs affect the bottom line
A hotel’s operating cost directly impacts a property’s profitability. Wasteful spending depletes profit margins and threatens a property’s financial health and long-term viability. Hotels must find a balance between over-spending and sacrificing vital services that will negatively impact the guests’ experience.
While it’s true you get what you pay for in terms of labor and service, given the new high cost of labor, hotels must find new ways to reduce costs without impacting the guests’ experience.
The first step to keeping hotel operating costs under control is practicing proper revenue management. Rather than manage revenue with outdated models based on fixed price systems, adopt a model that more accurately reflects today’s dynamic market.
At its core, revenue management “is the strategic use of performance data, local market data, competitor rates, and other applied analytics to help predict consumer demand to optimize pricing and distribution in a way that maximizes revenue and profits.” In simpler terms it’s selling the right room, to the right guest, at the right time, at the right price, through the right distribution channel, at the best cost.
Dynamic Pricing allows hotels to manage their revenue in today’s ever-changing economy. It uses flexible pricing for a product or service based on market demand. In a Dynamic Pricing model, businesses charge more as demand increases.
Worker shortages and the new high price of labor