6 lessons from Silicon Valley to help hoteliers conquer budget season

This was a viewpoint from Jordan Hollander, founder of HotelTechReport.com.

As every hotelier knows, budget season is the most stressful time of year. It doesn’t matter whether you’re a GM, marketer, revenue manager or even an owner - we’re all struggling to keep our heads above water right now.

We are forced to deeply analyze last year’s performance, market conditions and strategies then setup a concrete plan of how we’re going to attack the market next year despite massive global and market-based instabilities.

Silicon Valley’s startup culture understands this kind of stress well. Startups deal with existential crises on a daily basis so The Valley has evolved sophisticated methods and practices to win under intense pressure. Bring the Silicon Valley philosophy and lean startup methods into your hotel this season to differentiate from the compset, win budget season and outperform.

Set-up structured team brainstorming sessions

The budget process too often occurs in silos but one only has to look to Silicon Valley to understand that innovation stems from collaboration. Too many hotel groups engage in this traditional siloed approach where specialists like marketing managers work for weeks on end to eventually pitch management and ownership on ideas that they’ve developed in a vacuum.

In the end, your hotel is a product and the users are your guests. The people who are closest to those users are the ones who deal with them every day on the ground - your front desk agents, bellman, servers, and housekeepers. When you make strategic decisions about revenue or marketing strategy without listening to those who know your users best - you’re missing half the story.

When YouTube first developed its mobile app, its core team consisted of right-handed engineers. So when the product came to market, lefties were uploading thousands of videos upside down. By not considering multiple perspectives, you can dramatically impact the power of your product.

Michael Mohr, Principal at MetWest Terra Hospitality, approaches budget season with a collaborative mindset:

“We use quarterly reviews and especially budget season as an opportunity to structure in time for cross-functional collaboration. We bring together revenue management, operations, marketing, and sales to create a holistic game plan for the next quarter. Each member of the team brings a diversity of perspective and helps us eliminate what could otherwise become dangerous blind spots in our strategy. But even more critical than these structured times is to create a culture where team members know their input is valued and encouraged at all times.”

While we don’t want too many cooks in the kitchen during budget planning, take the extra time to listen to your team during the brainstorming process. Not only will you derive direct value from their insights but you’ll make them feel valued and take more ownership in driving operational success.

Prioritize and keep it simple

There’s a great quote from Twitter founder Jack Dorsey that goes, “Make every detail perfect and limit the number of details to perfect.”

Hoteliers are constantly pulled in a thousand directions. We are tasked to increase revenue while stripping costs all while creating the best possible experience for guests. Startups in Silicon Valley face the same resource scarcity felt by hotel GMs everywhere. The difference is that hoteliers often try to be all things to all people and the reality is that just isn’t possible.

Hotels are incredibly complex businesses in their own right. By prioritizing and keeping it simple we can deconstruct complex tasks to forge the path of execution. Tech product managers are masters of prioritization. They set up thousands of experiments to test hypotheses in real time. The results of these experiments inform the trajectory of the business.

Rather than starting budget season by looking at last year, start with a blank canvas. List out all the things you’d like to accomplish this year then prioritize them based on expected value (expected return x probability of success).

Aristotle once said, “to a ship without a harbor, no wind is the right wind.” If you don’t set clear expectations with management and ownership, you’ll be vulnerable to criticism every step of the way. Make a clear plan with goals and expectations to communicate your priorities and focus.

'Think Different'

Einstein famously said that the definition of insanity is doing the same thing over again and expecting a different result. If you hire employees from the hotels in your compset and run your hotel on the same dated operating system as them - the odds are that your satisfaction scores and operating efficiency will be in line with theirs.

Take a calculated risk and try something different. Make a short-term investment in a modern and flexible PMS like MEWS Systems to have a leaner cost structure and more productive employees. You’ll save on service fees, data exports and unproductive staff in the long run.

If you don’t currently leverage revenue management software, maybe this is the year to consider investing. Amazon prices items in real time by calculating price elasticity based on competition, meteorology, web browsers and even time of day - if you’re not leveraging data you’re missing a massive opportunity to maximize profit and capture valuable direct bookings.

"Using unrelated large data sets to make real-time pricing decisions is not a question for hoteliers today but a pre-requisite of revenue management. Big data, real-time, machine learning are not just theoretical buzzwords but are at the heart of any successful hotel revenue strategy. Excel spreadsheets just don’t cut it anymore" says Ravneet Bhandari, CEO of LodgIQ.

Technology is getting cheaper, more effective and easier to use - it is the easiest way to solve the problems from last years’ P&L and frankly the only way you’ll ever be able to compete with home sharing and the OTAs.

Invest in growth

Silicon Valley knows that growth requires investment. Too often budget meetings take the “where can we cut” approach rather than looking to double down on good investments from the prior period.

If you’re getting a great return on ad retargeting keep running with that until it stops working and educate your owners on the implications to the P&L.

And if your digital agency doesn’t provide intuitive real-time reporting to help you make those decisions, then perhaps it’s time to look elsewhere.

Having a fixed marketing budget going towards your website, conversion tools, and agency retainer means that there’s a lot of leverage with incremental ad spend. Expedia and Priceline are investing billions in Google ads precisely because they work.

“With the right budget allocation and flexibility to shift spend across channels, hotels can deploy a highly targeted, data-driven approach to increase incremental direct business.” said Tim Sullivan, CSMO at Cendyn. “Digital advertising can easily become a hotels lowest cost acquisition channel when enough budget is allocated to deploy a data-driven, multi-channel strategy that addresses top and bottom-funnel initiatives, as well as repeat business from high-value guests.”

Set expectations with management to double down when things are working so that you’re not locked into a scarcity mindset. Push your agency to educate your team on new trends because anything in digital that worked last year is less likely to work this year -- you need a partner who’s constantly trying new things and can educate to keep you on the cutting edge.

Leave room to fail fast and experiment

Expedia and Airbnb run hundreds of experiments each day which means they are constantly getting better. These experiments are actually really cheap to run. The problem is that most hotels don’t leave room to fail and experiment so there’s no way to compete these digitally native hospitality companies.

Embrace a culture of experimentation and leave budget to try new things. Maybe it’s creating a weekly event for locals with live music in the lobby or even adopting a new technology like Oaky or GuestCentric’s booking engine to improve your upgrade and ancillary revenues.

There are even free ways of experimenting, such as using the free content marketing platform Arrivedo to boost your SEO. Better yet, look for startups who need customers for a proof of concept and will give you their products free.

At my company, we come across some really incredible new platforms whose founders are thrilled to help you succeed at no cost. Many of these products will grow your business and they’re certain to bring new ideas on-property.

Find ways to keep a level head and de-stress

I have a friend who’s a very successful hotel owner. He says “if I were as busy as everyone else, I’d never get anything done.” Few of us really take the “don’t work hard, work smart” cliche to heart. Silicon Valley is synonymous with ping pong tables and beer in the office, extravagant parties, and extensive wellness programs.

During stressful times, it’s more important than ever to set time aside for reflection and decompression. Nobody does their best work when burning the midnight oil so make sure you and your team put forth an extra effort to clear your heads during budget season.

Humanize your staff. Let them know that you care about them and ask them about their goals for the following year. Take extra time to be together as a team, to breath and to reflect on the incredible work you’ve done lately.