In a recent strategic evaluation of revenue generation for a distinguished independent luxury hotel in San Francisco, we delved into the challenges this property faces in restoring its revenue to pre-pandemic levels. The hotel sought out our expert guidance on various aspects, including its Revenue Management System (RMS) configuration, distribution strategy, pricing strategies, and business mix.
NB: This is an article from TCRM
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There was one specific issue from the evaluation that stood out. It reminded me of an often-heard question in many front offices, “what do we do with all these suites?”.
The Hotel Suite Conundrum
Several decades ago, the prevailing wisdom led hotel owners and designers to incorporate a significant number of suites into their properties, assuming a robust demand for these premium accommodations. However, the reality has proven different. Often, these suites remain unoccupied or are offered as complimentary upgrades.
So, what went wrong with this idea?
For larger hotels that host group events or have substantial international clientele, maintaining a substantial suite inventory makes sense. Suites are valuable concessions to attract group business and satisfy VIP guests.
However, not all hotels enjoy such steady demand for these upscale rooms. In times of market disruption, like a pandemic, or when guest demographics change, the demand for suites can plummet. This leaves hotels grappling with the challenge of what to do with their unoccupied suites.
Addressing the issue, hoteliers often resort to upgrading their highest-paying guests or loyalty program members to suites after overselling standard room inventories. While this tactic can help maximize room occupancy, it’s not the most revenue-maximizing option.
Charting a Better Path
In our strategic evaluation, we recommended a range of options to solve this challenge, some of which may require financial investment, while others are cost-effective or free alternatives.
1. Pricing Differentials:
One effective strategy to address the suite dilemma involves adjusting pricing differentials, which is the gap between suite prices and the hotel’s other accommodations. This adjustment is generally a simple and cost-free way to boost suite sales. Often, suites are priced too high, which limits their appeal to potential guests.
In our Strategic Assessment, we recommended two tactical solutions including modifying the suite price differential based on the day of the week, knowing that certain days of the week run lower occupancy than others; and seasonal variations based on market demand. Exceptions to these tactics could also be made during citywide conventions or other periods of high demand.
