How to stabilise revenue

Q: I run an independent hotel which experiences hugely fluctuating demand according to the season. I’d like to make the income a bit more stable and if possible, give myself some guarantees. Any ideas?

A: All hospitality businesses have a ‘natural’ pattern; peaks and troughs that are pretty much the same year in, year out, almost unrelated to your marketing spend. Some of this will be regular customers, some will be related to what’s on in your area and some will just be natural market penetration. The trick is to invest in your marketing in such a way that you help alter the natural pattern, boosting guest numbers during quiet periods, without undermining or shifting the existing sales.

A great way of ensuring a regular income is to consider whether or not you can launch your own guest ‘membership’ scheme. Effectively a pre-paid loyalty programme, memberships enable you to elicit a regular income, at little or no additional cost to your business. What’s more, because the ‘deals’ are only open to members, it shouldn’t affect your guests from further afield or those who come for a one-off visit.

The key principal of membership marketing is to create a culture of exclusivity and added value. True, there are those like gym memberships which are a simple exchange of money for access to equipment, however unless you have a top-notch health facility, this isn’t something you’ll be able to develop or launch. Instead, focus on what your business does well and areas where there are consistent overheads and where profit margins are highest. From there, look at what you can exclusively offer to your members, which are not available any other way. Top Tip: whatever you decide, keep it exclusive; a membership will only work if the member feels that each perk is a money-can’t-buy must-have!

I’ve seen a lot of memberships work within hotel businesses and they range from one-off annual fees, through to regular monthly payments. Their success is always dependent on the area they are operating in and the range and value of the deals offered, but generally, they tend to be fairly successful. Here are some great examples I’ve seen at work before:

• FOODIE MEMBERSHIP; with a focus on locals with a good disposable income, the foodie membership encourages regular visits to the restaurant, of course with a great upsell on wine, drinks and additional guests. Not only do the diners get the best possible value meal – an exclusive set-price menu – but additional perks such as new menu tasting evenings offered free of charge, two-for-one deals on cocktails, bring a guest for free, and so on, mean the membership has true value. In real terms, your overheads change little and your profit margin should remain high, even with the ‘giveaways’; plus you receive a regular, guaranteed income.
• GETAWAY MEMBERSHIP; I’ve only ever seen this once, but it worked wonders for filling the hotel at off-peak times. Guests paid monthly increments towards a discounted quarterly stay and those who committed to a 12-month membership got five stays for the price of four. Alongside the overnight accommodation at a discounted rate, other perks included a free bottle of wine, a massage (they had a spa) or a local activity in partnership with another brand. This fifth stay can be limited to off-peak dates and you’ll benefit from using the room as a loss-leader for the associated bar and restaurant spend.

Despite being potentially lucrative, launching a membership should not be done lightly. First, there is the what; what you plan to offer and how to make it exclusive. This should quickly be followed by the when and the where i.e. your terms and conditions of sale including periods when the scheme is non-redeemable, and any excluded items. This will keep you protected. Finally, it is the value – there is no point launching a membership, only to find nobody is interested. Run a focus group, testing the potential price and offering, to gain an understanding of whether potential punters will find it enticing or not.

A well-run, exclusive membership programme can really help to fill the sluggish periods in your calendar and even better can help you break into new markets. If you are lacking locals, a restaurant-based membership could be your in, whereas hotels hoping to boost regular overnight stays, should focus on guests in a 100 mile radius. Best of all, use it to remarket to your previous one-off guests, encouraging them to become your coveted regulars and ensuring your cashflow is right on track.

By Angie Petkovic. This article first appeared in the December 2015 issue of Hotel Owner