2016 Business Planning Guide

The hospitality industry is changing by the minute and this often creates challenges for hoteliers to keep up with the latest trends, drive profits and increase guest satisfaction. As 2016 quickly approaches, it is important to put together an actionable business plan, in particular a “digital business plan!” This plan includes your budgeted revenues and expenses for each department!

Before jumping head first into your plan, it is important to remember that one person cannot do this alone. Today’s hospitality industry is way too complex for a General Manager and Director of Sales to attempt to map out a success plan without a full team. Two recent books stand out for me in showing how to approach a goal with a team. The first is Boys in the Boat by Daniel James Brown. This book about nine Americans and their quest for the gold medal in 1936 in Berlin is a must read for those building a team. Another great book is Team of Teams by General Stanley McChrystal. One quote from that book tells it all for this industry. “Change is occurring so rapidly that one cannot predict the future.”

Once you have buy in from your team, it is time to develop some key data points on macro and micro economic trends. If you have trouble here, we are happy to help. Now it is time to start with your brand. What does your hotel or company stand for? There is no need to be academic here, just have a fundamental understanding of what your firm represents. Whether it is “to create the most luxurious experience with constant pampering” or “a high quality budget/economy lodging experience for today’s vacationers,” the key is to articulate and communicate it to your team members and to your target market.

Prioritize your digital goals by laying out your short and long-term business goals first to form a foundation. Start with the matrices you have on hand for each of your digital platforms. That might include your newsletter and website. Your email “open” rates and web “bounce rates” are good places to begin. The old saying, “content is king” holds true here. Content creation and distribution are critical to the success of your digital marketing – good content grabs and holds attention!

Digital Marketing

For a Wikipedia definition, digital marketing is the use of digital sources based on electronic signals like Internet, digital display advertising and other digital media such as television and radio.  At its heart, digital marketing centers around the Internet which has become a very powerful medium. For the hospitality industry, this means understanding the importance of digital marketing through online bookings, mobile bookings and social media marketing and implementing strategies to maximize these efforts.

Reputation Management

Reputation management has become a strategic part of our business efforts and it is an integral part of our operations, sales and marketing efforts. It is more than just occasionally responding to complaints, it is about creating guest engagement, increasing credibility and monetizing the interaction. Find a place in your lobby where guests love to take photos. In other words, create that “Kodak” moment and you will see your property begin to populate social media sites! And remember that 70 percent of travelers make decisions based on review and responses on review sites.

Reputation management is not just about responding to reviews, it is also about how hotels work to improve rankings on these sites. Hotels must implement a carefully planned strategy and have attainable goals in place. Aim to improve your score, get your staff involved in improving the score, set small goals and celebrate the achievements as a hotel. This will help lead to better customer service from your team members and better reviews on the sites.

Social Media

Social media sites such as Facebook, Twitter and even TripAdvisor have changed how the hospitality industry interacts with guests, creates experiences for guests and has changed how hotels are marketed. Creating a social media strategy is essential to building your brand and engaging with guests. A powerful strategy should be executed that influences the target audience, creates engagement and promotes the property in real-time. A strong social media strategy for hotels should include the following:

  • Make review sites a priority and respond to all reviews in a timely manner
  • Use current customers to market your hotel and capitalize on their comments
  • Create a virtual concierge through your website or a digital application
  • Implement concise and impactful videos to enhance dramatic imagery
  • Utilize content marketing and real-time marketing via social media pages

Real Time Marketing

The hospitality industry has quickly moved from being a form of art to a form of science. We must be more strategic in the way we operate and market our hotels and understand the impact of the current trends in the industry. One of the more impactful trends and the new standard of marketing within the lodging industry is real time marketing (RTM). Although it would be unwise to discount the impact of traditional marketing, RTM must take place on a regular basis and incorporate content, revenue management and social media. This must be a crucial component of the marketing mix to master the science of the lodging industry today.

Providing content on an on-going basis is dominating the industry and how we reach our target guests.

Implementing Great Entrepreneurial Ideas

Fast Company recently held a conference and generated great entrepreneurial ideas (we converted the best to hospitality) that we should implement into our daily routine

  • Empower Your People – Turn Them Loose
    “Freedom is the greatest when the ground rules are clear. Chalk out the playing field and say, within those lines, make any decisions you need.” – Dick Brown, former chairman and CEO of EDS. For hotels, think about those guest service agents and other team members and how much easier everything would be if they did not have to constantly look for a supervisor, manager or owner.
  • Increase Your Net Worth
    “Networking is sharing your contacts with others to create value without the expectation of compensation. Your network is your net worth.” – Tim Sanders, former Chief Solutions Officer at Yahoo. For hotels, it’s all about networking. This could be for sales, finding contacts with companies that can increase the value of your asset, or any other purpose. Networking is essential.
  • Expand Your Roster
    “Think of your team as not just the people you pay, but as the people who pay you as well.” – Feargal Quinn, former executive chairman of Superquinn. For hotels, management companies can look to owners for advice from time to time. How about marketing alongside hospitals, tech companies and biomedical companies to bring people to your market?

Revenue Management

The cost of attracting, booking and retaining guests must be a factor in determining what segment of the market to pursue. The reservation cost per channel, optimum channel mix and other factors are critical for use by the revenue manager. This information must be put into play instead of just driving occupancy; the key is not rate but net profit per occupied room. Optimizing rates is finding the right price for the right product at the right time for the right guest. There is a major trend within the chain hotels to automate this process, however, this does not mean that individuals do not stay focused. A computer cannot discern why certain historical patterns exist. A one-time only piece of business or a critical shift in where holidays fall can materially impact the revenue management algorithm. Yes, revenue management is now truly a science but it requires strong data and history!

Distribution Channel Management

Distribution channel management has become a science which now requires that hoteliers must preserve their brand (and in most cases rate-parity) by utilizing the most cost-effective distribution channels, instead of using desperate measures to sell inventory. It is vital for hotel owners and operators to stay ahead of the latest trends within the distribution channels.

How do we do this? We provide rich content that answers guest’s questions on brand.com sites. Guest service agents must be used as an extension to the sales team by giving them the tools to close the “sale.” Provide them with training and the confidence to book business directly on property, as this is the most cost effective way to maximize profits. The GDS system should be checked regularly to ensure your content is loaded correctly and that agents are able to answer questions about your property. Finally, maximize profits by negotiating with your OTA distribution team (yes, the OTAs can be an integral part of your team) and reduce your commissions. Then make certain that you have a strategy in place to earn the repeat business of every single guest…and get them to book direct next time.


Today, there are entrants in the market that can have a significant impact on the hospitality industry. Airbnb is probably the largest but the sharing economy in general is a big disruptor of the way hospitality plays out in the near future. Moreover, look for new disruption among the distribution channel providers. Think Amazon, Facebook, Google, Apple and many more…this landscape will be changing soon!

In addition to disruption via outside companies, the pace of change will leave many behind if not up-to-speed on trends. Mobile is a great example…web site not mobile optimized? You are left behind. Not recently renovated? Same problem. Dated, aging brand representing your hotel? This is another challenge. Need to refinance within the next year? Keep an eye on interest rates. Lastly, expect the unexpected. Global events are not usually predicted by lay people. Be prepared for anything and everything. Our forecast is for a very strong 2016 if there is no “black swan” event.


At the end of the day, whether you are an owner, operator or both, net income and the value of your hotel is a key indicator of the market strength and your team’s performance. Capitalization rates (cap rates), which determine value by providing an estimated return that a buyer will receive on your current net income, are the best barometer for determining value. Today, these rates range from 5 to 11 and the average is 8. This means an investor would receive a first year return of 8 percent on a cap rate of 8. For illustration for those who are not comfortable with this part of the industry, a net income of $1M divided by a cap rate of 8 would equal a $12.5M value. On the other hand, that same hotel net income at a 7 cap would be $14.29M.

Boutique hotels, resorts and top tier metropolitan areas are lower than average, meaning that your price would be higher (lower cap rate means higher value). Now is a great time to invest as net operating income (NOI) increased by 12.3 percent in 2014 and is expected to rise another 14.2 percent in 2015 and another 12.9 percent in 2016, according to PKF. Values have already surpassed previous highs of 2006 and 2007.

A strong business plan must contain short-term and long-term goals that are measurable and attainable. The plan must be innovative, in line with the latest industry trends and focused on staying ahead of the competition. This includes both revenues and expenses, many of which are impacted by both macro and micro-economic trends. By developing a strong business plan, hoteliers are providing a road map for a successful 2016.


4 thoughts

  1. Dear Bob –

    Good article.

    Who do you use for digital marketing, web site design, and IT ?


    Len Krouner
    Tel. (858) 277-5323

  2. We do our own digital marketing via MyEmma, use buuteeq for Web and do not use any outside IT services. Thanks Len! Bob

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