Revenue Strategies for Boutique Hotels

By. Robert Rauch 12th Oct 2016

The market is poised for boutique hotels to make an impact on the hotel industry like they never have before. With an expected soft landing of the economy in 2017 (2-3 percent RevPAR growth max) it is more important than ever for independent hotels to ensure that they have proper revenue strategies in place. Competing with the big brands for market share can sound like a herculean struggle but with execution of the proper procedures, a boutique hotel can stand apart from the crowd.

Revenue Generation Understanding where your business comes from is the first step of proper revenue management. Millennials now make up the largest share of traveler demographics and are the biggest factor as to why independents will be performing better than in previous years. They remain neutral regarding their opinions on branded hotels and they prefer seeking out an experience rather than staying loyal to any one particular chain. Think urban renewals and adaptive reuse of space; these factors are highly attractive to a millennial traveler because they embody elements of the surrounding area and create a unique experience. Remember that technology plays an important role in their day-to-day lives so ensure your Wi-Fi systems have enough bandwidth to meet their demands. This technology is not only required in each guestroom but also in any large social gathering area that promotes a work/play environment.

With an established buyer persona, we can now look at your ideal revenue mix. Direct bookings are by far the most cost effective business for boutique hotels so it is always the goal to drive business to our own booking channels. Identifying what percent of business you need from group sales, Global Distribution Systems (GDS) and Online Travel Agents (OTAs) is important to a successful revenue strategy. Understanding the cost of all of your booking channels allows for you to properly layer in business by evaluating the effective average daily rate (ADR) and adjusting your available rates accordingly. Set occupancy thresholds for your hotel as key indicators of when to increase your rates. The further out a guest books, the better deal they should obtain in most cases. The worst thing you can do is to train your guests to book last minute by reducing rates or making last minute deals available.

A savvy sales team can make or break your independent hotel. Group business generally books well in advance and provides the ideal base business for a hotel. Without the power of a brand sales team and the tools that they provide, your independent hotel’s sales efforts need to ensure that they are utilizing the right channels to be effective. While GDS business is mostly pay-to-play, it provides exceptional return on investment (ROI) in the right markets. Responding to requests for proposals (RFPs) from these national accounts can be tedious but it is an essential piece to your revenue puzzle. Local negotiated rates (LNRs) are equally important for your sales team to seek out. These accounts are special rates set up with local businesses that have travel needs in the area. They are entirely driven by the relationships your team develops with the travel manager of the company and the service your operations team provides to these business travelers. Right now is the time to ensure these relationships are tapped for 2017.

Group revenue management is much more complex than transient revenue management. Balancing meeting rooms and sleeping rooms has always been tough for revenue managers who have not been on the group sales side of the business and salespeople not familiar with RFPs must equip themselves with new tools. Identify your hotel’s ideal rooms to space ratio to maximize profits on any piece of group business and to ensure your revenue manager and sales team are on the same page.

Events and Other Contributing Factors Events are another important pillar to your team’s strategy. While events generally do not provide a large amount of room nights, they do get people in the door of your hotel and help with your marketing efforts. If your hotel has an in-house food and beverage department, then capitalizing on these events is even more important to achieving financial success and should be incorporated into your revenue strategies. Food and beverage can be a huge selling point for a potential client. Gone are the days where frozen foods are acceptable. Farm to table and locally sourced product is expected at every dining occasion. Healthy options are also prized in today’s market. While comfort foods are still appreciated, ensure your food and beverage team is keeping up with the latest healthy living trends and adjusting their menus accordingly. Let your chef be creative! Sometimes the most inspired ideas stem from thinking outside the norm. Remember that destination is a high contributing factor in the decision making process so your sales team should be highlighting all the aspects of the area that are attractive. Does your hotel have a great bar where guests could grab a happy hour drink after their meeting? Make sure to emphasize any amenity that promotes your hotel as a destination, even if you think it is not relevant to the meeting or event. If your hotel is limited on amenities, then provide information on your local area and everything that could be attractive to a first-time visitor. The work hard, play hard mentality has taken the market by storm so even if a client is looking to host a business meeting, they will also be exploring what to do once their meeting is finished.

Stressing the importance of marketing in your overall revenue strategies cannot be overstated. Marketing is the crux of how your boutique hotel sets itself apart. Establishing your hotel’s identity and voice and ensuring that it is effectively communicated to all outlets is a must. Without the power of a big brand behind you, you are awarded the chance to create a brand that really defines the hotel and the experience your team provides. Your social media platforms create a stage for your hotel’s voice to be heard so their importance is far greater than they would be for a branded hotel. Develop creative packages and collateral that capture the guest experience to set yourself apart from a big box or cookie-cutter franchised hotel. These pieces must tell a story that evokes a potential guest’s wanderlust and shows value. The freedom of having no brand requirements allows this narrative to be told across all media under your complete control. Your website should be constantly updated with local happenings, events and hangouts to keep up with search engine optimization (SEO) changes that stress these local focused searches. This is a complete advantage over branded hotels that have to have boring and monotonous websites with very little control over content. The goal is to create a local community hub that provides exceptional content to any visitor.

While marketing spend may be a disadvantage for boutique hotels compared to their branded counterparts, their ability to adapt quickly to changes is quite the advantage and should be a part of any good revenue strategy. Take some of the money saved by not having franchise fees and invest it in your marketing efforts. As Google frequently adjusts the algorithms behind its search results, boutique hotels can react quickly and gain better placement on search engine results pages (SERPs). The higher SERP placement directly correlates to more bookings. With technology changes happening faster than ever and mobile searches now outperforming desktop searches, boutique hotels can take advantage by being easy to do business with and having simple booking paths. Investing in strategic partnerships is also an important strategy for keeping up with the marketing ad spend of the brands and can lead to the obtaining of quality local back-links that greatly increase SEO.

Branded hotels are at the whim of the brand when it comes to online advertising campaigns but independents retain all the creative control. If you are not currently investing in your pay per click (PPC) ad words and remarketing campaigns, now is the time to change that. These tools allow you to drive traffic directly to your website and convert direct bookings. With a highly tuned buyer persona from review of your web analytics and any other data you have access to, boutique hotels can create targeted campaigns with tremendous ROI. While competing with the OTAs and brands for spend on high value keywords does not make sense, you can take advantage of spending on your lower cost self-branded keywords so that you are not getting business stolen out from under you. Accepting the fact that you will never be able to keep up with the marketing spend of the OTAs is crucial to guiding your revenue strategies. OTAs do not need to be the enemy. Take advantage of their marketing reach during your slow periods and apply restrictions when needed to obtain your optimal revenue mix.

With so many moving parts and no brand systems or guidance to assist you, it is essential for your hotel’s revenue success to invest in the right tools. There are a number of property management systems, rate shoppers, channel management and customer relationship management tools that can provide the needed assistance for your revenue goals. With no big brother to watch over you it is important to audit these systems on a frequent basis to ensure that they are functioning properly. Having a connectivity issue can cost you thousands of dollars per month if you are showing no availability on certain channels.

Revenue management should never be on the back burner, especially for boutique hotels. Strategies need to constantly be looked at and questioned so that they can evolve with the market. Pay attention to your rates daily and check them multiple times a day during peak demand periods. Schedule weekly revenue meetings with your hotel’s key managers so that everyone involved is staying engaged and on the same page with your current strategies. Independent hotels can adapt quickly to changes in the market, so use this to your advantage. The “set it and forget it” mentality needs to be removed from your thinking to achieve revenue success. It may require lots of dedication from your entire team but the results are extremely rewarding. Good luck!

Reprinted from the Hotel Business Review with permission from

About Robert Rauch

Robert Rauch, CHA, is a nationally recognized hotelier and President of R. A. Rauch & Associates, Inc., a leading hospitality management and consulting firm. Rauch has over 35 years of hospitality- related management experience in all facets of the industry. Widely recognized as the 'hotel guru', Mr. Rauch maintains a blog where he expounds upon insights and

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