Hotelisten Insights - Insider knowledge for private hotels

In today's fast-moving hotel industry, privately managed hotels face particular challenges. Arnd Lindenau and Hans Hegger from Die Hotelisten are experienced consultants who know exactly what it takes to successfully manage privately run, mid-sized hotels or to get them back on track.

Here, Hans and Arnd provide important insights, valuable tips and practice-oriented strategies to help hoteliers optimise their business, reduce costs and offer their guests an exceptional experience.

Insights on pricing strategy and yield management

Dynamic prices, higher profits!

It's that easy, say DIE HOTELISTEN

Well planned financing is a decisive factor for the long-term success of your hotel. In the previous interview Arnd Lindenau discussed the importance of a financially well-planned renovation. But what is the next step to ensure that the investments will also bring the desired profitability? This is where yield management comes into the picture. With an intelligent pricing strategy and optimised capacity utilisation, you can maximise your operating income.

In this interview, Arnd Lindenau takes a look at finding the right measures and tools to increase your revenue and further improve the profitability of your hotel.

What exactly is yield management and why is it essential for private hotels in particular these days?

"Well, yield management is the fine art of revenue and profit optimisation in the hospitality sector. Rooms in a hotel are a perishable commodity. As a hotelier, if I don’t sell my rooms today, I will never sell them again. Really never again! Because the “overnight stay” service only works today and is not storable like in other sectors, that can simply place their goods in stock. This means that if I don’t sell today, this turnover is irretrievably lost. Therefore, it is important to maximise room occupancy and generate the best possible revenue. Yield management doesn’t just mean to offer a few different prices, but also taking an overall view with occupancy, turnover, budget, forward planning and a precise analysis of demand. Airlines have been doing this very successfully for years, train companies are at least trying, and hoteliers should implement this much more. But with a holistic approach and a proper analysis. Because only then it will bring the desired success."

What do you recommend to hotels before using yield management software?

"Before hoteliers even think about introducing a yield management system or a corresponding software, they should first have a reasonable pricing concept or strategy. Otherwise, even a yield management system is of little use."

Which are the most important factors that private hoteliers should consider when selecting and using yield management software?

"We pay particular attention to how the systems collect their data. It makes little sense to record prices from just one booking channel. The quality of the data is absolutely crucial. The fact that there is only some kind of algorithm but no other information on how the data is collected makes no sense at all in our eyes. Proper yield management collects a wide range of data including booking histories, external and internal factors that no system can display that easy. Hoteliers should never allow themselves to be blinded by systems and statements such as “AI” and “algorithm”. There is a lot of work required on the part of the hotelier to provide the necessary comparative data. All in all, a very complex topic."

Based on your experience, what are the most common stumbling blocks that hoteliers encounter when implementing yield management strategies and how can they be avoided?

"A major stumbling block is setting up yield management software on top of existing prices without having scrutinised and checked their plausibility beforehand. No price-market analysis is carried out, the categories are not looked at closely, internal processes are not scrutinised and discussed in detail. We help hoteliers with this in advance, so that they develop a coherent pricing strategy as a starting point. And only then we can look further. Not before."

How can private hoteliers ensure that their pricing strategy promotes both short-term profits and long-term profitability, as well as customer loyalty?

"The hotel must offer a competitive market price. And the customer must accept this price. Many hoteliers only know two key figures in the lodging sector. Occupancy and rate. All nice and well, but the third is the most important: RevPAR. Revenue Per Available Room. Only in combination with all three key figures the hotel can be assessed correctly and objectively, and develop a long-term strategy. What good it is if the average rate keeps going up, but occupancy rates may fall sharply at the same time because fewer and fewer guests accept the prices? If the rate is too high and the product is possibly no longer up to date, customer dissatisfaction with the price and service will inevitably increase. As a hotelier, you can hardly want that. Therefore, all three key figures must always be considered. And RevPAR is an excellent way to increase turnover. This also saves enough money in the budget for investments – in the rooms, for example."

What typical challenges do you see for private hoteliers who want to get their hotel back on the track to success in a difficult market?

"Yield management is not everything, but one part of the business development process. The hotelier must review all his distribution channels. Where am I successful and how? Which market segments am I addressing at all? As you can see, a comprehensive, but above all meaningful set of figures is absolutely essential. We urgently recommend that hoteliers maintain their existing hotel system and ensure that data is entered correctly. We also help them with this, so that they can really make good use of their hotel system. And not just for entering reservations and printing invoices."

Finally, if you could give a private hotelier just one important advice for a successful pricing strategy, what would it be?

"First develop a coherent price structure and implement it with the help of the existing hotel system. Clear structures, clear sales strategies, clear statements for offers and prices. That was now more than just one advice, but it is the interaction that makes the difference. Sounds strange, but it’s true."

Do not hesitate and secure your spot for a free initial consultation!

Insights on financing and profitability

Every day of remodelling costs money

Interview with Arnd Lindenau

In the following interview, hotel consultant Arnd Lindenau explains what financing options are availbable for privately managed, medium-sized hotel businesses and what mistakes private hoteliers often make when it comes to a renovation or modernisation.

The question of financing often arises before a hotel can be renovated. In your opinion, which financing models are particular suitable for small, privately-run hotels?

"Generally spoken are medium-sized hotels owner-managed and not operated on the basis of management or lease agreements like large chain hotels. In this case has the owner still complete control over the entire business. As a first step - before I even get in contact with the bank - I would need a meaningful set of numbers with at least a three-year review of the most important key figures of the business. Of course, the special circumstances of the covid pandemic will be taken into account here. A simple business assessment or balance sheet is by no means sufficient. The next step would be a good and coherent concept that shows the development potential with the planned investment. The guiding principle here is budget, budget, budget because banks don't want any unpleasant surprises when it comes to financing! With a good and logical analysis of the business performance, it is much easier to convince a bank."

What financial support is available for the hotel industry apart from the traditional credits? Are there any special funding programs, for example?

"The route is through your bank. Of course, there are KfW funding programs for energy-related issues or other such things. However, the requirements for obtaining the funding are often very high and can lead to significant increases of the construction costs. Also, if you choose to go your bank, the attractive conditions offered by the KfW are neutralised again by the funding requirements and risk premium of the bank. In any case, the conditions need to be analysed very carefully and compared to the total costs. In simple words: Don't be fooled. Take a close look."

From your experience, what are the biggest mistakes the hoteliers make when financing renovation projects? And how can they be avoided?

"The first problem arises with unspecific tenders and inadequate planning. The local assembly installer is asked what he proposes, but without even specifying in advance what exactly needs to be renovated. For example, person A will offer one fitting, and person B another fitting. It is often completly unclear whether the costs are calculated including the installation or not, by the amount of hours worked or on a fixed rate. As a result, many bids are not even comparable during the quotation phase. Especially with an approach like the one just described, many hotels run out of money during the renovation. There could be a bitter awakening at the end of the remodelling project if the costs are not precisely budgeted and negotiated in advance. Without a detailed budget and construction timetable that is binding for all parties, a reconstruction project should not be started at all."

What kind of mistakes regarding financing do you often discover in consulting situations?

"In my consulting work, I often experience that many hoteliers only rely on a single source of financing. It is advisable to examine various options, such as bank loans, investors or government funding programs in order to find the best solution. Before talking to the bank, the exact and detailed development of the company's performance must be outlined. Data from at least three years of business operations is extremly important - broken down into lodging and food & beverages. Otherwise, financing won't be successful. Revenues have to be budgeted in datail or even a bank that has been associated with the company for years will refuse financing. It is not just a matter of defining the financial requirements, but above all a matter how the credit can be realistically repaid. This requires a detailed set of figures. Very elegant is also the financing without external funds. To achieve this, the revenue needs to be analysed at an early stage, so that the measures taken ensure a positive development of the cash flow."

What other common mistakes often occur?

"Renovations should always be planned with the guest experience in mind. Hoteliers should ensure that the renovations meet the needs and expectations of their target group. Hereby, surveys or feedback received from guests can provide valuable insights. For this purpose, guest questionnaires can be provided with corresponding additional criteria. Far too little emphasis is placed on analysing exactly this guest feedback. However, it provides crucial information on what the guest really wants. Without this, you will miss the entire point at great expense.

In addition, poor communication between the different stakeholders, from architects to contractors and managers, can lead to misunderstandings and errors. Regular meetings and updates are important to keep everyone in the loop. Delays in the remodelling process are particular harmful to the project. Especially in the medium-sized hotel industry, people still trust that remodelling will "eventually be finished at some point". However, the fact that every day of remodelling costs money - because during that time the room do not generate income - is way too often overlooked. In contrast to the production industry, the hotel sector has a perishable good in the form of the room rentals. Our goods cannot be stored, so basically every day counts.

Finally, it has to be said that the medium-sized hotel industry often lacks the sight of trends. Hospitality is constantly changing and hoteliers should always keep an eye on current trends and technologies to ensure that their renovations are modern and competitve."