Ajay Mehtani: How do we improve the all important Hotel ROI?

Ajay Mehtani, Senior Vice President Asset Management South Asia at HVS- Anarock suggests that the way to improve the all-important ROI for Hotels is by “By thinking out-of-the-box from design to operations.”

Ajay Mehtani proves his point with some insightful strategies for the hospitality industry in a study.

Says Ajay Mehtani, “As an industry, there is a need to make hotels more viable. The pandemic has taught us to rethink this direction and develop hotel assets that can drive higher ROI. It can only be done when we look at making changes from Design to Operations.”

 Ajay Mehtani goes on to say, “Ideally, we should make changes to the industry status, compliance cost and interest cost, however, as these are policy matters, we cannot do much ourselves. Meanwhile, cost of construction, cost of operations i.e. the largest expenses related to utilities and manpower, are aspects that can be controlled by the hotel investors, brands and operating teams effectively.”  

Below are a few recommendations and suggestions for hotels in this regard shared by Ajay Mehtani :   

Create spaces for ancillary revenue generation by improving ratio of revenue generation areas 

• Create spaces for alternate sources of revenue within the same complex – de-risk with other asset classes like Serviced Residences, Co-Living, Commercial, Co-Working etc.
• Hotels, especially in the Upscale and Midscale segments, can reduce restaurant spaces wherever they have many standalone outlets within walking distance or can look at leasing outlets. Drive-thru and Home Delivery can add revenues; appropriate changes to design should be made.
• Design Banquet Halls in such a way that they can be outsourced easily and can be given to third-party company for use of space without any hinderance.
• Make parking a source of income rather than underutilized space only during events & meetings – it can be managed and secured by third-party operators with design changes.
• Create advert spaces within the hotel and on outside facades to use them as billboards for generating revenues.

Effective usage of technology while retaining the essence of service interaction in key areas

• Technology should be the driver (Cloud) so that people can work from off-site on common areas i.e. shared services for Finance & Accounting, Procurement etc.
• Front of the house tech to make all in-house interactions of guests over an app while at the hotel including room controls.

Energy cost optimization

• Build energy infrastructure to cater to blocks of spaces without impacting the experience i.e. should be able to operate fewer floors and shut down other areas whenever not required to lower cost of cooling when areas are not in use etc.
• Use wind and solar power wherever possible, directional use of day light, reflective material on building façade to reduce heating.
• Use heat pumps, LED, newer technology to reduce energy consumption, recycle water and run operations at the lowest cost.
• Create Rainwater Harvesting where you can harness water. 
• Look at options of making DG sets, STP common to close by hotels in area where possible and share costs.

Operations
 

• Creating workflows efficiencies / smaller but efficient spaces / cross-train associates with a single set of uniform (no change across the hotel) so that staff can be utilized across any area.
• Encourage change management process for associates to be able to work across a horizontal structure rather than a vertical hierarchical structure.  
• Last but not the least, hotels should move to dynamic pricing for all large volume accounts and give a discount as a percentage off on Bar rate like airlines rather than a fixed price to optimize revenues.

Read More: Hotel and Resorts