A Secret Weapon to Counter Rising Labor Costs
Inflation is raging and labor costs are on the rise.
Wages were up 7.1% for service and hospitality workers this summer. And it was THE hottest topic at this year’s Hotel Data Conference.
What’s more, hoteliers are struggling to fill their staff shortages even at higher wages. Hilton’s SVP of Brand Development, Phil Cordell, recently called the availability of labor "the single biggest challenge" for the industry at this time. Given the continuing shortage, higher wages are likely here to stay.
Cash, Profit, and Pricing
Making matters worse, most hoteliers are strapped for cash after burning through it to survive the pandemic. Simply absorbing higher labor costs is therefore not an option for these hotels and generating profit is mission critical.
Some hoteliers are trying to control costs by cutting back on amenities and closing restaurants. But turning a full-service hotel into a limited-service hotel is a risky strategy – one that might frustrate many guests and put future profits at risk.
Since profit is king right now, the question savvy hotel executives are asking is: how much lost profit can we make up with pricing?
The answer is nuanced…
In certain circumstances, you may be able to push price without a dramatic impact on demand. That will drop revenue to the bottom line. In other scenarios, driving price could cost you precious bookings. That would further drain profit, which is the last thing anyone wants.
N2Pricing™ RMS is uniquely positioned to fight back against rising labor costs and inflation. Three core capabilities help hotels respond effectively, maximizing profit:
- Accounting for Costs. N2Pricing’s price optimization algorithms account for costs. As labor and other costs rise, users can update the cost parameters in the system to make the optimization aware. This could lead to the system seeking higher prices, as discounting would be less profitable.
- Measuring Price Sensitivity. The question of how much price we can drive centers around the notion of price sensitivity. How will my demand respond to changes in price? N2Pricing measures price sensitivity (aka price elasticity) and re-calibrates the measurement frequently. It identifies dates and times when price sensitivity is lower and automatically looks to drive price there. It also sees high price sensitivity and will look to drive bookings by holding rate or even using targeted rate decreases where they will be most effective.
- Profit Optimization. N2Pricing has profit optimization at its core. So, the algorithm takes inputs like costs, price sensitivity, forecasted demand, and competitor rates and uses them to optimize rates to maximize profits. So, it thinks like an owner!
If you’re fighting inflation, it’s time to expect more from your RMS. Schedule your N2pricing demo to see how it can keep rising costs from crushing your bottom line.