Seasonality is a fact of life for most hotels and guesthouses, with the possible exception of London tourist destinations and perennial favourites such as Gretna Green that enjoy year-round visitors, often regardless of the weather.
These seasonal peaks and troughs in sales throughout the year are an inevitable challenge for your hotel to overcome. But there are ways to beat the seasonality rollercoaster and plan your marketing, sales and revenue generation to beat the dips and make the most of the highs.
Making your hotel a viable business
Seasonality can have a real impact, and as guest numbers dwindle, so will your income and your end profit. As such, these seasonal dips can threaten the viability of your hotel or guesthouse as a stable business venture.
So it’s crucial that you’ve considered the specific impact of seasonality on your particular business and have a strategy in place to deal with it.
It’s a good idea to plot occupancy levels alongside net revenue on either a monthly or weekly basis on a graph, so you can clearly see year-round peaks and troughs. This is your ‘early warning system’ and helps you to flag up months where you know guests will be thin on the ground, and cash flow will be poor.
One of the keys to managing seasonal fluctuations in your income is by using innovative pricing techniques – i.e. selling a room for the right price at the right time.
- Be aware of the demand for a room on a particular night.
- Price the room to the demand in the market on that specific date.
- Charge more for your rooms on Bank Holidays, or when there are special events taking place locally.
Your pricing should be more creative than just the old-fashioned way of seasonal pricing in blocks. Small tweaks to your tariff over peak periods can make a huge difference to your bottom line profit – so it’s well worth getting a grip on demand levels and tailoring your pricing accordingly.
Get a grip on your predicted income
Another way to overcome the seasonality challenge is to have a good overview of your predicted revenue. Be aware of your potential income from your fixed number of rooms for varying occupancy levels – and work this into your business plan.
Saints Tourism and Leisure has a spreadsheet template that will help you quickly and easily calculate your potential income. Give us a call to get your free copy of the spreadsheet.
Flexibility in your pricing model can really help you improve your potential revenues by allowing you to raise and lower room tariffs as required.
For example, do you really need to have a set tariff on your website? A more flexible approach is to adopt a strategy of saying standard rooms start at £x, superior at £x and deluxe at £x – but to ask customers to ring to get a price for the particular period they want to stay. This has the double benefit of keeping potential guests away from costly online booking agencies as they will ring up and hopefully make a direct booking with you.
The time between guests booking and arriving for a hotel stay has grown shorter and shorter in recent times – probably as a result of online bookings making the process so much quicker and easier.
To overcome this trend – and get revenue coming in as far in advance as possible – offer attractive discounts to customers who book ahead, rather than offering last minute discounts to latecomers. Hold firm on your terms re cancellations, too, and remember a cancellation charge is outside the scope of VAT.
Understand your guests’ needs
Getting in control of your hotel’s seasonal pattern and pricing policy are both useful approaches, but you also need to look at your main market and learn why guests are choosing your rooms, and what their core needs are.
Asking yourself a few key questions can build a revealing picture of your market profile and your unique selling point (USP) as a place of accommodation.
- What type of guests do you attract? Is there a core demographic who make the majority of your room sales?
- When is the key time, or times, in the year for their visit, and do you see repeat business from these guests?
- What services do they expect when they arrive at the hotel, and are there new ways you could ‘surprise and delight’ this core guest demographic?
Listen to your guests’ needs and make sure you cater for them so they get the experience they’re really looking for – e.g. if your guests are active all day walking the fells then make sure that you offer them a place to store their boots and wet clothes.
By offering your guests the experience they want you’re more likely to get repeat business. And use this to your advantage by offering them a discount as repeat visitors for a time when you know you are generally quiet – avoid any busy times, like Valentine’s Day, when you know you’ll be packed out already.
Diversify your hotel revenue streams
Your hotel or guesthouse is a business, like any other. So your end goal is always to maximise your net revenue.
Revenue doesn’t just come just from rooms but from a variety of different revenue streams. When your guests are on holiday they’re likely to have spending money burning a hole in their pockets, so make sure you’re offering additional services that help them spend that money with you rather than elsewhere. (Please be aware that offering some of these services could incur issues relating to insurance, liability, etc., so if you have any concerns, just talk to us first.)
- Offer the hire of walking boots and weatherproof clothing for the hiking community.
- If you have a gym, let non-guests use this for a nominal fee.
- Partner with local attractions and tourist spots to negotiate an introductory fee for guests who buy tickets.
Think about how you can improve the experience for each guest, and create a revenue stream based around that customer need.
Manage your costs and overheads effectively
There are unavoidable costs and overheads involved in running any hotel or guesthouse, whatever the size. And if you can manage and reduce those costs, it can have a significant impact on your profitability.
If revenue is seasonal, it can be worth engaging seasonal staff rather than year-round employees. Rather than landing yourself with an immovable payroll cost each month, you can hire staff as needed and reduce your salary spend.
It’s worth noting that you still have to give seasonal staff holiday pay, based on their last 12 weeks wages. But it is possible to avoid getting involved with making pension contributions for them under the new auto-enrolment rules by using the three-month postponement rules (it’s possible that seasonal staff will have left well before the three months are up).
Your variable costs – heat and light, direct purchase of food and drink supplies, laundry etc. – will reduce when the number of guests reduces. But your direct costs still need to be met even when guests are in sparse supply.
See what you can do to manage the costs you have in quieter times. For example, some mortgage providers are happy to agree to larger mortgage repayments in peak trading periods and lower ones in the off periods – offsetting the impact of dips in room bookings by lowering your overheads in that period.
Find out how to beat the rollercoaster
In short, the key lesson from this is not to let seasonality become a threat to your hotel or guesthouse. Look at how the seasonal rollercoaster affects your business, your guests and the market as a whole – and apply the right tactics to ride out the big dipper of seasonal uncertainty.
If you’d like more ideas on how to maximise your hotel revenues, talk to Saints Tourism and Leisure about a year-round strategy for keeping your rooms full and your cash flow looking rosy.
Contact Saints Tourism & Leisure to arrange a free initial consultation.