Revenue stream diversification to drive hotel profitability in 2022

CHICAGO, Nov. 29, 2021 – The global pandemic had a drastic and immediate impact on the hospitality industry. As hotel owners navigate the 2022 budget season, an emphasis must be placed on optimizing profitability and mitigating operational risks as travelers return to hotels around the globe.

The inaugural annual JLL Hotels & Hospitality Global Asset Management report highlights five recommendations that hotel owners should consider for successful 2022 planning:

• With greater operational complexities and a lack of historical precedent, owners should consider a shift in focus from RevPAR to Total RevPar to help drive profitability over the long term
• Formulating a property’s labor strategy is the most significant challenge heading into 2022 and represents a critical leading indicator for profitability
• Adopt COVID-19 non-labor expense management techniques over the long-term
• Yield manage revenues across food and beverage, and amenities outlets and consider adopting extra charges similar to the airline industry’s model to survive extraordinary increases in wages and inflation
• Capital expenditure strategy should balance near-term liquidity needs against long-term asset preservation goals

“Where we see the biggest shift for 2022 is the focus on Total RevPar as opposed to RevPar. This means that as hotels reinvent themselves, we should be looking at the total revenue of the entire hotel and how every square footage of the hotel impacts the bottom line,” said Andrea Grigg, Head of Global Asset Management, JLL Hotels & Hospitality. “Going above and beyond the room stay allows operators to analyze how the spa, on-site restaurants and fitness offerings supplement the guest rooms and, in some cases, provide a healthy daily revenue stream despite not capturing a room stay.”

Additionally, Geraldine Guichardo, Global Head of Research, JLL Hotels & Hospitality Group, noted, “The entire employee experience must be rethought with hotel owners and operators needing to adapt a holistic approach when recruiting, hiring, and training both lower wage and supervisory level employees. If done right, a hotel’s labor strategy can become a valuable competitive advantage.”

While some headwinds remain, operators that deploy a strategic and intentional go forward strategy with diversified revenue streams, efficient operating models, a technology focus to alleviate labor challenges and property upgrades to address sustainability will benefit from tremendous property value created.

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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