Running a hotel can sometimes feel like trying to keep a boat afloat in a storm. Just when you think you’ve got everything under control, waves of rising costs hit from every direction—labor, utilities, and supplies, just to name a few. Unfortunately, there’s no one-size-fits-all solution to weathering these financial storms. However, with a blend of technology and thoughtful strategy, the hospitality industry can navigate these challenges without losing sight of what matters most: the guest experience.
In this article, we’ll explore the key areas where costs are increasing and outline strategies that forward-thinking hotels are using to manage them. From leveraging Hotel Property Management Software (Hotel PMS) to adopting contactless technologies and dynamic pricing, there’s a growing toolbox of solutions to address today’s financial pressures.
Understanding the Root of Rising Costs in Hospitality
The hospitality industry has always operated on tight margins, but in recent years, costs have been increasing at an accelerated pace. What’s driving these increases?
1) Labor Costs: The most significant challenge for hotels worldwide is the rising cost of labor. Since the pandemic, labor shortages have driven wages up. According to a survey by the American Hotel & Lodging Association (AHLA), many hotel owners have reported a significant shortage in labor and an uptick in labor costs, with 86% of respondents having to increase wages, 52% have offered greater flexibility with hours, and 33% have expanded benefits to cope with the nationwide workforce shortage. Nonetheless, 79% say they are still unable to fill open positions.
2) Energy and Utilities: Hotels are energy-intensive operations. Heating, cooling, and lighting across hundreds or thousands of rooms, as well as maintaining facilities like pools and gyms, have led to increased energy costs.
Mateusz Sabak, co-founder, RentPlanet:
“Electricity prices have increased by about 25 per cent compared to last year, and an increase of even 115 per cent is forecast for the next year. This has raised the prices of subcontracting companies such as laundries. The costs of their services have in some cases increased by over 100 per cent – let’s not forget that they also have to cope with increased gas and water prices.
3) Higher Guest Expectations: The modern traveler is tech-savvy and demands a seamless, high-tech experience. From mobile bookings to in-room technology, hotels are finding themselves needing to invest in new solutions just to keep up. These demands can be expensive to meet, but they are crucial for remaining competitive in today’s market.
4) Technology and Digital Infrastructure: While technology is a tool for efficiency, the investment needed to implement and maintain digital infrastructure can be substantial. Hotels must frequently upgrade their Hotel Property Management Systems (PMS), integrate advanced contactless technologies, and enhance their cybersecurity measures to protect guest data. Additionally, costs for maintaining Wi-Fi, mobile booking platforms, and smart room technologies continue to rise. While necessary to remain competitive and meet guest expectations, these technological upgrades contribute to the overall increase in operational costs.
The Role of Technology in Reducing Costs
In response to these rising expenses, many hoteliers are turning to technology as a way to streamline operations, improve efficiency, and manage costs. Hotel Property Management Software (Hotel PMS) is one of the most powerful tools available to help hotels address these challenges, but it’s not just about implementing a system and hoping for the best. Successful cost reduction requires a strategic approach that combines the latest trends in hospitality tech.
- Mobile Booking and Self Service Technology
Guests are looking for convenience and flexibility, which has made mobile booking and self-check-in technology essential offerings. Hotels that provide these services can cut down on front desk staffing costs and reduce guest wait times, both of which contribute to higher guest satisfaction. According to research, nearly three-quarters (73%) of travelers want to use their mobile device to manage their hotel experience, including checking in and out, paying, ordering food, and more.
Additionally, implementing digital check-in solutions can effectively reduce costs while maintaining a high level of guest satisfaction. Here are two ways it helps cut expenses:
- Labor Savings: Traditional check-in systems often require multiple front desk staff, especially during peak times. By adopting digital check-in, hotels can reduce the reliance on manual processes, lowering the need for additional staff. While front desk staff remain essential, digital tools can streamline operations, helping manage labor costs more effectively.
- Lower Material Expenses: Items like registration forms and physical keycards come with recurring costs, particularly when occupancy rates are high. Digital check-in eliminates the need for these materials, allowing hotels to operate more sustainably and cost-efficiently.
2) Revenue Management Systems for Dynamic Pricing
Hotels have traditionally struggled with balancing supply and demand, but Revenue Management Systems (RMS), integrated with Hotel PMS, have changed the game. These systems use data analytics to predict demand, allowing hotels to adjust room rates in real-time. During high-demand periods, rates can be raised to maximize profits, while low-demand times may call for promotions or discounts. This not only helps hotels maintain profitability during volatile periods but also reduces reliance on deep discounting, which can undermine a hotel’s brand value over time.
3) Contactless Technology and Virtual Concierge
In today’s world, guests expect seamless and contact-free experiences. Whether it’s using contactless check-in or ordering services through a virtual concierge, hotels can meet these expectations while also reducing operational costs. A virtual concierge can handle guest requests 24/7 without requiring additional staff, while smart room service systems allow guests to place orders through a mobile app, reducing the need for call centers or additional F&B staff.
Additionally, hotels that embrace contactless technology—from mobile room keys to automated billing—can operate more efficiently and reduce manual labor while delivering a superior guest experience.
4) Metasearch and Channel Management
With so many guests booking through third-party platforms, managing inventory and pricing across multiple channels has become a complex task. However, Hotel PMS with integrated channel management allows hoteliers to manage room availability and pricing on multiple platforms, including Google Hotels, Expedia, and TripAdvisor, from a single dashboard. This not only ensures consistent pricing but also minimizes the risk of overbooking, saving both time and money.
By streamlining this process, hotels can increase their visibility across multiple booking channels, capturing more potential guests without the need for additional marketing spend.
5) Hotel Apps and Smart Room Service
A well-designed hotel app isn’t just about offering guests a digital amenity—it’s about driving efficiency. By offering an app that allows guests to check-in, request housekeeping, or even control in-room features like lighting and temperature, hotels can reduce staffing needs while still meeting high guest expectations.
Hotels that integrate their apps with smart room service systems can further enhance operational efficiency. For example, by allowing guests to order food through the app, hotels can optimize kitchen workflows and reduce errors caused by manual order entry.
6) Embracing Sustainability to Combat Rising Costs
One of the most impactful long-term strategies to reduce costs while meeting guest expectations is the integration of sustainable practices. Sustainability in hospitality isn’t just a trend—it’s becoming a necessity. Rising energy costs and environmental regulations are pushing hotels to adopt greener solutions, and guests are increasingly choosing hotels that prioritize eco-friendly practices.
Hotels are now investing in energy-efficient lighting, smart HVAC systems, and water-saving technologies. By leveraging these green technologies alongside Hotel PMS, hotels can track and optimize energy use in real-time, reducing utility costs while also appealing to the growing market of environmentally conscious travelers. When surveyed in 2022, over 80 percent of global travelers said that sustainable tourism was important to them and that they were willing to adopt sustainable travel incentives, something that has led to the ecotourism industry achieving a global market size of 172.4 billion U.S. dollars.
By making sustainability part of your hotel’s core strategy, not only do you reduce operational costs, but you also increase your appeal to a wider audience.
Sustainable Solutions for Operational Efficiency
- Smart Energy Management: Hotels adopting smart systems can monitor energy usage in real time, allowing them to identify inefficiencies and reduce waste.
- Waste Reduction Programs: By implementing recycling programs or reducing single-use plastics, hotels can reduce the cost of waste management.
- Sustainable Building Materials: Some hotels are even taking it a step further by using sustainable materials in new constructions or renovations, further reducing their environmental impact and long-term costs.
7) Managing Guest Feedback: Online Reputation Management
No hotel can afford to ignore its online reputation, and this has only become more critical in the age of instant reviews. Online Reputation Management Software, often integrated into Hotel PMS, allows hotels to track guest reviews and respond in real-time. Hotels that stay on top of guest feedback, addressing issues promptly, can improve their reputation without investing large sums in PR.
Proactively managing reviews can also result in increased bookings. This makes reputation management not only an essential part of a hotel’s marketing strategy but also a cost-effective one.
Final Thoughts: A Balanced Approach to Rising Costs
Rising costs in the hospitality industry are a reality, but they don’t have to cripple your business. By embracing modern tools like Hotel Property Management Software, hotels can streamline their operations, reduce overheads, and improve profitability. At the same time, these technologies enable a higher level of guest service, ensuring that your hotel stays competitive in an increasingly demanding market.
While technology can’t completely erase the financial challenges hoteliers face, it can help shift the balance, allowing you to focus more on delivering great guest experiences and less on counting pennies. After all, in hospitality, the guest is king, but smart technology is the secret to running a sustainable kingdom.