Hotels have long relied on traditional revenue streams such as room bookings, dining, and spa services. However, in an increasingly competitive market, innovative hoteliers are exploring new ways to boost their bottom line. One often overlooked yet highly lucrative opportunity lies within the function spaces and underutilized event spaces of a hotel. By effectively using these spaces, hotels can tap into a myriad of revenue-generating possibilities. Today, we’ll talk about what your revenue sources are and how you can get the most out of an events program at your property.
What is the Main Source of Revenue for a Hotel?
Room revenue typically represents the largest and most important source of income for hotels. This revenue stream comes from guests paying to stay in the hotel’s accommodations, and according to many sources, it often accounts for approximately 60-80% of a hotel’s total revenue.
There are several reasons why room revenue is so crucial. First, it’s generally the most predictable and stable income source. While other services like food and beverage or spa treatments can fluctuate, most guests who book a room will pay for it. Second, room revenue usually has higher profit margins compared to other hotel services, as the incremental cost of selling an additional room is relatively low. Finally, strong room revenue performance is often a prerequisite for success in other areas, as higher occupancy rates create more opportunities for ancillary spending within the hotel.
How Does a Hotel Measure Room Revenue?
There are numerous key metrics used to measure hotel room revenue. These metrics help hotels track their performance, make pricing decisions, and compare to competitors.
The most fundamental measure is Total Room Revenue (TRR), which is simply the sum of all room sales for a given period. However, this alone doesn’t provide enough context, so hotels use more nuanced metrics like Average Daily Rate (ADR) and Occupancy Rate.
One of the most important metrics is Revenue Per Available Room (RevPAR), which combines rate and occupancy to give an overall picture of room revenue performance.
What are Ancillary Hotel Revenue Streams?
While room bookings are the main source of revenue, successful hotels also leverage various ancillary revenue streams beyond just lodging. In the Food and Beverage category, guests can enjoy restaurant services, room service, bars, and cafes, ensuring a delightful dining experience throughout their stay. Spa and Wellness Services are also available, featuring spa treatments, fitness classes, and wellness packages to help guests relax and rejuvenate. For Events and Conferences, hotels provide function spaces for weddings, corporate events, and other gatherings, making them ideal venues for both personal and professional occasions. Ancillary revenue streams can significantly impact occupancy, ADR, and RevPar, especially functions and events.
Impact of Events on Hotel Rates
Events can significantly impact hotel rates, often leading to fluctuations in pricing due to changes in demand. Here’s a detailed look at how and why events influence hotel rates:
Events Increase Demand
- High Demand Periods: Major events such as conventions and large weddings, the demand for hotel rooms can surge. Hotels capitalize on this increased demand by raising room rates.
- Limited Availability: With more people needing accommodation during these events, the availability of rooms decreases. Scarcity can drive up prices as guests are willing to pay more to secure a room.
Revenue Management Strategies
- Dynamic Pricing: Hotels often employ dynamic pricing strategies, adjusting room rates in real-time based on current demand and occupancy levels. Events provide an opportunity to increase rates to maximize revenue.
- Length of Stay Requirements: During high-demand periods, hotels may implement minimum stay requirements, ensuring that rooms are booked for longer durations at higher rates.
- Premium Pricing for Convenience: Hotels that offer events can command higher rates due to their convenience. Guests attending the event are often willing to pay a premium for the location advantage.
Advanced Bookings and Last-Minute Rates
- Early Bookings: Guests who book well in advance of an event can sometimes secure lower rates, as hotels aim to ensure occupancy. As the event date approaches and availability decreases, rates typically rise.
- Last-Minute Pricing: Conversely, last-minute bookings during events can be significantly higher due to the limited availability and urgent demand.
Ancillary Revenue Opportunities
- Packages and Promotions: Hotels may create special packages that include perks. These packages often come at a premium but offer added value to guests.
- Event-Related Services: Hotels can boost overall revenue by offering themed dining experiences, or special amenities related to the event.
Economic Impact
- Positive Economic Impact: Large-scale events can bring substantial economic benefits to a hotel, not just through increased room rates, but also through higher occupancy, food and beverage sales, and use of other services.
- Potential for Repeat Business: Successfully hosting guests during major events can lead to repeat business, as attendees may return for future events or recommend the hotel to others.
How to Maximize Hotel Revenue Streams with Function and Event Spaces
Event space revenue extends beyond basic rental charges for the space itself. Think about F&B, catering, A/V equipment leases, and an array of event-specific services. Here are ways your hotel can unleash revenue by using function and event spaces and increase your group sales:
1. Offer Corporate Events and Conferences
Businesses are always on the lookout for well-equipped venues to host meetings, conferences, and seminars. By marketing your function spaces as prime locations for corporate events, you can attract a steady stream of business clientele. Ensure that your spaces are equipped with modern amenities such as high-speed internet, audio-visual equipment, and comfortable seating arrangements. Offering customizable packages that include catering and accommodation can make your hotel an attractive option for corporate clients.
2. Promote Weddings and Social Gatherings
Weddings, anniversaries, and other social events can bring substantial revenue. Position your function spaces as ideal venues for these occasions by showcasing their versatility and beauty. Offer a range of packages that include catering, decoration, and accommodation for guests. Partnering with local wedding planners and event coordinators can also help in promoting your venue to a wider audience.
3. Facilitate Community Events and Workshops
Engage with the local community by hosting events such as workshops, classes, and fairs. These events not only bring in additional revenue but also increase your hotel’s visibility and reputation within the community. Consider hosting art exhibits, cooking classes, or wellness workshops. Offering discounted rates for community organizations or non-profits can help build goodwill and long-term relationships.
4. Throw Entertainment and Themed Night Events
Transform your function spaces into entertainment hubs by organizing themed nights, live performances, and other entertainment events. From comedy nights and music concerts to themed dinners and dance parties, the possibilities are endless. Collaborate with local artists, bands, and performers to create a vibrant entertainment schedule that attracts both hotel guests and local residents.
5. Set Up Pop-up Shops and Markets
Pop-up shops and markets can bring a unique shopping experience to your hotel. Invite local artisans, boutiques, and food vendors to set up temporary stalls in your function spaces. These events can draw in crowds looking for unique products and experiences, while also providing exposure to local businesses. Seasonal markets, such as holiday bazaars or summer fairs, can be particularly popular.
6. Implement Fitness and Wellness Programs
Leverage the growing interest in health and wellness by offering fitness classes, yoga sessions, and wellness retreats in your function spaces. Hire certified instructors to conduct regular classes, or organize weekend retreats that include accommodation, meals, and a series of wellness activities. These programs can attract health-conscious travelers and local residents alike.
7. Market Co-working Spaces
With the rise of remote work, there is a growing demand for flexible co-working spaces. Convert your function rooms into co-working areas during off-peak times. Provide essential amenities such as high-speed internet, comfortable workstations, and meeting rooms. Offering daily, weekly, and monthly passes can cater to different needs and attract a diverse clientele of freelancers, remote workers, and business travelers.
Significantly Enhance Your Hotel Revenue Stream with Events and Tripleseat for Hotels
By diversifying the use of function spaces, hotels can significantly enhance their revenue streams and attract a broader clientele. Whether it’s hosting corporate events, social gatherings, community workshops, or entertainment nights, the possibilities are vast and varied. The key is to be innovative, adaptable, and responsive to the needs of different markets. With strategic planning and creative marketing, your hotel’s function spaces can become a bustling hub of activity and a significant source of revenue.
Unlock the potential of your function spaces and watch your hotel’s profitability soar! Book a demo today to learn how to increase and manage your hotel’s group sales from hotel room blocks, to booking event function spaces, and growing banquet revenues, in one tool with Tripleseat for Hotels.
Heather Apse
Heather is a Content Specialist at Tripleseat. Connect with Heather on LinkedIn.
