Hoteliers are now in the middle of 2023 budgeting. It’s a tricky task given the uncertain forecasts.
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A pre-pandemic surge in demand seems to have tremendous momentum.
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But people in many markets are talking about recessions.
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So… how to plan?
For insight, I checked in with Andrea Grigg, who leads the global asset management practice at JLL’s Hotels & Hospitality Group, which manages about 90 hotel assets worth more than $6.8 billion.
Here are some key 2023 insights from Grigg.
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It’s sensible for hoteliers to be cautiously optimistic.
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A key task is to take a savvier, more integrated approach to ancillary sales, such as at a hotel’s restaurant or spa.
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Too many hotels want to return to 2019 levels of staffing. She doesn’t think that’s desirable.
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Too many hotels don’t set aside money for inevitable renovation work.
Overall, optimism about 2023 seems sensible.
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“Overall, we’ve had very positive conversations about next year with hotel operators all over the world,” Grigg said. “In the past few weeks, we’ve had budget reviews in New York, San Francisco, London, Mexico, Chile, and so on.”
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“Across the board, sentiment is very positive from a top-line and demand perspective.”
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Of course, you should have a Plan B if things go wrong.
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“If all the clouds on the horizon come together and make a storm, your team needs to be able to adapt,” Grigg said.
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She notes that hotels can respond well by flexing up and down in rate and operational costs.
The coming months are a golden moment for many full-service hoteliers.
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Guests have recently been patronizing bars and restaurants at full-service hotels in higher numbers than usual.
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“As an asset manager, as you see your ancillary revenue increasing, I would increase the budgetary allowance for refreshing and repositioning the F&B [food and beverage] outlets,” Grigg said. “That will pay off if you have the right initiatives on property.”
To regain 2019 levels of profit, hoteliers will have to get better at upselling and cross-selling customers. That way, they can layer in more high-margin revenue on top of the basic room.
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“The strategy with ancillary sales needs to be integrated,” Grigg said. “It’s not, ‘Let’s capture a guest to go to the spa,’ and then treat the spa treatment as just a one-off. We need to change this mentality and see the spa, for example, as its own business unit and set that unit up for success.”
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“When you have the right elements together, you shouldn’t have to sell guests that hard,” Grigg said. “Make sure your restaurant or spa has the right programming, and your guests understand what they offer.”
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Grigg said London House Chicago is a good example of a property that’s effectively boosted its ancillary sales.
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“That’s a manager that has used creative programming, extraordinary PR, and high-quality service execution to make their rooftop the one place you must visit while in Chicago,” Grigg said. “What they’ve done for selling their space for proposals and weddings has been incredible.”
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“It’s not easy to do,” Grigg said. “It requires very open, purposeful, and intentional management.”