The fastest way to make your hotel more profitable is to reduce your costs. But how? This webinar explores some ideas.
The fastest way to make your hotel more profitable is to reduce your costs. But how? This webinar explores some ideas.
Brandon: Hello there, ladies and gentlemen, and welcome to this webinar by Cloudbeds on How Hotel Operating Costs Affect the Bottom Line. My name is Brandon Dennis. I’m the VP of Marketing here at Cloudbeds, and I’m joined by Alex Gaggioli, who’s our marketing coordinator. Many thanks to Alex, who did a lot of the research and helped put this deck together, as well as Rich Sanderson, who made it look really pretty. So, a lot of marketing effort went into making sure this webinar was looking good. This is going to be a lot of fun. I expect this to be a really energetic and engaging webinar, and I expect that you’ll have a lot of questions. Just so that I can share a little bit of the scope of this webinar, we’re going to start by talking about a lot of the data, so we’re going to be talking about why the things that we’re bringing up are affecting your bottom line.
And then we’ll be talking about tips that you can do to reduce your operational costs. If you have any questions during the webinar, feel free to click that little Q&A button and then jot down a question. Alex is going to be hopping on during the webinar and then interrupting me and then asking your questions on your behalf, for you. And then at the very end, we’ll have a Q&A where you can…we’ll have a free for all, basically, where you can ask any questions about this topic and we’ll do our best to answer. Alex, did you have anything you wanted to say before we begin?
Alex: Yeah, just in case you cannot see Brandon’s entire screen, at the top you should see an options drop down button, and fit to size or fit to screen will be the first option, just click that and it should work. If you’re getting any problems, just shoot it in the Q&A part and I can help you out.
Brandon: Sometimes we’re having issues where you can only see part of the screen, so chose the options as fit to screen and you should be able to see the entire presentation. All right, thanks, Alex. Without further ado, let’s move on with the webinar, and we’re going to start by talking about the thing that we have to get down first before we can make any changes. And the thing that’s probably obvious and that you’re probably already doing, which is tracking your operating expenses. We can’t know where our excess and where our waste is going, unless we’re able to track it. Whether or not you track it, it can make or break your entire business.
You can catch issues that you otherwise wouldn’t catch by just making sure that you’re watching every dollar that’s going in and every dollar that’s going out. But we’re talking about ways to reduce the amount of money that we’re spending. And time is money, so finding ways to track your operating expenses that don’t take a lot of time, is going to be essential. Manually tracking your operating expenses can be a huge time sink. And this is when you have an Excel spreadsheet or you’ve got an online Google doc and you’ve maybe created some scripts and you’re manually punching in your numbers at the end of the day. And then you’re sharing those with some of your employees and you’ve got to print them off. And then if you make a mistake, you use whiteout. It just takes a lot of time; it’s prone to user error and it’s not the best way to go about it.
One of the ways that we’re going to recommend, is using a property management system. It’s going to be really useful on this. So whether you use our property management system, which is called My Front Desk, or any other property management system, a good one is going to have operational expense tracking built into it and the ability to produce reports and PDFs. And this is going to be useful because it’s going to reduce a lot of the user error that goes into tracking your operating expenses, because it’s going to hook up automatically with the OTAs that you’re using and any sort of credit card processing tools that you use. They’re going to be much more accurate; they’re going to be much more portable and they’re going to be easier to edit. So, save time, save money, reduce your costs by finding automated ways to track your operating expenses.
Some online accounting software that we can recommend for a little bit more depth, especially when having to produce payroll, are going to be some of the ones that you see here. Quick Books, as you know, is going to be the default online accounting service. Many of you probably already use it. I’ve used it in the past. It used to come in a box. You’d go down to your box store, whether it was Comp U.S.A or Best Buy or whatever, and you’d buy another box. It was [inaudible 00:04:25] year. You’d get the updated software. Well now it’s in the cloud. Now it’s a software as a service, and you can subscribe to the service online. And it’s cheaper that way, and it’s kept up-to-date that way. And that’s the default way that software is coming to us these days.
Quick Books is an excellent piece of software and it comes in a variety of different prices. Now, the starting price, is $10.36 a month. And that could go up to $40 per month, depending upon what promotional pricing you have and what not. So, it’s definitely not free, and it may or may not be a choice that you want to use. Another good one that’s popular with smaller properties is Xero, and it has many of the exact same features that you’re going to need that Quick Books does, including being able to send invoices, and pay bills, and reconcile transactions. And that starts a little bit cheaper at $6.30 a month, but it can go up to $70 a month. So I would recommend taking a look at the features that you’re looking for, if paying for an online software as a service accounting software is the way you want to go.
Wave is a different one, and it actually has a free option. And we wanted to include this as an option for people who are wanting to automate their accounting and spend as little money as possible. And it has most of the same options that you can get with Quick Books and Xero, including the ability to create and send invoices, payroll, transparent pay structures, and so on and so forth. Now, the free option is going to be a little bit more limited, but they do have some other pricing tiers that you can check out. I believe it’s free with the exception of Payroll and Payments. And if that’s all you need to do, then Wave is a great option for you. So, the moral of this particular section is, upgrade from your Excel spreadsheet, save time, save money by using one of these low-cost or even free pieces of accounting software.
Next step is labor costs. This is a big one. We’re going to be spending a significant portion of the webinar today talking just about labor costs. And the reason for that is because, take a look at this graphic. Between 30% and 35% of your properties operating expenses are likely labor costs. And this is the average for the hospitality industry specifically. It’s a huge contributor to expenses. Some sources that we checked before creating this webinar said that labor costs can go up to even 47% of all of your operational costs, and this is because it’s going to vary by property size and type.
But the average for the industry is between 30% and 35%. Now, ways that we can reduce this is by cross-training employees. But we’ll be getting to that in just a little bit. One of the ways that you can…a major way that you can reduce the labor cost is through the recruiting process, because the recruiting process can save you a lot of time. And a lot of this data comes from Investopedia. The recruiting process is a costly process.
First, you’ve got to advertise that you’ve got a position available. Then when you find the candidate, you’ve got have the candidate come on in and then sit down and have an interview that takes up the candidates time; it takes up your time. Then you’ve got to run background checks; sometimes those cost money. Then you’ve got to go through pre-appointment assessments. And finally, when you finally get the candidate, the direct and indirect costs, according to Investopedia, on average, just for getting a new employee, are estimated around $3,500.
Obviously, that’s going to change; it’s going to vary from property to property. It’s going to vary depending upon what your ADR is, but the average is still quite significant. Even if you have a smaller property and your operational costs are lower, this will scale. This cost will scale based upon your operational costs as well, but it’s still going to be a huge slice of the pie. And that’s where we’re really getting at here. We’re getting at what percentage of your operational costs are labor. And the recruiting process is a large one.
Another one is employee turnover, and this is a sad truth when it comes to the hospitality industry. We’re using data from Cornell University, and this data shows that the cost of individual turnover is about 30% of their annual salary. And this is true for a number of reasons. And one of the major ones is that in the hospitality industry, when you’ve got a lower wage, or lower cost employees, whether it’s a front desk operator or a housekeeper, it takes a certain set of perks and salary requirements that can keep people at the job.
So, the first step is making sure that when you’re interviewing somebody and that you’re putting in a lot of time, interviewing hastily and hiring hastily can get a low quality talent onto your work team which in turn increases employee turnover, right? And then once you actually have the employee, you need to invest some time and resources into keeping that employee and reducing turnover.
So let’s say that you’ve got 30 employees and an average hourly wage of $12 an hour, and 50% of that was set to turn over, you could be spending, using those numbers in excess of $150,000 a year in the employee turnover. And if you could reduce that employee turnover by just a few percentage points, that equates to thousands of dollars that you’re saving that go directly into your pockets. Here’s some more hospitality specific labor statistics. The turnover rate is different based on property size, for example.
So you can see in this particular instance, you’ve got a property with fewer than 150 rooms. The turnover rate is fairly large, 63% over the span of the year of your employees will turnover. If your property size is larger, larger than 350 rooms, that percentage is only 37%. So it’s going to be different based upon your property size. The cost also is different based on property size, and it scales by ADR. So, if you’ve got a hotel with an ADR of $65 per room, the cost per employee for turnover is only $5,000. But if your ADR goes up to $125 a room, the cost to replace one employee is $32,750. And this is data from Cornell University and it’s pretty accurate.
Now, when they did their study, they used mid-level hotels, so this isn’t going to be true for bed and breakfast and hostels, but the principles remain the same. The more money that you’re bringing in and the longer it takes to train your employee, the more complicated the job is, the more expensive it’s going to be to replace that employee. So reducing your turnover is going to be a huge goon [SP] to decreasing your costs. So then, let’s take a look at the full cost of an employee. An employee doesn’t become profitable until that employee has been around for 6.2 months.
And the reason for that is because they’re learning the job on the job. Even employees who have come with years of experience, it takes them a long time to learn exactly how to work in your work environment. And this is true of any job, right? And I’m sure that you’ve understood this, having hired many employees in the past. So, between one and four weeks of on the job, they’re really only working at about 25% productivity. They haven’t quite reached their full potential, so they need more time.
Between 5 and 12 weeks, they’re working at about 50% productivity. They’re doing good, but they could do a lot better. Between 13 and 20, 75% productivity. It takes five months for one employee to reach full productivity, on average. And even once they’ve achieved full productivity, you’re not recouping the investment that you put into training that employee until 6.2 months. So if you’re burning through employees every 6 months, you’re wasting money. You’re not getting out of them the productivity that is necessary for you to recoup the investment that you put into them by training them and giving them health insurance, and giving them perks at the office, and so on and so forth. So here is where we really see the deep, dark hole where you’re dumping your cash into in terms of labor costs, if you’re going through employees extremely quickly.
So then, what is the actual full cost of all of this? Again, we’re working with averages. The estimate from Investopedia is that it’s between 1.5 times to three times the annual salary to achieve a fully baked employee. This includes benefits, taxes, equipment, training and so forth. So, to get a fully baked employee, that is an employee that has gone through the entire process – they’re not a raw potato and they’re not a semi-cooked potato; they’re a fully baked potato. That’s a tasty potato. That’s a potato you’re happy to put some sour cream and chives on – it takes 1.5 to three times a yearly salary to get that fully baked employee. And so it’s going to mean that if that employee is leaving you after six months, leaving you after seven months, you’re just not getting the investment out that you put into it.
So then let’s take a look at some of the options to decrease labor expenses. We’ve scared you already by showing you some of the numbers that are breaking out, how much this is costing you. So let’s briefly, if not briefly, maybe we’ll linger on this for a little bit. But let’s talk about some of the ways to reduce some of these costs. So obviously, reducing employee turnover is going to be a huge one. If you hire somebody and they don’t turn over, and they stick with you for four years, you’ve gotten a great investment. You’ve gotten a lot of work and a lot of talent out of them, and a lot of productivity that you’re not having to pay for over and over and over again.
So here are some tips from the Wall Street Journal on reducing productivity. Make sure that you interview candidates carefully. It’s not about them just having the perfect resume. Because you can have the perfect resume and not fit in with the company culture, and then leave after one month, or two months just because you didn’t like the way your coworker smiled at you one day, or something silly like that.
I used to work in a hotel. I used to be the van driver, when I was in college, for a local hotel. And I saw many front desk employees come and go. And they always left for the pettiest of reasons. It was something silly like not liking the way a manager commented on your shoes, or not being able to stand the sarcastic tone of the night clerk, and something really just silly like that. So, making sure that when you’re sitting down to interview candidates, that they not only have all of the necessary work credentials on their resume but that you can judge the personality, that you can talk with them and get that they’re going to be a great fit for the company culture, that they can be managed without becoming offended, that they’ve got thick skin, that they understand what it means to be in a work environment.
They understand what it means to work as a team instead of wanting to be a lone wolf, and that they can get along with other people. If you can make sure that the candidates that you’re interviewing meet all of those qualifications, then you’re going to be much more likely to be hiring somebody who’s going to be a long term investment, who’s going to be able to stick with you for years to come instead of churning after six months.
Next step is to get creative with benefits, get creative with flexible work schedules and your bonus structure and the kind of compensation that you offer. One of the things that I read from the Cornell study was that when you increase the salary of an employee, or you give them an expensive benefit, that can actually decrease the amount of money that you’re spending on labor in the long-term, because it decreases turnover.
So, ironically, by increasing the wages of your employees, you can decrease turnover, which in turn decreases the amount of money that you’re spending on labor. Depending, of course, if the talent that you’ve hired, the reason they’re staying with you is primarily based on price. But you can improve the work environment within which your employees are working in very cheap ways. Maybe all you need to do is put a fish tank in the lobby, and that will just make them happy. And that will make sure that don’t want to leave.
That’s a silly idea, but being creative is one of the ways that you can sit down and try and figure out ways to keep your employees longer. My mother is a small business person, and one of the ways that she has kept her employees over the years…I mean, she’s got a small coffee shop chain here in Seattle, and some of her employees have been working for her for 14, 15 years. And this is a coffee shop. Where does that happen? The way that she’s gotten around doing that, is by really turning her work environment into a family structure.
She has parties and birthday parties for people. She’s got quarterly staff parties and meetings, and everybody knows each other really well. And it’s a warm, just enjoyable work environment. And her employees have stayed with her because that’s the life that they want. They want that kind of working lifestyle, where they go into work every day and they don’t feel uncomfortable. They want to be able to feel like they’re going to work with customers that respect them and fellow employees that respect them. So that part of building a comfortable and enjoyable work environment is going to help retain your employees in the future.
And this leads right into recognition and praise at work. People don’t want to be coming into work every day and the first thing they get is a long list of duties that they’re going to have to do that day. I mean, yeah, it is their job, and yeah, they are going to have to do long lists of duties, but if that is peppered with frequent praise and recognition for the work that they’re doing, that’s a very cost effective way to decrease turnover. It doesn’t cost a lot of money to say, “Hey there, buddy, you did a nice job. Kudos.” I just did it and it didn’t cost me anything. It was pretty easy. Creating a positive work environment, we touched on this a little bit. Whether it’s an environment or whether it’s just in the mutual respect that you give your employees, that can reduce turnover.
And then outlining challenges and creating a clear career path. This may not be quite as applicable for your front desk operators that are working $12 to $15 an hour, but for other people who are either in your marketing department or who are managers, making sure that you sit them down every quarter and you go over what they did. And you’re outlining exactly where their career is headed and then you give them steps that they can use to achieve their next career milestone, these are great ways to keep them with you.
If they feel like they have to go outside of your hotel property to find the next step, or the next phase in their career, then that’s just going to increase the turnover that you get. It’s going to make that point in the future when they leave, to move on to the next thing that’s going to bring that point in the future closer to the present. And that’s what you want to avoid. It’s unlikely that you’re going to be able to keep your employees forever, so we shouldn’t have that expectation. But the longer you can keep them, the greater benefit you’re going to be getting out of them and the cheaper your labor costs are going to be.
According to this Wall Street Journal article – we’ll just throw this tidbit in there – many experts estimate that it costs upwards of twice an employee’s salary to find and replace a replacement. Churn not only affects your pocketbook but it can damage the morale of other existing employees who really liked that person, or who are taking sides in a petty argument. It’s just not good for the work environment, so reducing that is exceptionally important.
Another thing for retaining employees and reducing turnover is cross-training your employees. I briefly mentioned this earlier, but this is especially important for small teams and it can be really helpful for mid-level hotels to larger-level hotels. If you really want to reduce your labor expenses, instead of having five people who each specialize in one specific task, have two or three people that each wear multiple hats. This is useful for a number of reasons in that, yeah, you’re paying less payroll, but each person whom works for you is going to feel like a more necessary and integral part of the team. They’re going to feel like without them, the team just wouldn’t work as well, and they’re going to have more satisfaction with their job.
It also makes scheduling easier, if each employee is incredibly versatile, like, if each employee you have can do another employee’s job. If someone is sick or out of commission, it’s going to be much easier to bring in a substitute during that period of time and it’s not going to cripple your business during that period of time. And it just makes them feel more valuable and increases your investment in them. And then finally, when we’re talking about decreasing your labor expenses, this is 2015, a lot of our focus is going to be on software and technology. Finding software to increase your labor efficiency is going to be very useful. And one of the softwares we’ve studied is called SubItUp. And what this does, is it’s a scheduling software. It makes it easier to schedule the different employees that you have.
This is great for hotels who have a lot of people on staff who are cleaning rooms, or working on the breakfast room, or driving the shuttle vans, or running the front desk, and sometimes it may be difficult to manage that entire process through an Excel spreadsheet. So, finding some sort of software as a service, scheduling software like SubItUp, can save you a lot of time that you can dedicate to other things that would improve your company culture, like a party, or team t-shirts, or something like that.
So we talked about labor. As we said earlier, labor constitutes between 30% and 35% of your cost. That’s going to be the big E on the eye chart. That’s the major one for you to tackle. But we also want to talk about energy. Now, as you can see from this graphic, energy only constitutes six percent of your total operating cost. And the source of that is the Business Process Excellence. So, tackling this one is important, but not as important as labor. But we definitely want to take a look at some of the options that we can do.
So let’s talk about going green. Now, we’re not talking about this because we’re all hippies. No, as wonderful as it is to love the Earth, we are business owners and our primary concern, at the moment at least, in terms of this webinar, is talking about how going green can actually reduce your energy costs. That’s going to be one major focus of using this. And so, according to The Carbon Trust, they predicted that hoteliers can save up to 20% on utilities just by implementing some of the green practices that are outlined by Energy Star or the Trip Advisor Green Leaders Initiatives.
The towel re-use program alone saves up to 5% of your operational costs a year in utilities, and that’s according to the Green Hotels Association. Now, not all of your properties are going to be large enough to have towels in bulk enough numbers that simply having your guests re-use them would save 5% in your utilities. That’s going to be on a larger scale, so, that statistic is more applicable to larger hotels. But there are a bunch of other things that you can do, including the towel re-use program, which I’m sure you’ve all experienced if you’ve ever stayed at a larger hotel. You go in and you’re going to see a big sign sticking around that says, “We embrace green initiatives. Please re-use your towels.”
Alex: Hey, Brandon? I think there’s a problem with this screen. Can you try going back and going forward again? That worked. There you go.
Brandon: All right, how’s that? Can everybody see the correct screen?
Alex: Okay, I think it’s right now. Just the images were overlapping.
Brandon: The images we’re overlapping? Okay. Does it look all right now?
Brandon: All right.
Brandon: Thank you, Alex. I appreciate it. Well, we’ve fixed this slide just in time to move on to the next, so let’s see what’s on the next slide.
Alex: This one is messed up now.
Brandon: This one is messed up? Okay. How’s that?
Alex: There you go.
Brandon: All right, I’ll just do that from now on. I’ll do a double tap.
Alex: There you go. Thanks.
Brandon: All right, so let’s take a look at some energy case studies. Now, a lot of case studies, when it comes to going green for hotels, it’s going to focus on larger properties because a lot of chain properties will tend to do these studies to verify that, yes, these green initiatives have worked. So these are going to be benchmarks that we can take a look at for inspiration for our own businesses, especially if we have a small bed and breakfast or a hostel. So these are still things that we can use to inspire us and good data points to validate against.
So, if you upgrade your thermostats…because many of our properties are going to have older thermostats that don’t correctly show us the correct temperature. If you upgrade your thermostats, you could be saving up to 40% in your energy use. Or let’s say that you put a window film like the Hyatt Century Plaza did. They saved $670,000 a year simply by installing a window film that made it less likely for heat to leave the room. And they got a positive ROI on that investment in just six months.
So let’s go through a list of some things that you can do right now. Avoid overheating bedrooms and hallways. You want to maintain temperature of between 66 and 70 degrees. And if you have a bed and breakfast, you can take a look at some of the…there are a number of blogs out there from people who are trying to find ways to reduce their utility expenditure at home. And if you have a small bed and breakfast which is just going to be a home, then you can use many of those tips which brings out the philosophy of some of these others. So if we’re talking about bedrooms and hallways, and you don’t want to overheat a hallway and you want to make sure that each bedroom has its own thermostat, then you can take that principle for your small bed and breakfast as well.
Avoid operating the heating and cooling systems simultaneously. There’s no need to have your air conditioner going on at the same time as your heater. So having an updated system that’s going to be able to make a smart transition between the two instead of running two simultaneously is going to be saving you a lot. Use sunlight wisely. This is something that comes from the olden days when people were using…the only way that they did climate control in their homes was the usage of drapes. During hot seasons, you can leave the shades and blinds open on sunny days.
This is good for a bed and breakfast if you’re wanting to heat the common areas. Or if you’re in a hostel and you want to heat some of the common areas of your hostel, just use sunlight on the sunny days and then you can turn off the heaters. So leverage the use of the sun, leverage the use of your windows as necessary. Make that part of your front desk employees’ daily routine. At certain points of the day, they can go and check, and if the sun is out, they can open the blinds.
Many properties have modern TVs these days, which have power settings that you can take a look at and adjust the settings on your TV to make sure that they’re on a power saving mode, or that they default to a power saving mode when not in use. You can also set them so that they use less screen brightness. Now, this can always be adjusted by a guest who comes to your property, but if you have a default setting to set it to use less screen brightness, then you’re using less electricity. And over the span of a year, that could be a substantial savings. Most modern TVs have a quick start feature that allows for the TV to turn on faster. You could turn it off. I mean, so the guest sits on the edge of the bed and waits an extra five seconds for their TV to go on. Not the end of the world. But it could save you a little bit of money.
All right, here’s one. This was an interesting one that I didn’t know about: the drop a brick method. Drop a brick in your toilet. You know that reservoir behind the toilet that holds all of the water to give the gravity assist to flushing? Drop a brick in there, and what that can do, is it displaces about a half a gallon of water, which can save you about two gallons of water per person per day. If you duplicate that out to hundreds of rooms over a hotel, over an entire year, that’s a lot of water savings just by dropping a brick in a toilet.
Alex: Just so you know, it’s not a literal brick. That’s how people used to use this program, but now there’s a company called Drop-a-Brick, which is pictured here. That’s a lot less heavy and just absorbs the water and displaces the water without putting a heavy brick inside the tank.
Brandon: I was wondering why this brick was being squeezed like a sponge. That didn’t make a lot of sense to me in the photograph but…
Alex: Yeah, so it’s a sponge-like brick that absorbs the water and essentially does the same thing that a normal real heavy brick would do without breaking the tank.
Brandon: Do we know how much this spongy brick is?
Alex: It is $25, I believe.
Brandon: Jeepers [SP]! Okay, well if you want to spend $25 on a spongy brick to put in your toilet, well there you go. That’s an option. Or you could just go get a brick and just sit it very gently so that it doesn’t shatter any of the ceramic or something. That’s one option. So, the drop a brick method, you could save a lot of money on your water. LED light bulbs, this is something we’ve probably all done on our house. Yeah, the LED light bulbs are a little bit more expensive, but they almost never go out. You could save 85% on your energy in terms of just lighting over the span of a year, and it still gives off the same amount of light. And then there’s the important one. When I go into a hotel, it used to be that I would turn the A/C on. I would crank it to the highest setting on hot days before leaving so that when I came back from dinner, I would walk into my hotel room and it was the perfect temperature. It felt really good.
Now I’ve noticed, when I go to a hotel, I can’t do that because it’s got an auto shut off sequence where it detects whether there’s a warm body in the room. And if it can’t detect you, whether it’s motion or whatever, it shuts off. So you can find sensors like that. It frustrates me a little bit as a guest, but for a hotelier who’s trying to reduce the power consumption, making sure that you have smart and intelligent shut off and turn on sequences for lighting and for air conditioning can save you a substantial amount of energy. We can’t depend upon our guests to be sensitive to your operation of costs when they’re thinking about paying their hotel bill or going out and getting dinner and coming back to a nice, cold room. So finding ways to auto deactivate things like air-conditioning and lighting in your property can save you a ton of money.
And you can do that by just installing energy management sensors. Your provider of air conditioning will often come with many of those. All right, let’s talk a little bit about marketing expenses, because every successful property has to have some marketing strategy. Even if it’s just a sandwich board on the side walk, the sandwich board still costs money. So let’s take a look at where our marketing budget is, where we’re spending our marketing budget, and ways to reduce the amount of money we’re spending on marketing.
And one of the major things to think about is focusing on your customer acquisition cost, your CAC. How much is it going to cost you for each guest? Whether you’re spending money on advertising on social media, or on Google Ad words, you’re doing search engine Ads, or whether you’re putting an Ad in the newspaper or putting an Ad in the radio, it’s important to sit down and calculate what the customer acquisition cost of that is.
If you don’t make that calculation, then you don’t know whether or not the investment that you’re putting into your marketing is paying off. Because you could do the entire thing, you could be paying for online advertising, you could be paying for in print advertising, you could be paying your social media guy, and then if you’re not running the numbers, you could be spending significantly more on marketing than you’re getting back from the new guests that you got through your marketing program. So making sure that you sit down and you run the numbers is an important part of making a profitable marketing strategy. Let’s take a look at some ways to reduce the cost. So, blogging. Let’s take a look at some blogging tools. We do a lot of blogging here at Cloudbeds. Alex does a lot of blogging. I do a little bit of blogging.
Alex: Hey, Brandon, can you flip through screens again?
Brandon: Yeah, how’s that?
Alex: Still not there.
Brandon: How’s that?
Alex: There you go.
Brandon: Okay. It’s just strange because I’m not seeing it on my end, but apparently you guys are.
Alex: Yeah, I think it’s the fit to screen thing, but we’re good now.
Brandon: Okay, that’s good. So let’s talk a little bit about blogging. If you’ve seen some of my webinars in the past or if you’ve read some of our e-books, we talk a lot about how blogging can be a useful marketing tool for your property, especially if you’re a subject matter expert and if you have the bandwidth and the ability to blog on your website fairly frequently about topics that your guests are interested in. Just by having a consistent blogging schedule, you can, over the long term, get traffic to your website from people who are already doing research on a trip to your location, which makes your place a much more compelling place for them to stay.
So then, reducing the cost of blogging can be a very useful way to reduce your overall operational costs. So here’s a selection of free tools that we use to blog here at Cloudbeds and that other people have used in the past. Grammarly is a good one. Sometimes, it’s not always enough to trust a Google Chrome spell checker, or a Microsoft Word spell checker, or a WordPress spell checker. Sometimes, we need help with grammar construction in addition to simply avoiding misspellings. And in cases like that, Grammarly is a great little application that you can install into Google Chrome, if you do a lot of your composing in Google Chrome, or you can manually put your text into the Grammarly application and it’ll scan your documents. And it’s free.
One second, I just got to…there you go. Next up is Hemingway App. This is one of my personal favorites. And what this does is it changes your writing to sound a little bit more like Ernest Hemingway. And the reason this is important, is because Hemingway was very famous for no nonsense writing. He removed as much of the fluff from his writing as possible. He was very direct, which made his writing bold and clear. Which made it much easier for your average person to understand his writing. The Hemingway application is a free application. They do have a paid version, but it doesn’t work any better than the free version. And what it will do, is it will scan your writing to help you remove passive statements, statements that are less bold. It’s just a useful application.
Canva can help you with images. And what does Buzzsumo do, Alex? Can you give us a rundown on Buzzsumo?
Alex: So, Buzzsumo is a very powerful content analysis system. So, it does a few different things, but the free version will let you put in any topic. [inaudible 00:37:03] independent hotelier and then you’re going to get the most shared articles for that topic, whether it be top five social media stuff, why using Excel spreadsheet is bad for your business, why automated revenue systems are good, that type of content. And it also shows…you can get author analysis. So, for example, if you typed in cloudbeds.com, you would see our most popular content. So it’s a really content focused, content creation, ideation kind of tool. It’s really, really useful.
Brandon: There you go. That’s right. It’s used for research. Like, if you just don’t have any ideas on stuff that you could create on content that you could write, you could use Buzzsumo to take a look at what other hotel properties in your location are writing about, or what popular blogs in your area are writing about, and that can inspire the creative process within you to create your own content.
So then let’s take a look at free social media tools. There are quite a few of them. This one looking okay, Alex?
Brandon: Great, great. So, Buffer is one of my favorites. And the reason we’re talking about free social media tools, is because if you can reduce the amount of time that you spend on social media, then it’s going to improve the results that you get from social media, which of course reduces your costs of time in social media. So the reason we’re talking about Buffer, is because Buffer can be used to create an automatic schedule for your content.
So let’s say that you want to send a tweet on Twitter twice a week, or three or four times a week, at a specific time. You can set up a Buffer schedule and then all you have to do is share your thoughts into Buffer, and then Buffer will stack them on top of each other and then send them out on your desired social network at the time that you chose. Saves you a lot of time. It also means that you don’t have to be at your computer or have your phone in your hand at the exact moment that you want to send the tweet or the Facebook update, or the LinkedIn update, or the Google+ update, or the Pinterest update, or whichever networks that you’ve decided to connect to. A very useful tool.
Hootsuite which has…both of these have paid versions, and the difference between the free and the paid versions is the number of social networks that you can connect to, or whether or not you can connect to RSS feeds or so on and so forth. Hootsuite is very similar to Buffer. However, they don’t have a cue that you can just stack content in. Basically, you have to compose each update manually and then chose the schedule that you want to send out to. But they have a greater selection of networks that they can connect to and they can also integrate some of your blogs into what they do. So both are good for different uses.
TweetDeck is a Twitter focused free social media tool that you can either download as a desktop application for your laptop or your computer or use in browser. And I have actually haven’t used Crowdfire a lot. Alex, can you brief us on Crowdfire?
Alex: Yeah. So, Crowdfire does some of what Buffer and Hootsuite does, but the reason that I personally use it for Cloudbeds and my own personal purposes, is it tracks the people…so it’s two-fold. You can find people based on a topic to follow and then you can go in and just quickly follow them. And then you can also track who’s un-following you. So, for that purposes, you can un-follow people, kind of playing that follow for un-follow game, but also it’s great for figuring out if you’re detracting a certain type of person that you want to attract. It’s good to redo your strategy based on that. So you can really track your numbers and what’s really going on, because that data is not provided by Twitter.
Brandon: I see. So it helps in the kind of content that you’re wanting to share. If you understand that your followers or your guests like hearing updates about certain things, whether it’s events in your area, and then suddenly they start unsubscribing, that can give you an idea, “Oh wait, maybe they didn’t want to hear about that.” I see.
Alex: Yeah. Most people use it to follow and un-follow accounts. That’s its number one functionality.
Brandon: Gotcha. Let’s talk a little bit more about marketing automation. This is getting a little complex, but we wanted to bring it up just because we want to let you know that even if you’re a small bed and breakfast, or a small hostel, or just a smaller hotel, it’s possible to get some of the great marketing automation that larger properties with deeper pockets have, even if you have a smaller budget. And one of the things we want to bring up is something called, If, This, Then, That, abbreviated IFTTT. And what this does, is it allows you to create recipes that trigger events based on other events being triggered.
So we have three examples that we’re sharing here. What If This Then That will do in the first example, is if you post something to Instagram, then IFTTT will send out a tweet. In the second example, if you post something to Instagram, If This Then That will send it to Facebook. In the third example, if you star an email in your Gmail account, If This Then That will send it to Evernote. So, the possibilities are almost endless with this. One of the ways you could use If This Then That, is to automatically alert all of your viewers every single time you create a blog post. Or let’s say that you want to be notified every time a competitor in your area publishes a blog post. You could set up an If This Then That to give you a phone text or an email alert saying, “Hey, competitor XYZ just created a blog post about topic X. Maybe I should be talking about that.”
So, it takes a little bit of creativity but it’s really fun and it’s also a free tool. It’s a free tool you can use to set up all of these recipes and triggers and alerts to amplify your marketing presence online. And then let’s talk really briefly about email marketing. We have an entire different blog post on this topic on our blog, if you want to check it out. But email marketing is going to be an important part of your strategy, and in reducing the cost that you put into your email marketing is going to make it that much more profitable.
So one of our favorite tools is going to be Mail Chimp. This is what we actually use at Cloudbeds. And their cheapest plan is free. And for the free plan, you can have up to 2,000 subscribers to your email list. These are people who opt in to your email form on your website or other customers that you’ve accrued over the years. And you can send up to 12,000 monthly messages. And another free tool is called Vertical Response. It’s a little bit less than Mail Chimp. You can only have 1,000 subscribers and up to 4,000 monthly emails. However, if you do want to spend a little bit on your email marketing budget, which I think would be a good tool because email marketing is one of the most useful marketing tools out there. It tends to produce better results, at least to my experience.
Constant Contact is a good one to start with. The cheapest plan has 500 subscribers, so it’s really small, but you can send an unlimited number of emails. And then FanBridge, which has a little bit of a clunky interface, in my opinion, but it’s also very powerful. You can have as many subscribers as you want but you’re limited to sending up to 20,000 emails for their $15 plan. So Constant Contact would be good if you have a fairly low subscriber count but you’re wanting to send a lot of emails. And FanBridge would be good if you have a whole lot of people whom you’re wanting to send emails to but you really only want to send one or two a month. So those are some of the different options that you can use. And then of course, the free plans if you’re just starting your email process and you just want an entry level to get started, then either Mail Chimp or Vertical Response, depending upon your needs.
And then there’s software as a service solution. This is going to be ways to integrate all of the different day-to-day goings on at your property into one seamless application. So, one of the things that really increases operational costs is if you’ve got a different software to run your front desk. Let’s say that the last time that you worked on getting hospitality management software was back in 1999, and at the time, you spent $10,000 for a guy to come to your lobby and install a really expensive piece of software on a custom built computer that never gets updated over time. And your team has been using this piece of software on this computer for the past 15 years, 15, 16 years, and it’s never been updated and it’s now prone to viruses and hacking, and it’s slow to respond. And that was the last time that you upgraded your property management systems.
You’ve got that cost. And then the way that you update all of your online channels is manually, so you spend 30 to 45 minutes every single day, or an hour every single day, updating your online channels. Going through Expedia, giving them the updated inventory. Going to booking.com, giving them the updated inventory. That’s taking a lot of time, and then you don’t really have a direct booking option on your website. Let’s combine all of this. If you can combine all of the different hospitality management pieces of software that you’re using into one piece of software, or one suite of software, then you’re going to be reducing the cost that you’re spending; you’re going to be reducing the time that you’re spending updating all of these online channels and you’re going to be saving on your hotel operating costs.
And this is what Cloudbeds specializes in, so we’ve got our suite of hospitality management technology software. My front desk is our property management system. My allocator is our automated channel management system, and then my bookings is our online booking engine. And you’re more than welcome to go to Cloudbeds after the webinar and explore more about those solutions. And then just before we go to the Q&A, I want to invite you to participate in a pilot program that we’re doing, that is all about reducing your hotel’s operating expenses. Anna, who’s on our Biz Dev team, is welcome to your emails.
If you have a question about what you can do to reduce your hotel operating costs, you’re more than welcome to email email@example.com and set up a consultation. And then she can take a look at your expenses, take a look at what you’re doing in terms of marketing, and really help you nail down your marketing costs and figure out a strategy that works for your property.
So, that’s just an option if you want to. It’s a pilot program that we’re trying here at Cloudbeds. Feel free to reach out to her and ask her for a consult. That’s the end of the webinar. We’re now going to open it up to your questions. My name is Brandon Dennis. Thank you so much for coming. Let’s take a look at what you guys have to say.
Alex: Can you flip the screen really quick? It’s a little messed up here.
Brandon: There we go. How’s that? No?
Alex: Try it one more time. There you go. Perfect. Okay, so our first question is…it’s pretty general, but how to measure Return on Investment with marketing?
Brandon: That’s a great question, and it’s an essential question. So the way that you’re going to measure…there are a number of formulas online that you can actually find. In fact, I bet you could download Excel spreadsheets that have this formula already put in, where you can just punch in a few numbers. But the basic math behind it goes like this: so, every single month you’re going to find all of the different expenses that you put out there. If you’re paying for an email program, if you’re paying for a social media program, put all of those into the same bucket; those are your monthly expenses. If you’re paying your monthly marketing expenses, it’s if you’re paying for press releases or if you’re paying an actual person to sit at your property every day and run your marketing team.
But all of those are your marketing expenses. So you put all of the marketing expenses into one bucket and maybe you organize them by area, but you know exactly what you’re spending. Then you need to be tracking the reservations that you’re getting. And you can best do this by using a property management system. If you’re wanting to focus on direct bookings, you can use Gold Tracking with Google Analytics. I should have put Google Analytics in this webinar. My apologies.
Google Analytics is a free online analytic software that you can install on your website, and then you log into the Google Analytics Dashboard and it gives you a bunch of great insights. And this is going to be helpful for your marketing strategy. You can see where your traffic is coming from, what pages on your website they went to, and this is useful for tracking the ROI on your marketing strategy. You can create goals within Google Analytics.
So, for example, you could say, “Okay, Google Analytics, I want you to check a conversion every single time a guest reaches a thank you page on my website.” So they go through your online booking platform, and then after they submit, you send them to a thank you page saying thank you for the reservation. Every time somebody hits that page, I know that a reservation has been made. That’s a conversion. Google Analytics, please track that.
So you could tally up all of the conversions you get on your website, all of the conversions that you’re getting from your online marketing channels. Anything that my allocator, your channel manager is sending to your property matching system, take those numbers and then put them in your spreadsheet. And then divide the amount of money that you spent on marketing that month by the total number of booked guests that you got that came directly from your marketing strategy, and that will give you a number that is going to tell you exactly how much you’re spending with your marketing budget for each online reservation that you’re getting.
If that number is too high, then you know that you’re spending a little bit too much. If that number is too low, or if that number is low, then you know that you’ve got a well-oiled marketing strategy.
Alex: Great. Thanks, Brandon. We have a question from Val James, and they ask: “I’m a very small motel, 28 rooms, three employees. Is there any way to help cut costs since we’re so small?”
Brandon: Absolutely. It’s one of those things where every single property is spending money on their operations, so there’s almost always going to be room for improvement. As we talked about in this webinar, the major area for improvement is going to be labor. So if I were you, I would take a look at your labor costs. I would map it all out.
Maybe take a day, or half a day, or whatever you can spare, or maybe do it over a weekend, to find out exactly how many employees you have, exactly how much you’re spending on their salaries, how much you’re spending on any sort of benefits they’re getting or any other costs associated with your employees. Map their performance, go through everything that we’ve talked about in this webinar to really nail down your labor costs, because that’s where you’re going to be able to make up the most money. Maybe you can reduce your staff a little bit. Maybe you can find money elsewhere that you didn’t know you had to increase your staff, which is going to improve their productivity, which is going to make your property run a little better and improve morale, which will in the long-term save your little motel money.
That might be a great place. But if you know that your labor is already locked down, that you can’t improve in that area anymore, then I would focus on energy and reducing the cost of your marketing, and making sure that the online marketing channels that you’re using have some of the lower commissions. We just created an infographic at cloudbeds.com. Head on over to the blog section, and one of the first blogs in that section is going to be a nice infographic that breaks down some of the major online travel agencies and online marketplaces, and organize them by commission.
So if you want to, you can find some online travel agencies that you might not have known existed, and then find the ones that have some of the lowest commission rate and then see exactly how many people are using them. And instead of using the big names that you’re constantly using, that might cost you a bit more in terms of commission, maybe try experimenting with some smaller marketing channels that might be more niche, that might be more targeted towards the kind of clientèle that you’re trying to acquire, and have a much lower commission rate.
So those are just some of the ways that you can try experimenting with reducing your operation costs. All right, do we have any other questions?
Alex: We have nothing cued up right now. So if anyone has a question, fire away. If you can’t find the Q&A button, it’s at the bottom of the screen. A little bar will show up, and it should be right in the center and say Q&A.
Brandon: I think Alex and I have different layouts or something. On my screen, the Q&A button is at the top of the screen. You’re on a Mac, aren’t you, Alex?
Alex: I am.
Brandon: And I’m on a PC. So I think it’s laid out a little bit different.
Brandon: But it says Q&A on it and then you can go ahead and leave us a message. But I’ll tell you how we’re going to do this. After the webinar, we’re going to be publishing this webinar to cloudbeds.com and we’ll send out an email when that’s done with a link to it so that you can review this webinar at any time in the future. We’ll also be producing a transcript so that you can search the words that were spoken in this webinar, if you’re trying to find a specific section for future reference.
And we’ll let you know by email when we do that. And make sure that you stay tuned for our next webinars. We’re trying to do two new webinars a month, and we’re also on an e-book publication schedule. We’re producing two e-books a month and a series of blog posts a month. So the content team here at Cloudbeds is constantly churning out stuff that we hope is going to be really useful to you guys. So, thank you so much for coming to this week’s webinar. Are there any other questions, Alex?
Alex: There are not. Thank you so much.
Brandon. All right, thanks, everybody. This has been on How to Reduce Your Hotel Operating Costs. I hope it was useful. I hope we produced something that you can take home and immediately start experimenting with your business. Stay tuned for our upcoming webinars, and you guys have a fantastic Thursday.
Alex: Thank you.