A Short Guide to Cost-Effectiveness – 6 Ways to Reduce the Pressure of Increasing Costs  

There’s no way you can avoid the topic of inflation if you’re reading or watching the news. With COVID-19, and now the Russian-Ukrainian conflict, we witnessed a massive increase in the costs of products and services. It all started with energy and gas tariffs skyrocketing. Shortly afterward, other goods and services followed the same path. And the predictions are not very optimistic - The World Bank estimates that prices will remain historically high until 2024.  

For hoteliers, the surge in prices is among the biggest challenges this year. In February 2022, the utility prices were 35% higher on a nominal basis, compared to 2019, reaching EUR 8 on a PAR basis. Global food prices are at a record high. Construction materials prices rose even before the conflict, which makes it even more difficult to plan cost-effectively in terms of room upgrades or new constructions. If not managed well, these costs have the potential of creating major disruptions in terms of budget allocation, which can affect the general performance of the hotel.  

So what can you do to balance the situation? Here are some cost-effective suggestions that can help you reduce the pressure of increasing costs:

Review all your costs & earnings and see if there is anything that can be streamlined or cut off. 

Before adopting any cost-effective measures, make sure that you have a clear overview of your spending, but also on your revenue, by looking at metrics such as RevPAR, ADR, ALOS, ReRTI, etc. Are there any categories that cost more than budgeted? Is your RevPAR high enough and what can you do to improve it? Having the numbers in front of you and asking yourself and your team these questions is the first step towards a cost-effective strategy.  

Prioritize investments. 

Whether big or small, now is the perfect time to organize your projects based on their priority. In deciding what’s next on your plate, make sure you take into account things such as required resources (human, material, digital, etc.), necessary budget, timeline, and other obstacles that may slow down the project. 

Reduce energy use by measuring how much you use and adopting an energy-efficient policy.

A hotel can cut up to 20% of its energy costs if it properly implements an energy-efficient policy. First, start with measuring the current consumption. Are there certain areas where you feel you could reduce it? 

No expensive upgrades are required at the beginning. By making sure that you do regular maintenance on your pipeworks, and quickly repair leaky traps, you can already save some money. Other things to consider? Installing thermostats in the rooms, switching to LED lights, and implementing a smart light system with sensors will also make a huge difference in your monthly consumption. 

Do system maintenance on time.

Don’t postpone maintenance work even if your systems seem to function perfectly. Sometimes,  you may deal with hidden issues that, if left unresolved,  can turn into major challenges, and cost much more in the future. Keep your maintenance appointments in a calendar to make sure you can plan them on time. 

Invest in training and onboarding your staff to reduce attrition.

Attrition is a big problem in the industry. Once you onboard a person, you want to make sure their manager knows how to motivate and keep him/her engaged. A good manager can make a huge difference - a recent study by Gallup shows that managers account for 70% of the variance in employee engagement  - and therefore, can have a significant impact on reducing turnover.  

Use technology to automate processes where necessary.  

Contactless solutions are no longer an option in managing your daily operations. Whether it relates to internal processes or direct communication with your guests, these solutions can help you reduce the time your staff spends on certain tasks, in this way, helping them focus on creating a great guest experience.  From smart room keys to online reputation management software - all these will prove indispensable once you start using them.  

Catalina Brinza

Catalina is a social media and data enthusiast. At TrustYou, she's on the mission to bring the most out of travel and hospitality data. One day, she hopes to experience Japan's culture to its fullest.

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