Creative operational solutions to play key role in hotel profitability in 2023

CHICAGO – November 8, 2022 – The global lodging industry has made a comeback in 2022, with operating performance improving significantly over 2020 and 2021 and moving closer to pre-pandemic levels. The 2023 budget season is upon us, and hotel owners are continuing to search for ways to increase profitability while reducing operational risks.

JLL's Hotels & Hospitality Group’s second annual Hotels Global Asset Management Report highlights four recommendations for hotel owners when planning their 2023 budgets:

Transform labor strategy to attract and retain top talent. While there are no quick fixes for the industry’s workforce issues there are a few initiatives that owners and operators can implement. These include hiring talent with complementary skillsets that don’t have a background in hotels and hospitality, investing in automation software for back-of-house tasks and implementing creative pay or work structures.

Push rates judiciously and keep disciplined cost management solutions employed during the pandemic.  Hotel owners and operators can reduce some of the inflationary pressure by analyzing operational expenses and cost-saving measures. A few examples of this include using energy-efficient lightbulbs, cross-training associates, optimizing labor scheduling, locally sourcing ingredients for menu items and optional daily housekeeping.

Understand the evolving nature of lodging demand and intentionally drive ancillary revenue to optimize profit. Examples of this include reimaging under-utilized space for social gatherings, offering group activities such as culinary classes or group fitness classes for additional fees and adopting variable pricing models for secondary services such as parking and spa treatments.

Capital expenditures should aim to protect market share and enhance property value. Guest expectations are at an all-time high, this coupled with rising ADR, means properties need to maintain a fresh look and feel to maintain guest satisfaction.

“Don’t get distracted by climbing ADR trends, the current environment requires smart and proactive asset management strategies,” said Andrea Grigg, Head of Global Portfolio Asset Management. “Returning to 2019’s operating standards and staffing models will hinder a hotel’s ability to return to historical profitability levels and quickly erode the flow-through of the extraordinary ADR gains seen to date. Instead, challenge the status quo, expect innovative thinking, spend where it matters and remember the lessons of doing more with less.”

Global economic headwinds have had a limited negative impact on hospitality fundamentals across most major markets in 2022. With corporate and group travel approaching pre-pandemic levels, hotel owners and operators who embrace creative solutions to attract demand, and maintain high service levels, while managing labor issues and high operations expenses, stand to benefit from the industry’s ongoing recovery.

JLL’s Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor over the last five years, totaling $83 billion worldwide. The group’s 350-strong global team in over 20 countries also closed more than 7,350 advisory, valuation and asset management assignments. Our hotel valuation, brokerage, asset management and consultancy services have helped more hotel investors, owners and operators achieve high returns on their assets than any other real estate advisor in the world.

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