Barter Advertising Solutions can convert your resorts percentage of room nights that normally go empty and unsold each month into large scale advertising campaigns to increase brand awareness and increase both individual and group cash bookings at your resorts.
Hotel rooms are a perishable inventory and the lost revenue resulting from rooms on a daily basis that go empty and unsold can never be recovered. A resort group can substantially increase its available marketing dollars by exchanging even a small fraction of their rooms that otherwise would go empty and unsold at full retail value in return for major advertising to increase brand visibility and generate new cash bookings.
The hotel industry remains a cyclical business and ever changing economic and geopolitical tensions cause many travelers to cancel, defer or change trips – hoteliers need continuously examine all possible strategic ways to enhance performance and the bottom line. The inclusion of barter in a hotel’s annual marketing budget allows it to expand its sales effort and to dramatically stretch funds to test new markets and build branding and awareness. Hotels can use barter to attract desirable individual customers and meeting programs that generate cash charges for incidentals, as well as bring future cash business to increase market share. Bartering a fraction of a hotels average percentage of unsold rooms in return for major advertising campaigns is an intelligent tool for boosting demand and profit while expanding budgetary resources.
Regardless of the state of the economy, every financial strategy and solution should be considered to maximize occupancy, revenue and profitability during high and low demand periods. A recent STR Global Performance Report* on Luxury Properties in major cities worldwide reported that average occupancy was 75.7%. along with an average daily room rate of $302 per night. The report was based on 319 Luxury Hotels in major cities around the world with a total of 108,297 rooms (average 339 rooms per property). With an average occupancy of 75.7% and an average of 339 total rooms per property that means that on average 24.3% of the rooms are going unsold or roughly 82 rooms per night per property going unsold – multiply those 82 rooms per night by $302 in lost revenue and the result is $24,764 per night in lost revenue or roughly $742,290 per month ($8,915,040.00 in lost revenue per year) per property. If a resort group has 10 properties in their portfolio that amounts to almost $100 million lost revenue per year.
The importance of profit to owners and investors demands a critical look at an underused marketing tool – barter. Hotel executives have a fiduciary responsibility to capitalize on the value of their inventory. Using a percentage of unsold rooms as a currency through a marketing professional who specializes in barter strategies, hotels can position their brands to reach desirable consumer demos as well as corporate, group and leisure accounts. Many hospitality companies successfully use barter to strengthen brand image and boost demand for their properties while conserving cash to improve profits.
Barter provides hotels & resorts with a system for selling unsold room inventory in a way that is consistent with their particular their image and goals. Since the typical barter client is a corporate traveler, or incentive group that is not a current customer, hotels can reach entirely new types of clients and sources of future cash business. Exchanging a percentage of your average daily unsold hotel inventory is an effective means of purchasing advertising, promotions and other marketing services when funds are not available or are too costly. It is a viable option that can provide a valuable, competitive edge.
Barter can help your luxury property achieve maximum profit. Since hotels have perishable inventory, bartering complements the hotels operating systems in many ways. Due to the brief tenancy of guests, hotels must continually advertise in order to achieve, maintain and grow branding and awareness. Therefore, bartering rooms for advertising is an intelligent attractive solution since ad placements, like guest rooms, are perishable inventory. Hotels strive to attract clients that fit their target markets and build long-term relationships to attract customers who represent future cash-paying customers and will help spread the word to their friends and associates. Barter stays typically still provide incremental cash revenue from the barter customer while he/she is staying at the property as such guests still typically pay cash for food, beverage and incidentals, creating incremental revenues. In addition – newly opened hotels, which typically need to conserve cash and build customer relationships can strongly benefit from using barter. Their generally low occupancy rates and profitability make barter an optimal financial and marketing strategy.
The revenue of a lost room night can never be recovered. Rather than taking a loss, luxury resorts can use unsold rooms as currency for strategic advertising that reaches key markets/demos. Even just a small percentage of a property’s unsold rooms can be converted into substantial media campaigns.
Even a small luxury chain can achieve a substantial budget to exchange for valuable marketing as well as other goods and services. For example small luxury hotel chain with a total of 2,500 rooms with an average rate of $300.00 per night and an average occupancy rate of 80%. An average occupancy of 80% means that 20% of their total available room are going unsold – that translates to 500 room nights per day going unsold. At an average room rate of $300 per night that equals $150,000 per day ($4.5 million per month – $54 million per year) in lost revenue. Instead of getting nothing for those unsold room nights the hotel chain could take as little as 15% of their unsold room nights and convert that into over $8 million dollars in new strategic advertising campaigns to help increase the chain’s brand visibility, gain market share and generate new incremental cash bookings.
*Source STR Global Luxury Performance report – YTD 2014