Is your hotel set up for commercial success? here is how you find out!

In today’s competitive hotel industry, conducting a detailed commercial audit is essential for optimizing revenue streams, enhancing marketing strategies, and improving overall profitability. A commercial audit involves a comprehensive assessment of revenue management practices, marketing strategies, distribution channels, and sales effectiveness. By identifying areas of improvement and formulating actionable recommendations, hoteliers can stay ahead of the competition and achieve long-term success.

Each of the following 10 blocks provide you with a high level view of the main areas to cover with a commercial audit.

1. Defining Hotel Commercial Audit Objectives

To begin the commercial audit process, it is crucial to set clear objectives that align with the hotel’s specific needs and business strategy. Common objectives include revenue optimisation, cost reduction, market positioning, and improving guest satisfaction. Defining these objectives will provide a roadmap for the audit and guide decision-making throughout the process.

Here are the next level building blocks to help define a large hotel’s commercial audit objectives that align with the hotel’s specific needs and business strategy. For more detail on what goes into each of the blocks, click the button below.

1.1. Revenue Optimisation: Evaluate current revenue management practices, including pricing strategies, rate structures, and demand forecasting methods.

1.2. Cost Reduction: Conduct a thorough analysis of operational costs, including labour, energy, inventory, and distribution expenses.

1.3. Market Positioning: Conduct a comprehensive analysis of the hotel’s target market and competitors.

1.4. Marketing and Digital Presence: Assess the effectiveness of the hotel’s marketing strategies, including online and offline campaigns.

1.5. Sales Effectiveness: Evaluate the performance of the sales team across different segments, including corporate transient, leisure, and groups and meetings business.

1.6. Distribution Channel Optimisation: Evaluate the performance and costs associated with different distribution channels, such as OTAs, Wholesalers, Tour Operators, Global Distribution Systems (GDS), and direct booking platforms.

1.7. Guest Satisfaction Enhancement: Review guest feedback, surveys, and online reviews to identify areas of improvement in customer service, amenities, and overall guest experience.

1.8. Technology, Data Management & Business Intelligence: Review the hotel’s technology infrastructure and systems, including property management systems, revenue management tools, and guest communication platforms.

1.9. Staff Training and Development: Evaluate the effectiveness of staff training programs and identify areas for improvement.


2. Gathering Data and information

The next step is to gather the necessary data and information for the audit. This includes financial data, market trends, competitor analysis, guest feedback, and operational metrics. Sources such as internal financial reports, industry publications, market research, and guest surveys provide valuable insights. By collecting comprehensive and reliable data, hoteliers can make informed decisions based on accurate information.

Here are the high level building blocks to help work through gathering data and information as part of a commercial audit for a large hotel:

2.1. Financial Data: Gather financial statements, including income statements, balance sheets, and cash flow statements along with revenue breakdown by segments, such as room revenue, food and beverage revenue, and other ancillary revenues.

2.2. Key Performance Indicators (KPIs): Collect data on key performance indicators, including average daily rate (ADR), revenue per available room (RevPAR), occupancy rate, and average length of stay (LOS).

2.3. Market Trends: Conduct market research to gather data on local, regional, and global market trends.

2.4. Competitor Analysis: Identify key competitors within the hotel’s market and gather data on their performance.

2.5. Reputation Management: Collect guest feedback through various channels, including guest surveys, online reviews, and social media platforms.

2.6. Internal Reports and Systems: Utilise internal reports generated by the hotel’s systems, such as the PMS, RMS, and financial management software.

2.7. Industry Publications and Market Research: Access industry publications, reports, and research studies related to the hospitality sector.


3. Monitoring Key performance Indicators (KPI’s)

Establish key performance indicators (KPIs) to track the success of commercial initiatives and monitor progress over time. Examples of KPIs include average daily rate (ADR), revenue per available room (RevPAR), occupancy rate, customer acquisition cost (CAC), customer lifetime value (CLTV), and guest satisfaction scores. Regularly review KPIs and compare them to industry benchmarks to assess performance and identify areas that require attention or improvement.

Here are some of the KPI’s that impact the commercial success of a hotel.

3.1. Average Daily Rate (ADR): ADR represents the average revenue earned per occupied room in a given day. It is calculated by dividing total room revenue by the number of rooms sold.

3.2. Revenue per Available Room (RevPAR): RevPAR measures the hotel’s total room revenue divided by the total number of available rooms.

3.3. Occupancy: Occupancy represents the percentage of available rooms that are occupied during a specified period.

3.4. Customer Acquisition Cost (CAC): CAC measures the cost incurred to acquire a new customer. It includes expenses related to marketing, advertising, sales efforts, and distribution channels.

3.5. Customer Lifetime Value (CLTV): CLTV represents the total revenue generated from a customer over their lifetime as a guest.

3.6. Guest Satisfaction Scores: Guest satisfaction scores are typically measured through guest surveys or online review platforms and reflect guest experiences and perceptions.

3.7. Net Promoter Score (NPS): NPS measures the likelihood of guests recommending the hotel to others on a scale from 0 to 10.

3.8. Market Share: Market share represents the percentage of total market demand that the hotel captures.

3.9. Revenue Contribution by Segment: This KPI breaks down the hotel’s revenue by different segments, such as corporate transient, leisure, groups, and meetings business.

3.10. Return on Investment (ROI): ROI measures the profitability of specific investments or initiatives, such as marketing campaigns, capital improvements, or revenue management systems.

3.11. Gross Operating Profit per Available Room (GOPPAR): GOPPAR measures the hotel’s gross operating profit divided by the total number of available rooms.

3.12. Food and Beverage Revenue per Available Seat (RevPAS): RevPAS calculates the revenue generated by the hotel’s food and beverage outlets per available seat.

3.13. Cost per Occupied Room (CPOR): CPOR measures the cost incurred per occupied room, taking into account both variable and fixed costs.

3.14. Direct Booking Percentage: The direct booking percentage measures the proportion of bookings made directly through the hotel’s website or other direct channels, excluding third-party online travel agencies (OTAs).

3.15. Sales and Marketing Cost Ratio: The sales and marketing cost ratio compares the hotel’s sales and marketing expenses to its total revenue.

3.16. Revenue from Repeat Guests: This metric measures the revenue generated from repeat guests, highlighting the hotel’s ability to foster guest loyalty and encourage repeat visits.

3.17. Average Length of Stay (ALOS): ALOS represents the average number of nights guests stay at the hotel. It helps assess the hotel’s ability to attract and retain guests for longer durations.

3.18. Profit Margin: Profit margin measures the percentage of revenue that translates into profit after accounting for all expenses.


4. Market Segmentation Analysis

To maximise revenue potential, it is essential to understand the different market segments and their specific needs. Conduct a thorough analysis of market segmentation, including corporate, leisure, group, and niche markets. Evaluate the profitability and potential of each segment, identify target markets, and tailor marketing and pricing strategies accordingly. By aligning products and services with the preferences of various market segments, hotels can effectively capture and retain valuable customers.

4.1. Identify and Define Market Segments: Market segmentation involves dividing the overall market into distinct groups based on common characteristics, needs, and behaviours. Identify and define market segments such as corporate, leisure, group, and niche markets to understand their unique requirements and preferences.

4.2. Analyse Market Size and Growth Potential: Assessing the size and growth potential of each market segment helps evaluate its revenue-generating capacity and long-term viability.

4.3. Evaluate Profitability and Revenue Contribution: Understanding the profitability and revenue contribution of each market segment allows you to allocate resources effectively and prioritize marketing efforts.

4.4. Assess Market Trends and Competitive Landscape: Examining market trends and the competitive landscape helps you position your hotel effectively and identify areas of opportunity.

4.5. Identify Target Markets and Customer Personas: Defining target markets and creating customer personas helps tailor marketing messages, distribution channels, and service offerings to specific customer segments.

4.6. Evaluate Market Needs and Preferences: Understanding the unique needs and preferences of each market segment enables you to provide tailored experiences and optimize revenue potential.

4.7. Develop Marketing and Distribution Strategies: Tailoring marketing and distribution strategies to each market segment allows you to reach the right customers through the most effective channels.

4.8. Pricing and Revenue Management Strategies: Customising pricing and revenue management strategies based on market segments helps optimize revenue potential and profitability.

4.9. Process to Monitor and Track Performance: Continuously monitoring and tracking performance helps evaluate the effectiveness of market segmentation strategies and identify areas for improvement.

4.10. Processes to Review and Refine Strategies: Market dynamics change over time, so it’s essential to review and refine market segmentation strategies periodically.


5. identify competitive positioning

To thrive in a competitive market, it is crucial to understand the hotel’s competitive positioning. Identify direct competitors and evaluate their offerings, pricing strategies, and market differentiators. Identify opportunities for differentiation, target niche markets, and gain a competitive edge. Develop strategies to showcase unique selling points and position the hotel as a preferred choice for guests.

5.1. Identify Direct Competitors: Identifying direct competitors is the first step in understanding the competitive landscape. These are hotels that offer similar services, target similar markets, and are located in close proximity to your hotel.

5.2. Evaluate Competitors’ Offerings and Amenities: Understanding the offerings and amenities provided by your competitors helps identify areas where your hotel can differentiate itself and provide unique value to guests.

5.3. Analyse Competitors’ Pricing Strategies: Assessing your competitors’ pricing strategies helps determine how your hotel’s pricing compares in the market and identify opportunities for competitive pricing advantages.

5.4. Identify Market Differentiators: Market differentiators are unique features, services, or experiences that set your hotel apart from the competition. Identifying these differentiators helps position your hotel as a preferred choice for guests.

5.5. Assess Competitors’ Target Markets: Understanding the target markets of your competitors helps identify niche markets that are underserved or have growth potential. Targeting these markets can help you gain a competitive edge.

5.6. Analyse Online Reputation and Guest Feedback: Assessing competitors’ online reputation and guest feedback provides insights into their strengths and weaknesses from a guest perspective. This information can help you identify areas where your hotel can excel and differentiate itself.

5.7. Process for Mystery Shopping: Mystery shopping involves visiting competitors’ properties and experiencing their services first hand. This approach helps evaluate their customer service, check-in processes, cleanliness, and other aspects that contribute to guest satisfaction.

5.8. Analyse Competitors’ Marketing and Distribution Strategies: Analysing competitors’ marketing and distribution strategies helps identify their strengths and weaknesses in reaching target markets. This information can guide your own marketing and distribution efforts.

5.9. Benchmark Against Industry Standards: Benchmarking against industry standards allows you to assess your hotel’s performance and position relative to the overall market. This helps identify areas where your hotel can improve and gain a competitive advantage.


6. Evaluating marketing strategies & effectiveness

An effective marketing strategy is crucial for attracting guests and driving bookings. Evaluate the hotel’s online presence, including website performance, branding consistency, digital marketing campaigns, and social media engagement. Assess the effectiveness of different marketing channels, target audience segmentation, and the hotel’s overall marketing return on investment (ROI). Identify areas where marketing efforts can be optimized to generate better results.

6.1. Website Performance and User Experience: Evaluate the hotel’s website performance, including page load speed, mobile responsiveness, and ease of navigation.

6.2. Branding Consistency: Assess the consistency of the hotel’s branding across different marketing channels, including the website, social media profiles, and promotional materials.

6.3. Search Engine Optimization (SEO): Review the hotel’s SEO efforts to ensure it ranks well in search engine results.

6.4. Pay-Per-Click (PPC) Advertising: Evaluate the effectiveness of PPC campaigns, such as Google Ads, by assessing key metrics like click-through rates (CTR), conversion rates, and return on ad spend (ROAS).

6.5. Social Media Engagement: Analyse the hotel’s social media presence and engagement on platforms relevant to the target audience.

6.6. Email Marketing Effectiveness: Evaluate the hotel’s email marketing campaigns, including open rates, click-through rates, and conversion rates.

6.7. Online Reviews and Reputation Management: Monitor and evaluate online reviews and ratings across platforms like TripAdvisor, Google Reviews, and OTAs.

6.8. Social Influencer Partnerships: Evaluate the effectiveness of partnerships with social media influencers or bloggers.

6.9. Content Marketing Strategy: Assess the hotel’s content marketing efforts, including blog posts, videos, and interactive content.

6.10. Target Audience Segmentation: Evaluate the effectiveness of target audience segmentation in marketing campaigns.

6.11. Conversion Tracking and Analytics: Ensure proper tracking of conversions and website analytics to measure the effectiveness of marketing campaigns.

6.12. Return on Investment (ROI) Analysis: Assess the hotel’s marketing ROI by analysing the cost-effectiveness of different marketing channels and campaigns.

6.13. Competitive Analysis: Conduct a competitive analysis to evaluate the hotel’s marketing strategies compared to key competitors.

6.14. Guest Surveys and Feedback: Collect and analyse guest surveys and feedback to evaluate the effectiveness of marketing efforts.

6.15. Market Research and Trends Analysis: Stay informed about market trends, industry benchmarks, and evolving guest preferences.


7. Reviewing Sales Effectiveness

Evaluate the effectiveness of the hotel’s sales approach in various segments such as corporate transient, leisure, and groups and meetings business. Assess the performance of the sales team, including the role of goals and incentives in driving revenues. Identify areas for improvement and provide recommendations to enhance sales effectiveness and maximize revenue potential.

7.1. Sales Team Performance: Evaluate the overall performance of the sales team, including key metrics such as revenue generated, room nights booked, and conversion rates.

7.2. Sales Goals and Targets: Review the hotel’s sales goals and targets to assess their alignment with the overall revenue strategy.

7.3. Segment Analysis: Assess the hotel’s sales approach in different segments, such as corporate transient, leisure, and groups/meetings business.

7.4. Account Management: Evaluate the hotel’s account management practices, including the identification and cultivation of key accounts, relationship building, and proactive communication.

7.5. Sales Cycle and Lead Management: Review the sales cycle and lead management process, from initial contact to closing the deal.

7.6. Sales Collateral and Resources: Evaluate the effectiveness and relevance of sales collateral, including brochures, presentations, and proposals.

7.7. Pricing and Revenue Management: Assess the hotel’s pricing strategies and revenue management practices in collaboration with the sales team.

7.8. Sales Training and Development: Evaluate the training and development programs for the sales team.

7.9. CRM and Sales Technology: Review the hotel’s customer relationship management (CRM) system and sales technology tools.

7.10. Sales Reporting and Analytics: Evaluate the sales reporting and analytics capabilities of the hotel.

7.11. Competitor Analysis: Conduct a competitive analysis to evaluate the hotel’s position in the market and understand the strategies of key competitors.

7.12. Sales Incentive Programs: Evaluate the effectiveness of sales incentive programs in motivating and rewarding the sales team.

7.13. Sales and Marketing Alignment: Assess the level of alignment and collaboration between the sales and marketing teams.

7.14. Sales and Distribution Alignment: Assess the level of alignment and collaboration between the sales and distribution teams.

7.15. Sales Forecasting and Pipeline Management: Evaluate the accuracy and reliability of sales forecasting and pipeline management processes.

7.16. Customer Feedback and Relationship Management: Review the hotel’s customer feedback and relationship management practices.

7.17. Cross-Selling and Upselling: Evaluate the sales team’s ability to identify cross-selling and upselling opportunities.

7.18. Sales and Revenue Integration: Assess the integration between sales and revenue management functions.

7.19. Sales Cycle Efficiency: Evaluate the efficiency of the sales cycle, from lead generation to closing the deal.

7.20. Client Retention and Loyalty: Assess the team’s account/ client retention and loyalty approach and impact.

7.21. Sales Team Feedback and Engagement: Gather feedback from the sales team on their experience and challenges.


8. Analysing Distribution Channels and impact

Distribution channels play a critical role in reaching potential guests and driving bookings. Evaluate the performance of online travel agencies (OTAs), wholesalers, tour operators, global distribution systems (GDS) alongside direct booking channels like the brand website and call centres. Assess distribution costs, commission structures, channel performance, and the potential for increasing direct bookings. Develop strategies to optimize distribution channels and reduce dependency on third-party platforms.

8.1. Online Travel Agencies (OTAs): Evaluate the performance of OTAs (e.g., Expedia, Booking.com) in terms of bookings, revenue generated, and market share.

8.2. Wholesalers: Evaluate the performance of wholesalers and bed banks in terms of room nights booked and revenue generated.

8.3. Tour Operators: Evaluate the performance of tour operators in terms of group bookings, revenue generated, and customer satisfaction.

8.4. Global Distribution Systems (GDS): Evaluate the performance of GDS providers (e.g., Amadeus, Sabre) in terms of bookings and revenue generated.

8.5. Brand Website: Evaluate the performance of the hotel’s brand website in terms of traffic, conversion rates, and direct bookings.

8.6. Call Centre/s: Evaluate the performance of the hotel’s call centers in terms of conversion rates, customer satisfaction, and revenue generated.

8.7. Metasearch Channels: Evaluate the performance of metasearch channels (e.g., Google Hotel Ads, TripAdvisor) in terms of click-through rates and conversions.

8.8. Channel Performance Metrics: Analyse key performance metrics for each distribution channel, such as revenue contribution, conversion rates, average daily rate (ADR), and return on investment (ROI).

8.9. Distribution technology & Channel Management Tools: Evaluate the effectiveness of channel management tools in managing and optimizing distribution across multiple channels.

8.10. Direct Booking Strategies: Assess the hotel’s efforts to increase direct bookings and reduce dependency on third-party platforms.

8.11. Competitive Analysis: Conduct a competitive analysis to evaluate the distribution strategies of key competitors.

8.12. Guest Segmentation and Targeting: Evaluate the effectiveness of targeting specific guest segments through different distribution channels.

8.13. Channel Costs and Commissions: Assess the distribution costs associated with each channel, including commissions, fees, and marketing expenses.

8.14. Channel Performance Tracking and Analytics: Evaluate the availability and accuracy of data and analytics for each distribution channel.

8.15. Brand Reputation and Direct Bookings: Evaluate the impact of brand reputation and guest reviews on the hotel’s direct bookings.


9. Assessing Revenue Management

Revenue management plays a pivotal role in a hotel’s success. Evaluate pricing strategies, room rate optimisation techniques, demand forecasting methods, revenue channels, and distribution management practices. Analyse pricing structures, evaluate revenue streams, and assess the effectiveness of revenue management systems and tools. Identify opportunities for improvement and implement strategies to maximise revenue potential.

9.1. Pricing Strategies: Evaluate the hotel’s pricing strategies, including dynamic pricing, seasonal pricing, and promotional pricing.

9.2. Room Rate Optimisation Techniques: Evaluate the hotel’s approach to optimizing room rates, including strategies like length of stay restrictions, overbooking, and upselling.

9.3. Demand Forecasting Methods: Evaluate the hotel’s demand forecasting methods, including historical data analysis, market trends, and predictive modelling.

9.4. Revenue Channels: Evaluate the hotel’s revenue channels, including direct bookings, online travel agencies (OTAs), wholesalers, and corporate contracts.

9.5. Distribution Management Practices: Evaluate how the hotel manages its distribution channels, including channel mix, channel selection, and channel optimization strategies.

9.6. Pricing Structures: Evaluate the hotel’s pricing structures, including rate plans, packages, and ancillary services.

9.7. Revenue Streams: Evaluate the hotel’s revenue streams, including rooms, food and beverage, spa, events, and other ancillary services.

9.8. Revenue Management Systems and Tools: Evaluate the effectiveness of the hotel’s revenue management systems and tools, such as revenue management software and analytics platforms.

9.9. Competitive Analysis: Conduct a competitive analysis to evaluate the revenue management practices of key competitors.

9.10. Market Segmentation: Evaluate the hotel’s market segmentation strategies in targeting different customer segments with tailored pricing and marketing approaches.

9.11. Performance Metrics: Evaluate the performance metrics used to track and evaluate revenue management effectiveness, such as revenue per available room (RevPAR), average daily rate (ADR), and occupancy rate.

9.12. Forecast Accuracy: Evaluate the accuracy of demand forecasts compared to actual performance.

9.13. Collaboration and Communication: Evaluate the level of collaboration and communication between revenue management and other departments, such as sales, marketing, and distribution.


10. Leveraging Technology & Data analytics

In today’s digital era, technology and data analytics play a crucial role in commercial audits. Utilize advanced revenue management systems, data analytics tools, and business intelligence platforms to gather, analyse, and interpret relevant data. These technologies can provide valuable insights into market trends, demand patterns, guest preferences, and competitor strategies. By harnessing the power of technology, hoteliers can make data-driven decisions and optimise their commercial operations.

10.1. Revenue Management System (RMS): Assess the hotel’s utilisation of an advanced RMS to optimize pricing, inventory, and distribution across various channels.

10.2. Systems & Data Integration: Evaluate the hotel’s ability to integrate data from various sources, such as PMS, CRS, online channels, and guest feedback platforms.

10.3. Data Analytics Tools: Evaluate the hotel’s use of data analytics tools, such as business intelligence platforms and data visualization software.

10.4. Demand Forecasting and Market Intelligence: Assess the hotel’s use of advanced analytics and market intelligence tools to forecast demand accurately.

10.5. Pricing Optimisation: Evaluate the hotel’s use of pricing optimization tools and algorithms to determine optimal room rates and pricing strategies.

10.6. Distribution Channel Management: Assess the hotel’s utilization of technology tools to manage distribution channels effectively.

10.7. Guest Data Analysis: Evaluate the hotel’s ability to collect, analyse, and leverage guest data to personalize marketing, pricing, and service offerings.

10.8. Competitive Intelligence: Evaluate the hotel’s use of technology tools to gather and analyse competitor data, including rates, promotions, and online reputation.

10.9 Marketing Management Tools : Assess widely used marketing management tools by the hotel that support sales initiatives across different segments for effectiveness.

10.10 Sales Management Tools : Assess widely used sales management tools by the hotel that support sales initiatives across different segments for effectiveness.


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