Like any successful business or company, one of the key foundational aspects of running a hotel is having a good business model. There are a vast number of business models to choose from, but most eliminate certain hassles, while being prime targets for others – meaning, of course, there is no perfect business model, there is just the right business model for you. Here are three business models and the perks and potential pitfalls of each.
1) Luxe or “all-inclusive” hotel or resort
Some people want to know upfront exactly what the price will be for a total package and are willing to pay a little more to have access to amenities they may or may not even use. This model is definitely geared towards more exclusive or luxury “resort” hotels, but can also be an attractive model for families or tourists in almost any location. A continental breakfast of some kind has become de rigueur in most hotels but if you have a restaurant on site, you might consider offering full packages that include meals, local transportation and possibly even alcoholic beverages. In addition, you may even consider a total one-price package that includes all tips and gratuity and possibly even a selection of tickets to local destinations or events.
Why it works: Having one price packaging can alleviate stress and strain on both the guests and staff of the hotel. Guests don’t have to constantly be balancing available offerings against their budget and staff don’t have to wonder whether or not they are going to be tipped well – or tipped at all. Offering one all-inclusive price for everything allows guests to just relax and know that it’s all taken care of. If it’s available, it’s been paid for.
Potential pitfall: Sometimes people who are drawn to “all inclusive” packages have unreasonable expectations of what should be available to them and they can create major headaches if their expectations are not met. All-inclusive hotels can attract people that feel entitled and sometimes they can feel entitled to things that are actually unreasonable to expect.
2) A la Carte
In the same way that some people like to pay one price and know that everything is taken care of and included, other people resent paying for things they know they will not be able to use. A la Carte hotels tend to be more budget friendly and attract clientele that don’t necessarily want a lot of frills or bells and whistles, which also cuts down significantly on overhead. While a la carte hotels may not bring in as much money as luxe hotels, their lower overhead tends to make their profit margin relatively even across the board.
Why it works: Allowing people to pick and choose what they do and do not want to pay for allows them to feel they are getting good value for every dollar they spend, which also makes them feel good about the hotel itself.
Potential pitfall: Often people who opt for a la carte offerings tend to be frugal and there can be a fine line between frugal and miserly. In addition, they expect what they do pay for to be worth the value paid, and people can have very different ideas when it comes to worth and value. A la carte hotels can attract clientele that want to haggle over every single charge and the price of everything.
Hybrid hotels – like many airlines – offer both premium and a la carte options. This gives airlines a broader consumer base to work with, as there are options for both luxe passengers and a la carte passengers. There are generally a smaller number of first class seats, but this gives them the option of bumping up any economy overflow into business or first class and offering additional amenities to any first class passengers that might end up bumped back to business or economy class.
Why it works: Having a broader consumer base to work with gives you greater assurance that your hotel will always be full.
Potential pitfall: Even when it is clear that some people paid more for their stay, a la carte or economy guests can sometimes feel like they should be given access to the same perks and amenities anyway. This can potentially create conflict among your guests and make an uncomfortable situation for everyone involved.
No matter what business model you choose, it will have pros and cons. At the Passport Group, we would love to help you explore all of your options and find just the right model for you and your property. Give us a call today and let us help you find just the right business model for you.