Strategies for Hotels and Bed and Breakfasts to Increase Profit Margins

Ever since the idea entered your head, you haven’t been able to let it go. And now, you know almost without a doubt that you want to start and run your own bed and breakfast, or perhaps even a small hotel.

But, you’ve got a lot of questions.

What are you going to do when no one rents the room? How can you get people to rent a more expensive suite? How can you get people to choose you over your competitor down the road who has much worse service, but a better view?

Asking the right questions gives you time to come up with strategies and tactics that can help you increase your revenue, price your services correctly, and even generate new revenue streams you’d never previously thought of.

Let’s examine some of those tried-and-tested strategies that will boost your revenue.

1. Upsell when you can

Upselling isn’t just a sales tactic relegated to ecommerce websites. In fact, it has been practiced by service businesses worldwide for years.

The trick to doing it well is to offer something the customer perceives as valuable—and of course, you have to do it tactfully. Don’t be so aggressive that you put people off or make them uncomfortable, as you are asking them to shell out even more cash.

For example, asking a guest if they’d like to upgrade to a suite with an ocean view probably won’t be negatively received, and in fact may even be appreciated. After all, maybe they didn’t know a room with an ocean view was available!

Because hotels often have more than one revenue stream, there are a number of things owners can upsell to boost revenue, including upselling rooms, foods and beverages, and event add-ons like audio-visual equipment and table centerpieces. According to HotelNewsNow columnist Caroline Cooper, upselling exposes customers to options they might never have known even existed.

Hotel Marketing has a great article on how to implement a front desk upselling program, including advice on structuring rates so that upgrades are reasonable, training techniques to help front desk staff upsell, recognition and incentive programs, and much more. It’s definitely worth a read.

To upsell effectively, you first need to figure out which of your services you want to promote. Remember, if what you’re promoting does not have perceived value to your customer, the upsell won’t work.

2. Raise your prices

You don’t have to be located in the Florida Keys to charge a moderate price for your hotel or bed and breakfast. In fact, if you know a thing or two about how to increase your perceived value, you may be able to charge quite a lot more.

Why? Because pricing your rooms or services based on value is a time-tested strategy. Whether or not you believe it, people will often not buy what seems to be a good product if the price is too low. But, by the same token, they also won’t choose to stay with you if your prices are too high.

So, how do you figure out what the best price for a night at your hotel or bed and breakfast is?

The key to figuring out how to price your own services is to start by looking at your competitors. When someone doesn’t choose you, who do they choose? What price does this competitor charge?

When you’ve done some basic fact finding, list all of the ways that your offering is better than the second option, and then list how the second offering is better than yours. Now try to quantify how much these differences are worth.

Finally, to determine the best price, take the price of the second best option, plus the value of your advantages minus the value of the second best option’s advantages. Voila! You have your price.

[see-also]What You Absolutely Cannot Afford to Forget When Pricing Your Products[/see-also]

3. Set up a customer referral program

We’ve said it before and we’ll say it again: A customer referral program is a great way to bring new customers in the door.

In fact, according to Referral Saasquatch, 92 percent of respondents trust referrals from people they know, and 65 percent of new business comes from referrals.

Best of all, there isn’t just one good way to go about implementing a customer referral program. In fact, a quick online search will return a number of success stories you can look to for ideas.

Perhaps the most obvious referral is a monetary reward, such as the $10 reward PrizeCandle offers if you refer a friend. But it doesn’t have to be a cash-in-hand type of reward. What about offering your guests free dinner for two nights next time they stay at your hotel, or perhaps a free dinner at a local restaurant next time they book your bed and breakfast?

The ticket to success, it turns out, is that you create “fans.” After all, who is going to want to refer you if they didn’t enjoy their stay with you? And, according to a 2013 Nielsen report, word-of-mouth recommendations from friends and family are still the most influential form of advertising. So, don’t just think long and hard about the type of referral program you want to implement, but also consider how you’re going to please your customers!

4. Reward extended stays

While restaurants and cafes need to turn tables to boost revenue, hotels and bed and breakfasts simply need to keep rooms occupied. In fact, the longer a guest stays, the better—it means fewer unpaid nights, a chance to foster loyalty, and an opportunity to show off your excellent customer service.

If you’re drawing people in by offering discounts left, right, and center, you may be making a big mistake. Discounting your hotel or bed and breakfast at every available opportunity is only going to decrease its perceived value, and worse, potentially lose you a lot of money.

A better way to keep rooms booked is to use discounts as rewards—offer a discount only to those guests who choose to stay for an extended period of time. This will make your customers feel appreciated, and will save you from having to discount everyone right from the start. Plus, it will make people feel good—like they’ve got a bargain.

5. Sell hotel-branded products

When it’s a nice hotel or bed and breakfast, how often have you walked out with the complimentary soap, shampoo, and lotion?

If your guests are doing as much, it’s actually a good thing—a sign they like what you have to offer.

And, if what you have to offer is worth “stealing,” you have an untapped revenue stream at hand.

Luxury travel blogger Mrs. O says she hardly ever brings home the mini shampoo, soap, and conditioner bottles she finds in hotels, simply because she doesn’t want loads of them cluttering up her shower. But, she admits there are a few that really are worth taking back, and even spending money on! “I have discovered many a brand through hotel stays (and airlines too) and if I love them, I will purchase them at a later date,” she says.

Consider selling some of your products or toiletries in your gift shop if you run a hotel, or at reception if you operate a bed and breakfast.

If you’re interested in figuring out what brands are worth “stealing” (or at least selling), check out Mrs. O’s list of top luxury hotel toiletries.

[see-also]Business Branding Guide[/see-also]

Ready to take the next step?

If you’re ready to start planning your bed and breakfast or hotel, make sure to check out our free hotel and bed and breakfast sample business plans. And, if you’re not quite there yet, read our complete guide to starting a bed and breakfast.