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21 November 2018

The Big Creep: Limited-Service Hotels & Rising ADR

By Margaret Ady - Co-founder of Apaleo

We're all supposed to have a budget, no doubt. But it isn't always easy. Living expenses aside, there's Netflix and Spotify and Audible and Hulu and Strava and so on and so on. The costs don't look like much. Five bucks here per month. Twenty bucks there a month. But suddenly, they start to add up, and before you know it, it's month-end, your budget is blown, and you're eating packaged ramen for lunch.

Limited-service hotels find themselves in a similar conundrum, though admittedly, it is one of necessity demanded by the growing expectations of guests. Limited-service hotels are offering more and more, so much so that limited doesn't even seem like the right term anymore. Everyone expects a gym, now, right? And some in-room tech. And a swimming pool. And a full breakfast buffet. And once guests expect it, well, you'd better deliver or else they'll move on down the road. All these new amenities are blowing the budget. In order to stay competitive, rates have to remain in line with limited-service expectations. Otherwise, guests will move on up to the full-service hotel. What limited-service hotels are prone to these days is what Andrew Alexander, president of Red Roof Inns calls "ADR creep," where a hotel's rates inch upward as it tries to cover the costs of all the expected services (Hotel Management). For lack of ways to make up the costs, rates are rising, which jeopardizes the whole category.

Where limited-service hotels can impact the bottom line is in finding the right balance behind the scenes. First stop: technology. Technology needs are different between full-service hotels and limited service but many of the latter end up with a complicated, training-heavy property management system (PMS). Bad fit. For a lot of reasons. First, there's the cost. Typically, they are more complex, which means more expense both in set-up and maintenance. But then there's also the expense of inefficiencies, which can creep in, dragging down operating costs at the same time as ADRs are going up. You can bet that there are integration fees and long contracts that bind you well into the future when the whole landscape has probably changed.

Think about staff turnover. It's high. Always has been, probably always will be. It's just the nature of the business. Each new hire has to go through extensive training—and sometimes still doesn't get enough training to use the technology correctly—and then you lose them. How many hours of training have you lost? How much misuse has there been? And you're about to do it all over again. Limited-service hotels need, more than most any other category, foundational technology (PMS, CRM, etc.) that can be picked up within minutes, not hours. Tech that doesn't require day- or week-long sessions in boring conference rooms to get up to speed.

Also, consider invoicing. How much time do you spend on invoicing right now—and how much angst? What a pain in the you-know-what. Features like automated payments are a boon to limited-service hotels.

While each of these things may not seem like a lot on its own, when you add up them all up, it's like ADR creep… an endless cycle of administrative costs weighing down the operations, eating up profits. But if you chip away at them here and there, you start to bring expenses back in line—and when you free up staff from menial trainings and complicated systems, they are freed up to do a better job with guests.

It can seem like chasing a white whale to find the technology that offsets the ADR creep, but it's out there. In fact, it's here. It's a cloud-based, easy-to-use, wildly easy to set-up PMS. It's a game changer in terms of speed and in terms of integrations. And it's not unwieldy. It's like a friendly cost-saving companion that allows you to build the amenities your guests want without constantly inching rates upward to cover the expenses. No more creep. No more ramen. (Please, no more ramen.)

Margaret Ady

Margaret Ady is a co-founder of apaleo, responsible for the company’s brand positioning, marketing, and strategic growth. Prior to apaleo, she led marketing for Berlin-based SnapShot, and prior to that, for TrustYou. In 2016, she was awarded HSMAI Europe’s Top 20 Extraordinary Minds in Sales, Marketing and Technology. Before joining the hospitality technology scene, Margaret held key leadership roles at The Walt Disney Company and The Oprah Winfrey Network. Margaret has also provided research, branding and marketing consulting services to many companies, including 20th Television (Fox), Nielsen and Red Bull. Margaret graduated from the University of Southern California with degrees in Economics and Psychology and a focus in business. During her studies, she was awarded the USC Annenberg Communications Critical Pathway Grant for her research in new technology and its impact on healthcare decision- making.

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