Hotel executives understand that business success is rooted in efficient operations. Hotels that foster a culture of continuous operational improvement can gain a considerable competitive edge, culminating in both satisfying guest experiences and maximized profitability. This guide offers strategies for achieving both outcomes while balancing the diverse activities and expenses inherent in hotel operations, from daily guest services to advanced revenue management.
What Are Hotel Operations?
Hotel operations comprise all of the processes essential for running a hotel. From the front desk to room service, housekeeping to facilities and beyond, hotel operations involve the daily orchestration of hands-on work that ensure guest services run smoothly. It also includes the many back-office functions — core functions such as marketing, revenue management, and regulatory compliance — that help hotels fill their rooms, increase revenue and profit, and adhere to industry policies and rules.
Key Takeaways
- Analysis of hotel business performance and financial data plays a critical role in determining whether and how to change operational processes.
- Amid staff shortages, hotels are seeking ways to improve how they recruit, schedule, and train employees.
- Revenue management is crucial for maximizing revenue and bookings.
- Hotels are increasing their investments in technology to drive improvements in their operations.
- Solutions include property management and revenue management systems, as well as automation of back-office processes and front-of-house work.
Improving Hotel Operations Explained
Hotels took a significant hit in 2020, when the COVID-19 pandemic led to a 48% drop in U.S. room revenue alone. The industry, now valued in the trillions, has since rebounded, but the crisis underscored the importance of maintaining tight operational reins. Naturally, top- and bottom-line finance goals are the fundamental driver for improvement efforts. However, a hotel’s long-term health depends on the seemingly contradictory goals of managing costs and enhancing the guest experience. For example, a hotel that decides to cut its housekeeping budget to reduce expenses could see a decrease in repeat customers, the loss of skilled cleaning staff, and negative customer reviews.
That said, programs designed to improve hotel operations typically focus on investing in business growth rather than making cuts. In practice, a hotel might hire more housekeepers and invest in competitive wages and training. It might also purchase software that dynamically schedules more front-desk staff at peak check-in and checkout times. Granted, the cost of labor will increase, but that will likely pay off in terms of increased efficiency, lower staff turnover, positive customer experiences and reviews, and increased bookings.
Of course, housekeeping and front-desk operations are just one piece of the very complex operations management puzzle. Hotel managers also must concern themselves with revenue management, marketing, guest safety, property maintenance, and more. Hotels embarking on an improvement journey often find it best to develop a multifaceted plan that includes tracking measurable key performance indicators (KPIs) — chief among them, occupancy rate, average daily rate, and revenue per available room — to monitor progress toward their goals and identify areas that could benefit from improvement. Some also conduct a SWOT (strengths, weaknesses, opportunities and threats) analysis to assess where they should dedicate the most energy and investment for improvement.
In addition, an effective hotel operations improvement plan identifies areas that could benefit from automation and other advanced technology, such as artificial intelligence (AI). It also involves documenting processes and establishing standard operating procedures. This documentation, aligned with business KPIs and hotel financial statements that report on performance, bring accountability to the process of improving operations.
Even if a hotel isn’t engaged in a widescale program for hotel operations improvements, small changes can be made over time to increase profitability and customer delight. A management principle that’s becoming popular with operations and general managers in the hospitality industry is Kaizen, a Japanese management technique that focuses on making small changes that result in cumulative benefit. For example, rearranging the breakfast buffet to create a more logical flow can help the line move faster and make hungry guests happier.
Common Challenges in Hotel Operations
While leisure travel bookings have posted strong gains in recent years, hotels are facing economic and logistical headwinds that could dampen profitability and growth if they stick with the operational status quo. Research shows that operational issues, such as increased costs and staffing concerns, are the top challenges for hotels in 2024, but these are just the tip of the iceberg. Hotel operators must contend with a range of challenges.
Staffing issues:
The hospitality industry continues to rebuild its workforce following the sudden reduction caused by the COVID-19 pandemic. According to the American Hotel and Lodging Association, 68% of hotels are experiencing staffing shortages. But even when hotels are fully staffed, hotel managers can be challenged to schedule workers in a way that optimizes operational efficiency, particularly when handled manually. At the same time, management must take care to establish a positive workplace culture to retain staff. In a service industry like hospitality, more satisfied workers are likelier to deliver exemplary guest experiences.
Inefficient processes:
Inefficiency in hotel processes is a profitability- and guest experience-killer. Inefficiency can be found in processes at many different levels. For example, poor communication among management, staff, and guests can result in guests checking in or out at the wrong times and causing housekeeping delays and long waits at the front desk. Manual front-of-house processes for everything from valet parking to hotel reservations also cause delays that will dampen customer satisfaction and frustrate employees. At the back of the house, inefficiently designed revenue management decision processes leave money on the table and adversely impact bookings.
Guest satisfaction concerns:
Guest satisfaction is the lifeblood of the hotel industry: High satisfaction levels drive loyalty and continued bookings, increase the amount of money customers spend on property, and bolster brand image. However, it’s challenging for management to create a clean and welcoming environment while balancing seemingly innumerable cost management and logistical concerns. Hotels are turning to technology that automatically orchestrates schedules and workflows to ensure that the right staffers are in the right places to keep the property well-tended and guest services readily available. Technology also can help track guest feedback to improve processes and streamline guest-facing communication so that hotels can manage expectations and respond quickly to guest requests.
Revenue management:
Revenue management is a priority among hotel managers. In a February 2024 survey, 57% of hotel decision-makers reported that revenue management was more important to their businesses now than it was the previous year. One of the biggest revenue management challenges is the centralization of pricing and inventory across the many different sales channels used by organizations in the hospitality industry, including third-party travel sites. Other complex revenue management challenges include predicting demand, dynamic pricing, and booking management.
Regulatory compliance and safety:
Hotel operators must demonstrate compliance with numerous regulatory requirements and safety standards, for which performance must be continuously tracked. Management must develop a thorough understanding of existing standards, from legal and practical perspectives, and stay apprised of updates and new compliance requirements. This includes regulations around building safety and fire codes, food safety, occupational safety, environmental sustainability, and accessibility for guests with disabilities. Hotels also must manage business and legal compliance related to labor practices, licensing and permitting, accounting, and cybersecurity. Meeting the requirements for all compliance initiatives requires considerable planning and training, meticulous documentation, and enough staff bandwidth to work with both internal and external auditors.
Environmental sustainability:
Regulators and travelers alike are increasingly scrutinizing hotels’ environmental sustainability. According to a 2024 Booking.com report, 83% of global travelers indicated that sustainable travel is important to them, for reasons ranging from wanting to do the right thing to believing sustainability will enhance their experience. As management seeks to improve hotel operations for the sakes of efficiency and guest satisfaction, they're also challenged to ensure that processes and systems are eco-friendly. This means orchestrating procedures to manage waste, reduce energy consumption, and ensure that buildings meet green standards for sustainability.
6 Strategies for Operational Improvement in Hotels
Hotels that anticipate the preceding operational challenges and implement strategic improvements in technology, processes, and data analysis can gain a significant edge over competitors. The following strategies can help them improve their operations over time.
1. Implement Technology Solutions
Technology systems play a pivotal role in optimizing hotel operations. Technology helps streamline complex planning, track business performance, and automate repetitive processes. Hotels also depend on technology to improve communication among hotel management, staff, and guests. Some of the most beneficial technology systems for hotel operations include:
- Property management systems (PMS): PMS platforms offer a single administrative hub for managing operational processes including occupancy management, account management, scheduling, and other front-of-house administrative tasks. PMS platforms are often integrated with back-office systems as well, to provide end-to-end visibility into hotel operations for effective hotel budgeting, financial planning, and dynamic pricing.
- Customer relationship management (CRM): CRM systems provide a platform for aggregating guest and corporate customer information, such as past visits, purchases, and preferences. This helps hotels tailor marketing and guest experiences in ways that may lead to improved loyalty and increased bookings.
- Channel management systems: Channel management systems help hotels manage revenue and pricing across various online channels, including online travel agencies (OTAs). Channel management systems often are bundled into PMS platforms.
- Mobile apps: Hotel management leverages mobile apps internally and externally to improve communication with guests and among employees. Mobile loyalty program apps enable guests to, for example, set room preferences, provide feedback and book stays. Mobile housekeeping apps, meanwhile, allow housekeepers to receive updates about guest requests, resupplying their carts, and other issues while they are working to complete their daily rounds.
2. Optimize Staffing and Training
Staff at both the front and back of the house have responsibility for executing hotel operations improvement plans. Implementing strategies for tracking and managing staff performance is fundamental to any improvement plan. It’s also important for hotels to properly train employees on how to implement and maintain new systems and procedures. That said, successful hospitality organizations understand that the most creative and effective ideas often come from employees “in the trenches.” These organizations encourage employee feedback and provide easy and safe platforms which employees can use to share their ideas.
Some strategies for building an efficient and effective workforce include:
- Staffing assessments: Assessments administered before an employee is hired, during the hiring process, and while on the job can help hotels more effectively recruit, hire, and provide targeted ongoing training for staff members.
- Training programs: Hotels are increasingly turning to mobile-friendly, on-demand training that offers staffers bite-size training modules designed to help them continually brush up on their skills. These modules are developed according to various workforce assessments, corporate standards, and regulatory requirements.
- Cross-training initiatives: Many hotel positions require a high degree of flexibility and knowledge across different domains. Cross training helps prepare employees for the variable, manifold demands of hotel work, giving staff the ability to fill in during shifts with different demands. For example, an employee who typically works at the front desk during the slow night shift should be able to fulfill certain back-office duties as well.
3. Enhance Guest Experience
Customer satisfaction is always the goal of operational improvements, but hotels will do well to target specific investments to enhance their guests’ experiences, including:
- Personalized guest service: Research shows that 61% of consumers are willing to spend more money at hotels that offer personalized guest services that can occur during the booking process, during their stay, or after their stay has concluded. One of the most common services is rewarding frequent guests with personalized loyalty rewards, but hotels can also provide services based on selections made by future guests during the booking process, such as a champagne toast package for stays marking a celebration, or board games and nightly cookies and milk for families traveling with young children.
- Guest issue resolution: Hotels that use mobile apps, predictive analytics, and other technology to respond to guest issues -- or, better yet, to anticipate problems -- can turn a potentially negative interaction into a positive experience.
- Guest feedback mechanisms: Offering guests a range of communication channels for providing feedback throughout their experience can improve issue resolution and elicit creative ideas for improving hotel operations in ways that matter most to visitors.
4. Streamline Operations
Process and system optimization play a significant role in hotel operations. Hotels can benefit across the entire organization by streamlining operations in these key areas:
- Standardized operational procedures: By standardizing operations, hotels can considerably improve the efficiency of their processes. Standard operating procedures also make it easier to onboard new staff in an industry with historically high turnover.
- Automation and digitization: Hotels are increasingly banking on the efficiency gains afforded by automation, particularly when combined with the power of AI. Whether it’s an automated text message that kicks off the checkout process or the use of AI-powered room-cleaning robots, automation is an increasingly important tool for improving hotel operations.
- Efficient housekeeping practices: Hotel guests rank cleanliness as their No. 1 hotel criteria, which should make it a top target area for operations improvement. One of the most effective ways to increase the efficiency and effectiveness of housekeeping is to use the dynamic scheduling capabilities of a PMS to ensure staff is allocated according to real-time needs.
- Energy-efficient technologies: Energy-efficient technology such as smart building systems, advanced sensors, and AI algorithms can help hotels minimize energy waste and reduce operational costs.
5. Optimize Revenue Management
Revenue management optimization involves analyzing travel industry trends and internal business data to gauge, for example, how much money different types of guests are willing to spend for particular rooms at particular times. This allows hotels to maximize their revenue per room while bolstering occupancy rates. Here are some of the most important tools for optimizing revenue management:
- Dynamic pricing strategies: Hotels have long used dynamic pricing and inventory management strategies to adjust hotel rates according to seasonal trends, local events, and other factors that trigger fluctuations in demand. Now, many hotels are extending dynamic pricing practices to other areas of their operations, such as parking management.
- Data analytics: Algorithms running against historical trends data help anticipate future customer demand and willingness to pay.
- Upselling and cross-selling initiatives: While often overshadowed by dynamic pricing, upselling and cross-selling are key revenue management tools. Analytics can help here as well, identifying opportunities to offer customers upgrades or additional services they are most likely to buy into. Hotels can then preemptively make offers based on that data, personalized to key customer segments or even for individual guests.
- Pricing and distribution strategies: Effective revenue management depends on pricing and distribution strategies that optimize pricing and marketing across different guest segments, properties, and room types. This requires intelligent pricing automation systems that leverage comprehensive historical data, competitor pricing, and advanced analytics to perform hotel forecasting that supports advanced pricing practices.
6. Ensure Regulatory Compliance and Safety
Meticulous planning and documentation help hotels remain in regulatory compliance and meet safety standards. One of the biggest challenges in the hotel industry is the sheer number and variety of regulations that a property must contend with; it’s simply not feasible to track all of the data involved in a simple spreadsheet. Hotels require the following to meet compliance and governance demands on an ongoing basis:
- Regular audits and inspections: Frequent audits and safety inspections on the property and on the books ensure that hotels are operating according to corporate standards and remain compliant with regulatory rules.
- Security measures, emergency preparedness, and crisis management protocols: Hotels depend on comprehensive security checklists to keep guests and property safe, as well as emergency preparedness and response plans to see them through crises as they occur and evolve. Hotels must prepare detailed playbooks that instruct employees on how to perform key tasks according to their roles when emergencies occur.
- Ongoing training on compliance and safety: The world changes quickly, which means the training employees received six months ago may not suffice today. Hotels should provide ongoing compliance and safety training, including assessments and simulations that demonstrate employees are retaining and applying their training appropriately while on the job. Both planned and random simulations are especially important for stress-testing security protocols and emergency response plans.
How Technology Can Improve Hotel Operations
Hotel tech spending is on the rise, with 61% of hoteliers reporting that they spent more on technology in 2023 than in 2022 and 71% predicting that they'll continue to increase spending in the next three years. Some of this investment will be dedicated to improving hotel operations.
Technology plays a key role in automating and accelerating rote tasks and communications. For example, touchless check-in and checkout processes give guests more time to explore the property and have a drink at the hotel bar. Indeed, what’s good for the hotel is often good for the guest, with 80% of travelers reporting that they prefer automated self-service offerings facilitated by web app, mobile app, or digital kiosk.
Technology, such as AI-powered automation, is also essential for bolstering efficiency in daily hotel operations. Technology dedicated to staff scheduling and waste reduction can go a long way toward cutting costs and making the most of hotel resources. Many hotel managers are also leaning on tech investments to boost top-line revenue generation and improve hotel accounting. Leveraging emerging technology like generative AI can improve demand generation and other marketing efforts, while sophisticated analytics and integrated accounting platforms boost revenue management initiatives. The latter is a top-performing tech investment for hotel operators today, with 83% reporting that the ROI for revenue management technology is high or very high.
Improve Your Hotel Operations With NetSuite for Hospitality
Enterprise resource planning (ERP) can play a pivotal role in streamlining and consolidating the many core functions that power effective hotel operations. NetSuite ERP is a powerful option for hotel managers on this front. An all-in-one cloud business management solution, NetSuite ERP offers a single, integrated suite of applications for managing accounting, order processing, inventory management, POS, CRM, and more. NetSuite for Restaurants and Hospitality is specifically designed for the needs of hoteliers, providing integration with PMS platforms and visibility into business performance metrics that impact guest experience. The analytics and financial reporting centralized on NetSuite ERP can help hotel management make better operational decisions that optimize efficiency and improve guest satisfaction.
While it’s possible to bring the spirit of Kaizen to hotel operations through incremental changes, wholesale improvement requires concerted effort and strategic planning across the organization. Hotels must strategically leverage automation technology and business performance data to drive significant gains in operational efficiency. By emphasizing smart technological investments and meticulous documentation, hospitality leaders can take their operations to new levels of efficiency and profitability while strengthening the guest experience.
#1 Cloud ERP
Software
Improving Hotel Operations FAQs
How can the hotel industry improve efficiency?
Some of the biggest improvements the hotel industry can make to improve efficiency include instituting dynamic staff scheduling, implementing energy efficiency initiatives in buildings, and streamlining financials through integrated applications such as hotel management systems and ERP.
How to improve performance in the hospitality industry?
The hospitality industry improves performance in key areas such as revenue per available room, average daily rate, and occupancy rate by instituting strong revenue management practices and implementing automation across operational functions.
How can hotel operations be improved?
Hotel management needs a solid plan that identifies areas for improvement and uses metrics that track performance over time to measure the impact of operational optimization efforts. Hotels commonly focus on technology investments, guest interaction enhancement, and revenue management to improve operations.
What are the 5 phases of the hotel guest experience?
Hotel operations support the guest experience, which can be categorized into five phases: research, booking, arrival, stay, and post-stay.