For many innkeepers, having a solid year-round business would be fabulous. But the reality is that doesn’t happen often. And some areas experience a light 15-25 percent occupancy rate, making it hard to make ends meet, much less have a viable business to sell.
You don’t have to do what the others in your area do to create business and grow their income. If you keep doing the same things you’ll keep getting the same results. Oh, I think that’s the definition of insanity, a state you don’t want to be in. If you want the scenery of your business actions to change, do things differently.
Here are a few suggestions for increasing your off-season business or broaden your peak season, ideas to include in your business plan:
- Require a two night minimum. This is especially valuable when you have other revenue streams that would benefit by your guests being around longer, like a restaurant, bar, or gift shop.
- Require your weekend business take a non-weekend night as part of their two night minimum.
- Drop your rates mid-week and off-season. This is my least favorite approach because it says to travelers you aren’t worth your regular rate so all they have to do is wait and get your discounted rate. If you are going with the pricing strategy of matching what others in the area are charging, then this approach may seem more natural. If you price your rooms according to what it costs you to provide the experience you offer, then this undermines you tremendously. However, this approach is common in seasonal tourist areas.
- Add value to the stay and leave the prices steady. Offer wine, flowers, or candy to your guests when you wouldn’t normally offer them. Include dinner in the price (dinner doesn’t have to be fancy, just good and fresh).
- Develop packages. This approach can work for you and other tourist-related businesses to build business; you can team with others to create packages like carriage/sleigh rides, candlelight dinners, massage for two, a night on the town with a play or concert — all with a night at your lovely inn.
Work the business but keep an external focus so you don’t stunt your business’s growth or get stuck in a rut. Here are some business building approaches to consider and adopt:
- Discount corporate accounts or long terms stays (five nights plus?)
- Implement weekend or mid-week packages
- Price the same room three ways, or maybe seasonal rates (I prefer adding value for a specific room rate rather than dropping the price). Pricing the room three ways means having a price for “bed and breakfast”, one for “bed, breakfast, and a picnic lunch”, and one for “romantic bed and breakfast” — champagne and flowers being included.
- Calculate your break-even point on room income only, not other incomes, because that is really the business you are in.
If you are buying more house than you “need” for other functions, then it might be interesting to look at break-even with your room and function incomes.
It costs about $30 to actually rent a room (though you can be sure that price goes up as utility and employee costs go up). Take into consideration the cost of laundry, food, utilities and labor to evaluate your out of pocket expense. Of course there are other costs involved, but the actual outlay for the room is rather minimal. I bring this up because you may be approached by someone who wants to stay with you for an extended period of time so you need a basis on which to figure a long-term rate. During your off season that could make all the difference in the world to your cash flow. I know many innkeeper who have benefited by such a renter.
Maximizing income is the name of the game. Attaining a 100 percent occupancy is not the goal. If you are at 100 percent, you have reached your income limit — you have hit your income ceiling. If you are at 100 percent, when do you schedule room repair and maintenance? When do your rooms, furniture, sheets and towels, or staff get a break? To maximize your income, you need to make changes before you near the 100 percent point. This could be the signal to raise your rates, to add rooms, increase the length of your minimum stay, or maybe to reduce your discounts. Work on your pricing strategies. Remember — your ideal is not to have maximum occupancy but to have maximum income.
When you find you are approaching 80 percent annual occupancy it’s time to make a change. That change can be raising room rates or adding rooms. You need to take action so you can continue maximizing your income.
What ideas have you come up with for increasing your off-peak business?