Revenue Without Profit is Worthless

2024 will be a year of challenges and opportunities, as the hospitality industry continues to find its way in a post-pandemic world. Economic challenges unfold, but new opportunities are opening up. China outbound travel is returning, technology is innovating at a rapid rate, and hoteliers have more opportunities to revenue manage beyond room rates.

Here are my five trends to look out for in the year ahead:

Focus on Profitability

The first thing, and I think, the most severe, is that we have seen heavy cost increases across all hotel cost drivers in recent months. This puts a lot of pressure on hotel P&Ls. We see VAT jumping back up in Germany, for example. Minimum wages and the cost of goods are rising, and we see that the cost of energy is not coming down as we expected. Revenue without profit is worth nothing!

As such, the focus must be on profitability. Therefore, in addition to watching costs, hotels need to re-evaluate their wholesale and tour operator contracts. Now is the time for dynamic pricing across all channels. We know that the business model of some wholesalers and tour operators is to buy hotel rooms cheaply, but hoteliers need to understand the value of their offering.

Beware of the Middle

The ultra-luxury and limited-service are segments that continue to perform. But ‘normal’ hotels such as standard four-star business hotels face a lot of pressure, especially if the destination isn't great and corporate travel slows down. I am convinced that we'll see big changes in this sector. A lot of the larger leased portfolios are heavily leveraged. And I think we'll see a couple of these companies either getting restructured, acquired, merged, consolidated, or going out of business.

Also, with the rise of interest rates, the financing of new-build hotels is difficult, and the refinancing of existing mortgages is also extremely challenging.

The Rise of AI

Yes, we will continue to see the rise of AI in accounting, HR processes, etc. GenAI and predictive analytics have become the new standard. Now that the genie is out of the box, the challenge is to understand what the algorithms are doing and how we can benefit from their true potential.

One of the most difficult things is to use artificial intelligence in a meaningful and productive way and not just for the sake of using it.

The hospitality industry has never been a shining example of technology disruption. We must speed up and learn a lot more about the tools we're using. The true benefit of these systems, including RMSs like Duetto, is to manage the system, to be strategic, and to look for constant improvements in your strategy. Look beyond ADR growth. Human plus machine delivers the best results.

China and The New Silk Road

China is recovering. China outbound has been missing over the past years and we have seen just a shy bounce back but if we look at the actual power of China outbound, it is huge.

It is worthwhile to discover the “Belt and Road” initiative which many call the New Silk Road. Many of the countries involved are beyond our strategic focus. But if we look into where China is investing, those countries could be set for very big things.

Revenue Management Beyond Rooms

The next big thing in Revenue management is F&B Revenue management. Why?

• There are more POS terminals than front desk terminals in hotels worldwide hence VC sees a bigger opportunity and fuels that segment with cash.
• The number of F&B outlets and restaurants is much bigger than the number of hotels hence the impact is huge and for many hotel operators F&B is the second largest source of revenue.
• A lot of entrepreneurial brain power is moving into that field. In other words, some of the smartest revenue management colleagues I know have started to develop strategies to capture the potential of F&B.

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2. It's just the next logical step once you master rooms revenue and I'm pretty sure we will see dynamic pricing, soon. The only problem is that we still print menus, and we don’t change them too often. However, through the pandemic, takeaway delivery increased a lot and customers got used to a new F&B app format. Now, customers can make their table reservations online, order, and pay through the app. It’s all electronic menus, so yes, the prices can change.