Many entrepreneurs hesitate to tap into the hospitality sector because it’s one of the most challenging industries to succeed in. According to Epos Now, 60% of businesses in the hospitality sector fail within the first year, and 80% fail within five years. There are many reasons why businesses in the hospitality industry fail, from lack of knowledge regarding expenses to limited capital.
Some entrepreneurs don’t have the most critical elements of a successful hospitality business, such as an original business concept, staffing, and excellent customer service. On top of that, they fail to protect their business against risks that lead to financial problems or closure. Whether you’re starting a new hospitality business or already own one, protecting your venture is crucial for promoting growth and success. Below are a few steps you can take to protect your hospitality business without risking your future.
Maintain Your Standard Rates
Fear triggered by a crisis forces business owners into making rash decisions that may result in more problems down the road.
For instance, when your hotel profits start to drop, it might make sense to rethink your pricing. However, cutting down your rates often results in lost revenue per available room. With this in mind, use your best judgment against market findings to determine your next business move.
In most cases, hotel experts recommend using effective techniques to impress hotel guests instead of reducing rates.
To achieve the best outcomes, incentivize guests based on the current market situation. For example, in a time of uncertainty, people want convenience. Therefore, provide more flexibility when it comes to booking and cancellation policies while maintaining your standard rates.
Also, consider adding value by providing extra touches like linen beddings to create a luxurious feel or offer amenities free of charge.
While you can’t eliminate all the risks in the hospitality industry, you can mitigate threats that affect your business growth and success by purchasing insurance.
In addition to buying general liability coverage, cyber insurance, and professional liability, invest in workers’ compensation. According to industry experts, workers’ compensation insurance offers all the state-required benefits, such as necessary treatment in the event of an accident. Employees also receive wage replacement, thus reducing the risk of injury claims from workers injured at the workplace. Having insurance also protects you from lawsuits filed by customers who aren’t happy about the quality of services you offer.
Get Smart With Digital Marketing
Successful entrepreneurs in the hospitality sector tend to invest more of their resources in digital marketing campaigns, and it’s easy to see why.
Digital marketing increases your online visibility, thereby boosting traffic on your hotel or restaurant website. Additionally, internet marketing boosts your business credibility, allows you to reach a larger audience, and the costs involved are affordable. However, to enjoy these benefits, marketers recommend creating an effective digital marketing strategy. Make sure your marketing plan encompasses content marketing, SEO, paid advertising, social media, and email marketing.
Don’t Forget To Incorporate Your Business
Running a hotel as a sole proprietor is easy but not the best way to protect your venture from internal and external threats.
Typically, a sole proprietorship doesn’t protect personal assets. For instance, let’s say a worker or customer files a lawsuit against your hotel, and the business can’t afford to pay a settlement. You’ll be forced to use your assets and personal savings as payment. For this reason, it’s wise to separate yourself from the business legally by choosing a legal entity for your resort or restaurant. In addition to protecting personal assets, you’ll also be complying with hospitality law.
Depending on your organization’s goals and objectives, you can choose to register your business as a limited liability company, general partnership, limited partnership, S corporation, or C corporation. Each business structure has its advantages and disadvantages, so before deciding, weigh all your options carefully. Take the time to learn how different business structures work and choose one that fits your hotel.
Develop A Revenue Management Strategy
Implementing a solid revenue management strategy is vital if you’re looking to grow and protect your hotel business.
Ideally, a revenue management plan helps hoteliers optimize financial results by maximizing revenue. However, to make the most of your revenue management strategy, you need to utilize performance data and analytics. That way, you can predict demand, develop a pricing model, and boost the amount of revenue your hotel generates.
Additionally, take time to understand your market. Find out your ideal customer, what factors affect demand, and who your competitors are. This trick helps you make informed decisions about pricing and marketing. Successful hoteliers recommend embracing SEO, price and mobile optimization, incentives for direct bookings, and hiring a freelance revenue manager.
Create An Emergency Response Plan
Disasters occur when least expected, and when they do, people react quickly and try to get away from dangerous situations. As a result, they might end up hurt and your property may sustain some damage.
To mitigate the aftermath of a disaster, you need an emergency response plan for your hotel. That way, your staff will have an idea of what to do when disasters arise. It’s important to note that a good response plan highlights who to contact, how to react, and the resources to use to reduce human injuries and damage to property.
Your emergency management plan should also specify the staff members responsible for enacting the response strategy and the local emergency teams they should contact. Therefore, when creating an emergency response plan, make sure to access the possible risks that may affect your hotel’s operations. Gather contact details of local emergency teams, create an effective communication plan, and plan for safe evacuation. Doing so helps protect employees and guests from physical harm and, at the same time, prevents property damage and financial loss.
Succeeding in the hospitality industry can be difficult, but it’s not impossible if you choose to future-proof your business against risks.
As a rule of thumb, avoid cutting rates to attract customers. Instead, keep your standard rates and offer special packages like free amenities to incentivize hotel guests, and implement a revenue management strategy. Most importantly, invest in insurance to protect your business and employees, form a legal entity for your hotel, be smart about digital marketing, and create an emergency disaster plan of action.