6 Biggest Revenue Management Mistakes That Hotels Make

Operating a hotel is no easy task; managing staff and schedules, staying on top of the latest technology and trends, keeping up with maintenance and renovations; not to mention ensuring your guests are happy and working long irregular hours. It’s a lot.

One of the most challenging aspects of running a hotel is revenue management. Hotel revenue management is something that often confuses or overwhelms people, and for many hoteliers, it’s something they don’t even attempt. However, even some small adjustments can go a long way.

In this article, we get a glimpse into the world of hotel revenue management by one of the best revenue management experts out there, Mr. Chris Hunter of hotelrevenueman.com.

Chris began his career in tourism and has years of hotel management experience under his belt. Throughout that time, he developed a system to help hoteliers find the demand curve for any property – allowing them to know when to raise or lower rates. With his special focus in the hospitality industry, his clients are regularly seeing increased annual profits of upwards of 30% using his hotel revenue management strategies.

Chris is also one of our hotel consulting partners. So lucky for us, this means we’re able to pick his brain and share his knowledge with you. Here’s Chris’ list of the Top 6 Biggest Revenue Management Mistakes That Hotels Make. We hope you enjoy.

6. They Don’t Even Try

“Not changing your rates daily based on demand is a big mistake and I’ll show you why.

There’s a hotel in one of my client’s cities that has the same rate everyday: $63. During the week this is too high which causes guests to stay elsewhere. During the weekend it’s too cheap which causes them to sell out quickly. It feels good to be sold out a week ahead of time, but they could raise their rate to $80 and still sell out. They’re leaving $17 per room on the table and for a hundred room hotel that’s $1,700 a day and $3,400 per weekend. Multiply that by the 13 weeks of summer and they’re missing out on tens of thousands of dollars!”

5. They Sell Out Before the Day of Arrival

“In theory, perfect revenue management works like this: you sell your last room at 11:59 pm on the day of arrival. In reality, you want to have at least a handful of rooms to sell throughout the day of arrival.

The demand curve continually increases with the day of arrival having the highest demand and commanding the highest rate. If you sell out before the day of highest demand it means that your rooms were too cheap and you left money on the table.”

4. They Price All of Their Rooms the Same

“One of my clients reached out to me asking me to help him increase revenue at his property. He had a two story, horseshoe-shaped property with exterior entrances to the rooms and no elevator. At the center of the property was a pool and on the outside was a parking lot. He told me that everyone wants to stay on the poolside.

I asked him how much more it costs to stay on that side, and he told me all the rooms are priced the same.

I assumed people preferred the ground floor so they could skip the stair climb and told me I was right. I told him to take his current rate and make that his discount rate, then build from there. Add $5 for poolside and $5 for the ground floor. So, a ground level (+$5), poolside (+$5) room will cost $10 more per night than an upstairs, parking lot view room. This property instantly found revenue they had been leaving on the table.”

3. They Don’t Go Low Enough During Times of Low-Demand

“Typically, in a tourism destination, Sunday is the biggest checkout day of the week leaving Sunday night with the lowest demand.

Each day of the week the demand slightly increases to the weekend (Friday/Saturday night). With demand being low during the beginning of the week and the city being full of rooms to sell, leaving your rates as high as they were during the weekend is a mistake.

I figured this out, lowered rates for my clients during times of low demand and stole market share. One of the OTAs (Online Travel Agencies or websites that resell hotel rooms like Booking.com or Expedia) reached out to me at the end of a season and told me that in one of my client’s markets only one other hotelier figured this out.”

2. They Don’t Look Far Enough Into the Future

“The majority of hotel bookings come two weeks prior to arrival. If you only get the last two weeks right your property will still probably do pretty well.

But, if you look further into the future you will be able to spot potential problems and fix them before they cost you thousands of dollars. Right now I help my clients manage about a month out, but I also take the opportunity to quickly scan data for three months out.

Recently I saw that one of my clients had a holiday weekend about three months out priced too low and I encouraged him to increase the rate by 50% to an appropriate rate. A few guests who were planning that far ahead found that deal and had already booked rooms, but that was much better than having half of the hotel sold at a discount rate.

Concentrate the majority of your efforts on the approaching week, two weeks and month, but don’t forget to at least glance into the future to see if anything stands out as being a possible issue.”

1. They Don’t Go High Enough During Times of High Demand

“This is EASILY the biggest mistake I see hoteliers make.

Right now stop reading this, open google docs, and type out the 10 busiest times of the year in your market.

I’ll give you a head start: Holidays like Memorial Day and Labor Day, summer weekends, special events like the annual car show or strawberry festival.

Now, look at your list. Your rooms are not priced high enough during those times.

Look at last year’s occupancy. Every day that your property was 100% occupied (or really close like 95%) is a time where you could have gotten more money for your rooms.

I had an out of state client that had been on Hotel Impossible. A year later he found my revenue management videos on youtube and asked if I could help him. He had bad reviews and no money to fix issues. I taught him this principle and asked him for the dates where demand was so high that it was likely that the entire city would sell out.

I then taught his GM my system for tracking demand. We ended up raising rates to almost double the previous year’s rates during those times of high demand. His busiest month saw a revenue increase of 47.2%, his busiest quarter was up $171,000, and his revenue increased 24% for the whole year.

Raising rates feels scary, but I want to challenge you to at least start taking baby steps even if that means raising only $5. When you see that work, then look at the next time of high demand and try $10. Each time it works successfully you’ll gain the courage you need to make bigger, necessary adjustments in the future.”

In Closing

This is just the tip of the iceberg when it comes to the knowledge that Chris has regarding revenue management. And as you can see, revenue management is something that could be a game changer for your hotel. The potential upside is huge, and the amount of risk is low. But, you’ll likely need some help along the way.

Bottom line… the successful implementation of revenue management strategies for your hotel could help you experience more predictability and profitability.

A Room with A Bed Isn’t Enough- 8 Ways to Future Proof Your Independent Boutique Hotel

As an independent hotelier, you are always looking for ways to provide the best in service to your guests. You want to give them the best experience so that they come back to you when they require your services again, and the way to build loyalty and a great hotel brand.

Largely, customers are seeking a personalized experience, and they definitely want to remain connected from the booking process all the way to check out. Trends like mobile check-in and checkout are growing in popularity, and Wi-Fi remains a most-wanted amenity for guests of all ages.

Here are eight ways you can make your brand the greatest and get your customers coming back for more great stays.

1. Get Super Connected

In the old days, you would pick up that phone that sat on the little desk in between the beds, and you would call the front desk for help with whatever you needed. Or, you’d call the designated number for concierge, and get the help that way.

However, if your hotel has an app, consider taking a cue from Marriott and Hilton. They have the ability for consumers to complete the check-in process right from their smartphones, get into their room using a mobile key, and send out text messages with queries and requests to hotel staff members.

Connectivity is certainly growing as a standard by which hotels are measured. And of course, be sure that your rooms are equipped to handle the changing needs of today’s device-carrying travelers: some hotels even feature charging ports that are a welcome sight to those who may have left theirs on the plane.

2. Emphasize the Wi-Fi

Business travelers are getting work done. Digital nomads are meeting guidelines. Families with kids need the tablet for entertainment. The faster, the better!

The faster you can make your Wi-Fi, the better. Some customers are willing to pay an upcharge for higher speed, but this may be off-putting to some.

In the same vein, provide plenty of power outlets so that devices can be plugged in and charged with ease. Every member of the family has at least a smartphone-so be sure you are prepared.

3. Put A Focus on Local Fun

One way to really improve hotel guest experience is to help travelers experience the city like a true local. With the advent of Airbnb, this is now more important than ever. One huge example is the Unforgettable Experience packages that the Hilton’s Waldorf Astoria offers.

These include destination-specific activities right in the room rate. One such experience situated in Dubai includes dinner and a camel ride for two people. While you certainly do not have to provide camel rides, consider ways you can appeal to your guests by integrating local activities.

You might offer a rate that includes passes to a local attraction, or a dinner voucher for a favorite local restaurant, for instance. Experiences are now more important than ever to consumers, especially millennials, who currently hold them in higher value than “stuff.”

4. Improve Brand Experience by Making Training an Everyday Occurrence

There is no doubt that your staff already puts in 110% when completing their daily duties, and everyone from the GM to the housekeepers to the landscapers does their best. But there are some great ways that you can combine traditional training methods with technology to ensure that every agent and employee is up to speed.

For instance, suppose you have implemented a new Property Management System. Be sure that you are taking advantage of all methods available to teach and train employees. Have them take part in classroom training exercises, complete e-learning, or use an application that monitors your employees’ actions while they work so you can guide them as they learn the system.

Make a concerted effort to have every employee trained on new procedures, technology, and rules. Customers having to wait in line while an employee fumbles around is unacceptable and leaves everyone frustrated.

A well trained and informed staff will resonate soundly with guests. Your brand becomes synonymous with excellence.

5. Provide Personalized Customer Service

A hallmark of your brand can easily be personalized customer service. In a world where we are becoming more and more connected in the digital sense instead of the personal sense, it has become critical to treat your guests like they are the only ones in the entire hotel.

Not all guests should get the same treatment, and excellence is measured in different ways from guest to guest. Some want a speedy check-in; others like to stop and chat with you. Do your best to learn your customers’ name and greet them as such.

Demonstrate an eagerness to help. Remember the guests’ preferences. And be sure you and your employees are able to offer solid information about the local area such as good places to dine or interesting local activities.

Though your brand may not be as large as national chains, you can still treat guests like VIPs. Be sure your staff is trained to be attentive and treat everybody with the utmost of care, regardless of who they are. Guests leave reviews everywhere now: Google, Yelp and more-so when they feel special and cared for, others will know and book with you.

6. Make Booking Easy

You can do simple things that will hugely improve on your booking process and deliver guests the fast and easy experience they desire. Make the calendar part of your process easy by filling out the check-in and checkout boxes with today’s date, plus one day.

Lots of hotels have blank calendar fields and filling it in helps the user get one step closer to whatever dates they need.

You can include a progress measurement for the booking progress. People like to know how long a task will take before they can move onto the next thing, and a progress bar, steps till completion or other measurement method helps consumers move along and stay encouraged to finish the process.

Be sure your process does not ask consumers to log in or create an account unless they will be rewarded in some way (points, etc.). This just annoys the user with more tasks all for marketing reasons, not a great experience.

Every hotel is different, but at the minimum, just ask for full name, email, and phone number. You might also include special requests and time of arrival fields, too. Be sure that your website also offers security credentials, too-it’s peace of mind for users.

7. Guest Engagement

This ties into making guests feel like they are the only ones present in your hotel at any given moment. Guests that are disengaged are not as likely to return to a property and will more than likely discuss their experience online using any number of popular review sites.

Millennials are less likely to be engaged, says Gallup, but the silver lining is that guests who are engaged are less sensitive to price whether they demand luxury experiences or an economical stay. Therefore, guests that have an emotional attachment to a hotel are more likely to book at that property, regardless of budget.

You can encourage engagement by doing some easy things: Encourage them to provide feedback, and of course, treat them as the unique and varied individuals they are. Even though guests are there for different needs and experiences, they all desire great customer service that is delivered with a strong personal touch. Be sure you go over expectations with your staff to ensure the highest satisfaction among guests.

8. Provide Guests the Amenities They Want

There are amenities that customers really like, and then there are ones they can do without. Providing the right mix of amenities that add value to your guests’ stay is critical in making an impact. Consider changing the following:

  • Room Service-Customers are yearning more for good, strong Wi-Fi or a gym. Combine this with the desire to eat local cuisine and experience what the locals do, room service is desired less and less.
  • Valet-Many travelers, even those who stay at luxury hotels, prefer to park their own car.
  • Slippers and robes-Many guests prefer to just wear their own clothes and would not mind if hotels nixed the bathrobes.
  • Mini-bar-The mini bar is often expensive, and travelers do not want to pay the price. Plus, it is expensive to stock these.

Final Thoughts

Your independent boutique property can speak volumes for itself when you provide customers what they seek, which is a personalized, engaging experience, a connected stay at your hotel, bridges to the local cuisine, activities, and establishments, and of course an easy process from start to finish.

By integrating as much helpful technology as you can, and keeping staff trained to be attentive and friendly to your customers’ needs, you will surely notice more repeat business and your hotel will be established as a modern and beautiful place to stay for business, travel, or anything in between.

The Ultimate Guide: How to Start a Restaurant

How to Start a Restaurant

If you’ve looked around online about how to start a restaurant, it’s likely that you’ve seen an article or two talking about all the reasons you should not even try.

But don’t listen to these naysayers — it’s your dream, so go for it. Even after hearing all of these arguments of these pessimists, if you’re still excited about pursuing your dreams of being a restaurant owner, then we’ve got the perfect step-by-step guide that you’ll need for starting a successful restaurant.

Three Foundations of Opening a Restaurant

Before you get hung up on too many ideas, focus on these three foundations of starting a restaurant:

  1. Pick a Relevant Concept.
  2. Hire the Right Chef.
  3. Location, Location, Location.

There’s nothing that can ever really prepare you for starting a restaurant, no matter what type of background or level experience you came from. No matter how much you read, how many videos you watch, how many seminars you go to, there are some things that can only come from the experience of being a restauranteur. However, with this guide, we will do our best to make sure that you are set up for success, and are fully prepared to make the plunge.

Finding your perfect Niche

In our experience as both restaurant branding experts and passionate foodies, we know that there are many options out there as far as concepts that you could consider. Each one requiring a certain set of skills in order to keep them running effectively.

As you consider starting your restaurant, try to find opportunities that you can take advantage of. What food, service, or convenience have you found missing? Is there a need in your market that is still unfulfilled?

As you consider these questions, if you find that it’s not meeting your options enough, maybe consider looking at the latest restaurant trends for inspiration.
There are plenty of unique, and fun concepts out there – so there’s no need for you to create something from thin air.

Should You Choose a Franchise?

As you are dreaming about one day opening a restaurant, you might be thinking, “I don’t really want to reinvent the wheel, but there is a big need for a fast and casual Indian joint in my city!”

If that sounds like you, then it might be good to start looking for a franchise opportunity.

The great thing about a franchise is that most of the work has already been done for you. Organizing a menu, conceptualizing interior design, and making a marketing plan from scratch, are all things you don’t have to worry about. Plus, the allure of an already recognizable brand will help draw in customers for you.

The brand recognition that comes with franchise restaurants, as well as a lower failure rate than independently owned restaurants, are all part of the reason franchises are so appealing.

However, just like anything, owning a restaurant franchise has both pros and cons. Despite all the benefits that come with launching a recognizable brand with a proven plan for success already in place, there are a few downsides.

First and foremost, franchises aren’t cheap. Often times you’ll need a large sum of personal assets instead of a loan, and buying the rights the franchise are typically non-refundable.

In addition to this, you don’t have flexibility with the business model, so when it comes to getting creative with running your restaurant, your options are pretty limited. For instance, if your franchise headquarters opts to do a complete overhaul of its decor, then you’ll have to put out the money for it, even if you don’t want to. If you’ve chosen the franchise route, then make sure you consider these things and do some more research into your specific franchise before you dive in.

A Better Business Plan: Crafting a Brand Strategy

In all honesty, when all you want to do is get cooking in the kitchen, crafting unique and delicious recipes, and making your customers happy, the last thing you want to do is slow down and begin writing a business plan.

Nothing sounds less fun than researching, creating spreadsheets, graphing charts and analyzing statistics.

But, before your eyes glaze over and you move on to the “fun” steps of opening a restaurant, you should ask yourself the following:

Would you try and create a dish you’ve never made before without ever even looking at a recipe? No.

Just as a recipe gives you the guidelines, roadmap, and action plan to create a stellar dish, a brand strategy will give you the recipe to make sure your restaurant is set up to win, not fail.

This step is often the difference between a restaurant that will fail or one that will succeed. Or a restaurant that is doomed to make just enough to pay bills or one that is very profitable and successful.

A brand strategy gets you thinking deeper

A brand strategy gets you thinking deeper about the future of your restaurant, the market you’re serving, the risks and challenges you’ll face, and the viability of seeing your ultimate dreams become reality.

When your brand strategy is well thought out and refined, you’ll have a better idea of which steps should come next for you as you are opening your restaurant and pursuing your dream.

Here are the 12 biggest questions you should answer as you are planning for the future of your restaurant:

Decide What kind of restaurant do you want?

There are so many types of restaurants in all shapes, and all sizes. From fast-and-casual concepts to food trucks, to cafes, bars, or major franchises. Step number one is narrowing down your ideas to a specific concept.

Write out a long and short answer to this question, and then get familiar with explaining it to family, friends, investors, lenders, and future customers. This will be like your “elevator pitch” in a way. It’s something you’ll need to practice repeating over and over.

Who is your restaurant for?

Before you can begin getting customers into your doors, you need to know who they are. This is also known as your target market. It’s a group of people who your restaurant is meant to serve.

The more specific you can get, the better. When you know your customer deeply, and intimately, you’ll be able to craft a better menu, design, environment and better overall experience for them.

When you understand your customers’ decision making, their fears, their desires, their motivations – your marketing campaigns will be much more effective and you’ll reach your ideal demographic more easily.

When you make these customer profiles, it’s good to be aware of how many households in the area you plan to serve are in your price point. You’ll need to find a location that is close to customers who can support your prices, and that isn’t already flooded with similar restaurant concepts. This decision is hugely important in the long-term success and growth of your restaurant.

Who are your restaurant’s main competitors?

Many business owners might tell you to never worry about your competition and just run your business with your nose to the ground. Only worry about yourself.

This could be good advice in the sense that you don’t want to mindlessly copy your competition, always worrying about what they’re doing, and trying to mimic them, or “one-up” them. However, when you’re first starting a restaurant it’s vital to know who your primary competitors are in the market.

You’ll want to know how they are similar, and how they are different from your restaurant. Do plenty of research to identify your competitors, as this will save you from the frustrations and failure that can come from creating a restaurant concept that is already too saturated or is positioned poorly against the other options.

Where’s the best location?

You’ve heard it before, “location, location, location.” It’s been said millions of times, yet it still rings true to this day. This step is one of the most important steps in the success of your restaurant.

By now you should have already narrowed down potential locations based on defining your target market and looking at your competition. You should be able to make some smart conclusions from these things.

For instance, it would be silly to put a high-end steakhouse in the middle of a low-income neighborhood.

With the same token, a trendy taco truck probably wouldn’t do well near a gated community of retired elderly people. Although, who knows… everyone loves tacos!

What’s your unique value proposition?

Don’t let this word scare you, it’s not complex, and really all that it means is that you should find what makes you different from your competition.

What is it about your food, your storefront, your atmosphere, your location, your pricing, that makes you unique and stand out among your competitors?

Maybe there’s something special about your specific location, or maybe you offer a very unique customer experience, or maybe the ingredients of your food are locally sourced and organic. There are many ways that your restaurant can stand out amongst the competition, so it’s important to discover this for your own restaurant.

One important factor of discovering and defining a unique value proposition is the menu that you offer. It’s important to test it, even on a small scale. Host tasting parties, or pop up events, leading up to the grand opening of a restaurant. This will allow you to gain important feedback, so you can know how to serve your customers best.

Your menu may change over time, but with a well-defined brand strategy, unique value proposition, and understanding your customers, the menu that you launch with should serve your restaurant well.

How will your customers find your restaurant?

How are you answer this question will be the beginning foundation of your restaurant marketing strategy.

Unfortunately for businesses, especially restaurants, the idea of “if you build it, they will come “doesn’t apply. Simply existing, is usually not enough for a restaurant to survive let alone thrive.

Since you now understand your customer, be thinking of ways that you can connect with him. Will you connect through paid advertising, social media campaigns, rely on word-of-mouth? Word-of-mouth referrals are great but aren’t always enough. You need to have a plan of action of what, and who, you’ll need in order to help get your message out.

Some other ideas for spreading the word could be inviting food bloggers to visit your restaurant, hosting a large grand opening event and inviting the community, and of course ensuring your restaurant is listed on Yelp, OpenTable, and has updated listings on Google and other social platforms.

Also, before you open you want to make sure you have a press kit, Nice photography, a video, and an “about” section of your website ready for any local or national news organizations that show interest.

What resources will your restaurant need?

You’ve heard it said before, it takes money to make money. And the same rings true for restaurants.

You’ll need to know what it will take to open and operate your restaurant. What types of resources will you need? Will you be the head chef, or will you hire a head chef? What type of technology will your restaurant use to process payments, or book reservations online? How many employees will you need? Will you hire an agency specializing in restaurant branding to design your logo, or have your nephew design it?

Take time now to list out all of the expenses your business will incur; both one time and recurring expenses. Be diligent, and as precise as possible.

Don’t forget to search for costs related to other mundane and operational things. Utilities, pest control, cleaning services, laundry services, etc.

If there are other needs that are not related to money, list those out as well.

How will your restaurant make money?

You can have the best idea in the world about what food or service you offer that customers will love, but that doesn’t always mean that your restaurant concepts will succeed and be profitable.

The effort that you put into your business model through developing a brand strategy is often what will determine how successful your restaurant will be. Will you generate just enough revenue to get by? Will you be able to make enough to cover all of your expenses? Will you eventually be able to make more money, and be profitable?

This is often where many restaurants fail because they don’t take the time thinking this through. The average restaurant thinks that simply opening their doors, will mean that the restaurant will make money.

That simply is not the case.

You’ll want to think through things related to the pricing structure of your menu, how you will choose your staff, what sort of insurance and licenses you will have and how much they will cost, and many other tax obligations, and red tape you’ll have to jump through.

How long will it take for your restaurant to make a profit?

It’s typical for a new restaurant to start out with a loss when they first open up, the first year is especially difficult. As you continue to invest in the necessary resources and work towards understanding and acquiring new customers, and work out all the kinks that come with operating a restaurant, there is a learning curve.

However, after some time, if you’ve done your due diligence, you’ll be making a good profit on top of your expenses.

Consider using a revenue forecast model to figure out how long it will take your restaurant to recoup your initial investments, to simply breakeven, and eventually run a profitable business.

What values will you never compromise in running a restaurant?

When you are in the thick of operating a restaurant, it important to be making good decisions at every turn and knowing what you stand for is critical to that.

You should define what values are most important to you, in business and personally. What values do you hold closest to you? What’s something that’s non-negotiable?

Write these values down, and limit them to two or three. This doesn’t mean you can’t have more than two or three values, but as the saying goes, “ if everything is important, then nothing is important.”

Creating and documenting these core values at the start will help you in your decision making, your operations, and every decision you make for your restaurant. From choosing the right vendor to how your menu should evolve over time, or critical decisions during pivotal times.

What’s your staffing plan?

Great service makes food taste even better.

It’s important to have skilled, hard-working, and qualified staff. And this begins with finding great candidates.

You can certainly find candidates through the usual means of job boards and website listings, and there’s always the classic sign in the window approach. However, finding the best quality team members is often achieved through personal connections.

Whether it is your head chef, a friend, or family member, reach out and start looking for the most reliable candidates possible. It’s very likely that your chef will want to bring people they have a past working relationship with, so be sure that these people fit into your company‘s culture.

Finding them is just one challenge, next you’ll have to train them.

Solid foundational training related to rules of food service and best practices in customer service will set your company apart, and a lay out a precedent early on with your restaurant.

When your team members are engaged, and you have a staff that supports you and your vision, and delivers exceptional customer service – that is a recipe for success. Your customers will notice, and their loyalty to your brand will strengthen.

What’s the endgame?

Have you considered what your endgame is? Is your plan to build a restaurant that one day you hope to sell, or are you hoping for a long-term sustainable business for you and your family? Do you simply want to start a small restaurant that you can pass down to your children and your grandchildren? Or are you wanting to start a franchise that will revolutionize the industry?

Understanding where you want to end up and how you want to get there, and when you want to get there, will help you make informed and smart decisions along the way.
Before going any further you should take time and outline what that looks like to you and create steps along the way.

If you want to reach your goal in 10 years, what should you be doing on an annual basis? What action should you be taking on a monthly basis to reach your annual target? What thing should you be focusing on a weekly basis to reach your monthly goal? And what should you be doing on a daily basis, to reach your weekly goal?

Make Your Restaurant Official

Now that we have the big picture game plan out of the way, it’s time to get down to business, making it official.

The early stages of starting a restaurant are filled with more paperwork and legal red tape to jump through than at any other point in your business.

This is definitely not the most exciting part of opening a restaurant, but be diligent. Taking time now to ensure that you properly establish your restaurant from the beginning will save you many potential headache and hazards down the road.

Below are some of the primary steps you’ll need to take in order to get your restaurant legally established with all of the proper paperwork for federal, state and local authorities.

Register Your Restaurants Official Business Name

If you’ve chosen a unique name for your business, then you should go and file your “Doing Business As” (DBA) name with your state’s agency.

Even if you have different future plans for the legal structure of your restaurant, filing a DBA at this early stage will protect you from getting your name stolen from you by a fellow restaurateur. It’s really simple and usually only costs a small amount to register it, so don’t wait.

Pick a Legal Structure for Your Restaurant

The next big step for getting your restaurant legally sound is to decide what sort of business entity is right for your restaurant.

Whatever structure you decide now will affect how you file for your state and federal business taxes, will influence how you split duties and roles of your team members, and determine how you will be held liable in the event that legal action is taken against your restaurant.

At this stage, it can be a good idea to consult with a business attorney to help you make the right choice because there are a lot of long-term issues that can arise from choosing the wrong option at this stage.

As you are considering all options, here is a basic overview of the various business structures you can choose from.

Sole Proprietorship

A sole proprietorship is the most basic business structure, and a simple one, but there are upsides and downsides to this structure.

In this structure, you alone own the company and are personally responsible for any liabilities or legal claims associated with it.

The best part of this structure is that you don’t need to take any formal action to start.

If your business is operating under your own name, you can start right away. Or, if you have a clever idea for your business’ name, then filing a DBA will be all you need.

This could be a perfect structure for you if you won’t be taking on any fixed assets or hiring employees: examples would be a food truck, pop-up restaurant, or a very small operation.

Partnership

This structure is meant for a single business that is owned by two or more individuals.

There are a number of partnership structures you can select from, including a general partnership, joint venture, or a limited partnership.

The downside, and why most experienced entrepreneurs don’t recommend the partnership structure, is because there isn’t much protection from liability offered.

As you are considering this, also remember that business partnerships are very much like a marriage. It should be a long-term commitment, and you are legally and financially tied to them.

Because of this, you should do your due diligence in choosing a business partner who is in it for the long haul and shares your same goals and values. Be sure that you are both very clear on the terms and expectations, and put it into detailed writing. Define the roles and responsibilities of each partner.

Be very clear and communicate well upfront with your partner, before anyone “signs the dotted line.” This could save you from potentially catastrophic issues that may arise in the future.

Corporation

The corporation is a very complex business structure typically reserved for larger organizations, or for those that have a particularly high liability — needing some extra reassurance.

Many attorneys will recommend this is the legal structure for your restaurant. And it scales well as you hire more employees.

However, keep in mind that filing as a corporation requires you to have Board of Directors, and has more stringent tax filing requirements.

So be sure to consult an attorney and be prepared from a more complex process.

S-Corporation

These are very similar in structure to a C-Corporation, yet it’s different in that it’s taxed on an individual business owner level, instead of as a corporation.

If you think that the structure of the corporation would be a good fit, but don’t want to have to deal with complicated dividend tax filings, an S-Corp might be a good route for you.

Limited Liability Company (LLC)

An LLC offers a liability structure similar to a corporation, yet flexibility and simplicity of a sole proprietorship or partnership. The Limited Liability Company (LLC) structure has grown in popularity over the years because you are able to get the “best of both worlds.”

Restaurateurs who select an LLC for the business structure can choose between a single officer, a partnership, or a limited liability corporation.

When selecting between various options, always it’s important to consult with an attorney.

This is an important decision that will have a potential long-term impact on your business, so be sure to do your due diligence, research, and consider all the options.

Get a Tax Identification Number

Your tax ID number, also known as your employee identification number (EIN) helps the IRS keep track of your restaurant for tax purposes.

It’s almost like a Social Security number for your business.

If you plan to hire any employees, such as waitstaff, hosts, hostesses, chefs, cooking staff, or even dishwashers, you’re going to need this number to ensure that your restaurant is on the up and up. This is especially important if your restaurant is established as a corporation or partnership.

You can easily obtain an employer identification number by applying online at the Internal Revenue Service website.

Register Your Restaurant for State and Local Taxes

In addition to federal business taxes, almost all US states and territories require you to pay income and employment taxes for your business.

Some states even have additional requirements, such as state-mandated Worker’s Compensation or unemployment insurance.

Be sure to check out your requirements, since filing procedures vary widely from state to state.

Get Secure Permits, Insurance, and Licenses for your Restaurant

Every four years the FDA will update the food code, but the specific details of what is required, strongly encouraged, or just optional can vary depending on which state you live and sometimes even between specific counties.

We recommend starting by finding your states food service code regulation department. Be sure to check your local health department to ensure that all of your bases are covered.

It’s also a very good idea to keep a calendar to remind yourself of renewal, and payment due dates. You don’t want to experience the frustration of walking into your restaurant one day and find that one of your permits or licenses has expired!

Get Food and Health Code Licenses

No matter the size of your operation, it will require some sort of official approval showing that you are safely handling the food and drinks that you serve.

The specific names of these can vary depending on your establishment, but they all certify that you’re safely handling, storing, and serving the food in your restaurant. And if you thought that having a food cart or a simple booth at a festival will get you out of this, think again. They have licenses for those too.

Alcohol has its own special sets of permits and rules. These will not only cover the protocols around safely serving alcohol, but also deal with training on how to handle customers that have had a little too much to drink.

Health Department Permits

Isn’t this the same thing that we just talked about? No, not exactly.

The health department has its own specific standards and guidelines around how you store, prepare, and serve your food. Your restaurant will need to be inspected to comply with operational standards as well as consumption safety.

Things like maximum occupancy, ventilation, fire hazards, sink placement, restroom regulations, or food preparation surface types, and so on.

Make Your Restaurant Compliant with the Americans With Disabilities Act

In 1992 the Department of Justice passed the Americans With Disabilities Act to protect consumers and employees with disabilities from being discriminated against, and allowing places in public to provide proper accommodation.

The complete details of the ADA are available, but the Small Business Administration has also created a short guide for small businesses to understand what is expected of them.

Besides all of the specifics of various angles, measurements, and legal jargon, it really just boils down to having proper accommodations in place for people with disabilities. So they can safely park, enter your restaurant, order food and eat at a table.

Find Insurance for Your Restaurant

Despite jumping through all the red tape and every legal hoop with the health department, you still need some added safety nets in place.

There are many, many small business insurance options. There’s one for everything, and some are way more beneficial than others.

Specific requirements vary depending on where you live, and how you were funded, but at a base level you want to consider these:

  • Property Insurance
  • General Insurance
  • Life Insurance
  • Auto Liability
  • Unemployment Insurance
  • Liquor Liability
  • Worker’s Compensation Insurance
  • Fire Insurance
  • Food Contamination
  • Loss of Business

Funding Your Newly Opened Restaurant

To be quite honest, funding a restaurant isn’t easy.

Even if you only hope to open a small café, all of the costs associated with construction, staffing, permits, equipment, marketing, and of course the food, can add up very quickly and can easily be more than what you have in your bank account.

You’ll likely need some funding from somewhere to start your restaurant unless you happen to be independently wealthy.

Restaurateurs choose to finance their restaurants in many different ways. Some reach out to friends and family, others will get a loan, and some work with investors.

Below we are going to review some financing options that can be considered.

Small Business Loans for Starting a Restaurant

The most common way that many small businesses get financing is through borrowing funds through a bank or lender.

The lending industry has grown tremendously over the years, and now has a wide variety of loan products that can meet the needs of any entrepreneur.

If you think this could be a good route for you and help you fund your restaurant, then it would be worth taking a moment to review the most common loan types used.

Term Loans

This is probably the most well-known type of loan. A term loan provides a set timeline and repayment structure, with fixed or variable interest rates.

The terms of this loan will vary depending on your business needs, and your credit rating. Terms can range from one year with daily payments up to a five-year with monthly payments and everything in between.

SBA Loans

Because small business lending is so risky for many commercial lenders, they’ve been slightly hesitant to let the small business owners borrow money, and this is especially true with new restaurant ventures.

Due to this, the Small Business Administration began to guarantee up to 80% of the loan principal for term loans with participating lending institutions. This might be a viable option if you are already experienced in the restaurant and food industry. If you are not, you likely won’t be considered.

The SBA offers many different loan programs, including some for aspiring restaurant owners.

If you plan to go this route, you will certainly need to have all of your ducks in a row. Write a great business plan that highlights the need for your restaurant and the uniqueness of your concept. Also, be prepared to have anywhere from 20% to 30% of the total loan amount in cash — or take out a mortgage on your home.

Keep in mind that while an SBA loan may make lenders more willing to consider your application, the SBA loan process is very lengthy and can take several months.

Equipment Financing

Equipment financing might be a good choice if you are needing cash to make a large purchase such as point of sale technology, furniture, or commercial kitchen appliances.

This type of financing is very similar to the structure of a car loan, with the amount that you can borrow depends on the price and type of equipment that you’re buying.

You likely won’t be asked to put up collateral either, because the equipment itself will serve as the collateral.

The terms of this type of financing typically are a fixed interest rate — often between 8% and 30% — along with a fixed term length which makes your payments the same each month.

Short-Term Loans

For a restaurant with smaller and immediate needs for finances, a short term loan can be a lifesaver. These loans are typically between three and 18 months and are similar to traditional term loans. They are usually in the range of $2500-$250,000.

Short term loans can get you to cash in hand in as little as two days, helping you make rent payments, pay food vendors, cover your payroll, or meet other immediate overhead expenses when cash is tight. Interest rates can be as low as 14% on these types of loans.

Line of Credit

The most flexible form of financing for a business is a business line of credit, which gives you capital to draw upon to meet your business needs.

After being established, you can draw from your line of credit just as you would a personal credit card. Use your line of credit for more working capital, buying inventory, paying off other debts, or getting you through seasonal cash flow issues.

If you are planning to apply for any type of small business loan at any point in the future, be sure that you regularly audit your personal and business credit reports, and do everything you can to improve your score.

Aside from your annual revenue, length of time you’ve been in business and your average bank balance, your personal and business credit scores are often the most important factors that determine if you’re eligible for a small business loan.

Business Funding Alternatives

There are also other ways to finance a restaurant. Here are a few alternatives you may consider to help cover the costs of your new restaurant venture.

Angel Investors

Every single day there are thousands of people who are investing both finances and their expertise into what they believe is the next big thing.

Angel investors have the means and experience — and have often been very successful entrepreneurs themselves — to personally invest in a variety of restaurant ventures, lending their resources and expertise, and furthering their own income as well.

When an angel investor provides funds and expertise, you will also be giving them a certain amount of equity in your business, and often times they will have a certain amount of decision making power.

Just as you think through a partnership, be sure that you think through working with an angel investor. You want to make sure that you both are wanting the same thing for the restaurant.

Venture Capital Firms

Venture-capital firms are similar to Angel investors, but they are more organized and can fund projects on a much larger scale through purchasing percentages of a business in a startup’s “round” of funding.

Most venture-capital firms require a minimum investment to be in the $1 million range, so you should only consider this if your goal is to build a very large scale chain of restaurants, as opposed to only a handful of locations.

Funding a restaurant through a venture capital firm can also be highly competitive most restaurant owners won’t meet the criteria a venture capital firm would seek.

Friends and Family

You’re likely to have the support of your family and friends as you start your restaurant, and some may even be interested and willing to invest funds to help it succeed.

Accepting money from friends and family may often have strings attached, despite everyone’s best intentions. Loss of income and a failing restaurant can ruin relationships.

If you go this route, strive to keep all interactions as professional as possible.

Negotiate as much up front as you can, and communicate expectations as clearly as possible. Be sure to offer a well-thought-out proposal just as you would any other investor, and put the exact terms of the investment in writing.

Restaurants will often offer “dining perks” for these investors. Think of it as a permanent reservation or discount to sweeten the deal.

Crowdfunding

Crowdfunding has grown significantly in popularity over the years. Websites like Kickstarter or IndieGoGo are perfect for small ventures that are simply looking to offer products or goods in exchange for a contribution.

Larger scale startups may consider equity crowdfunding platforms like EquityNet. This type of crowdfunding will sell company equity to capital investors.

You should not underestimate the value of a few hundred pledges, each around $10, $20 or even, $50. And if your campaign goes viral, your possibilities grow even more. It can all add up fast!

A Final Note

At the end of the day, starting a restaurant is not for the faint of heart. There are many challenges ahead, and many questions must be answered.

The restaurant industry is one of the most ruthless, cutthroat, notorious industries. The failure rate of restaurant startup is significantly higher than any other industry.

Although we covered a lot of details surrounding what it takes to start a restaurant, the bottom line is that you won’t fully understand these challenges, until you’ve experienced them.

Before starting your restaurant, take time to make sure you’re ready to jump in – mentally, financially, physically, and relationally.

Make sure you seek out help from mentors and experts in the industry.

Any additional amount of work you can do, before getting too far into the process, can save you a lot of wasted time, energy and frustration down the road.

When the time comes for you to develop a brand and marketing strategy for your restaurant — please reach out to the restaurant branding experts at Longitude. We’d love to chat.

Save Money on Marketing Your Independent Boutique Hotel with a Great Brand

As a boutique or independently owned hotel owner, you want to effectively market your brand. However, getting a strong return on investment (ROI) may be a challenge. For example, many independent, boutique hotel owners and managers are spending upwards of a $1000 a month on marketing. What they typically lack, though, is measurable results from their marketing spend. This lack of return can typically be pointed back to a poor or non-existent brand strategy. In this article you will learn some ways that a brand strategy and better visual identity can affect your marketing efforts for the good and create measurable returns on investment.

There are several ways how having a strong brand strategy and visual identity can greatly enhance and improve a hotel’s marketing efforts. Below are the four most effective strategies.

  • Develop a Strong Market Position
  • Understand Your Guests Needs/Decision-making
  • Have a Well-Crafted Message that Resonates with Guests
  • Create Better Brand Identity to Drive More Valuable Customer Perceptions

Building a great brand by implementing these four strategies can save your hotel from the effects of wasted marketing dollars. Great brands are contagious and the consumers start becoming brand ambassadors. However, getting to that point requires dedication to a clear strategy outlined in these four steps. As you execute on these strategies you will start creating better ROI from your marketing efforts. Helping your guests become evangelists for your brand becomes the end goal with the right strategy in place.

Develop a Strong Market Position

A market position is defined as the consumers’ perception of your brand in relation to other hotel options in your region. As an independently owned boutique hotel, your resources are very likely limited when it comes to marketing and branding expertise. However, that does not limit you on your ability to develop a strong market position.

Some of the steps any boutique hotel owner can take to develop such a position are:

  • Create a position statement – what do you stand for and why does it matter?
  • Identify how your position statement stands out against your competitors. What other offerings do consumers have when they come to your geographical location?
  • Create an outline of where your brand fits in the midst of all of the competition. This might look like a market position map of sorts.
  • What are the conditions of the marketplace? Is tourism up/down? What are guests looking for? Do you offer something unique that they cannot get anywhere else in the region?
  • How is your independent boutique hotel unique? A strong market position requires a clear differentiator. Something more than just a bed to sleep on.
  • Consider hiring a third party to provide some qualitative and quantitative testing of your market position. Will it hold up? Is it accurate?

Understand Your Guests’ Needs a Decision-making Process

Your brand identity and marketing message should align with your guest needs and be communicated through channels they use in their decision-making process. By understanding your guests, you can communicate clearly with them the way they want to be contacted. For example, maybe your guests are more advanced in age and are not on Instagram. Those dollars once spent to attract guests can be used where your customer is, in this case maybe the dollars are better spent on newspaper or radio? Once you have a clear market position, communication becomes the next most important thing. Rather than cast big nets to draw in guests, you can focus your efforts getting much more return for every dollar spent. Meet the customer where they are at. Know them and know their process for making a decision when it comes to lodging in your town.

Have a Well-Crafted Message that Resonates with Guests

When it comes to marketing, getting the message right is critical. There are examples over and over again where the brand message significantly increases the consumer perception of value. For example, big hotel brands use things like a robust reward program to drive engagement for frequent travelers. In fact, just recently Marriott merged loyalty programs of Starwood Preferred Guest and Marriott Rewards for exactly that purpose. The benefits for frequent travelers in their program are things like…executive lounges with gourmet snacks and drinks. What message resonates with your guests? What matters to them? Craft a clear message that reminds guests why boutique is unique.

Create Better Brand Identity to Drive More Valuable Customer Perceptions

Brand identity is defined as the image which is connected to your independent hotel’s brand culture. It typically includes a logo, typography, fonts, colors, positioning, white space, and strategy. A better brand identity improves customer perception. However, it is important that any change is executed right. You must be careful to build the image that drives perception of value. While there are several examples where building a brand identify have failed according to the brand and marketing community, most brands only fail if they don’t deliver increased perception of value to their buyer. The image should be designed to reflect your customer. Apple, Google, and Amazon are three companies that are good at building brand images and experiences that resonate with their customers.

In summary having a good strategy and solid brand identity helps guests connect with your independently owned boutique hotel. When they are connected to your brand’s position you turn guests into raving fans. They create a sense of need for the experience they had with your brand. Guests remember amazing experiences and associate brand image with that experience for good or for bad. Experience is important.

When guests are in love with your hotel experience and the brand image is strong, over time they will stand up and fight for your brand when needed. There are examples where boutique hotels were rebuilt after a disaster like a fire or a flood. While the hotel owners didn’t always want to rebuild, those that did were driven by their guests. When you have guests, who stand up for what your market position is, you have a powerful way to increase sold-out nights, price per night which result in increased revenue and profits. You must remember that guests want an experience… not just a bed to sleep in when it comes to going boutique.

What is your guest experience like?

 


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4 Steps Independent Hoteliers Can Take to Attract More Guests Without Spending More on Marketing

You may have big hopes and dreams for your independent hotel, but don’t forget – you need guests!

Dreams Without a Plan

Have you seen the movie “Field of Dreams?” It’s one of the most iconic movies related to America’s favorite pastime, baseball. The main character played by Kevin Coster builds a baseball field in the middle of a cornfield in Iowa. It’s this film where the famous phrase, “if you build it, they will come” was coined. It makes for a great story, but it’s a terrible strategy for opening a new hotel.

It’s time for a wake-up call, folks. You’re starting a business, not building a baseball field in a movie.

You may have investors, or maybe your a small independently owned and funded hotel. Either way, you will want to see a return on your investment – and preferably sooner rather than later. This hotel needs to start generating revenue quickly in order to make the business profitable.

Guests aren’t going to simply show up because you’re building a shiny new hotel.

Hotel owners, hoteliers, investors, and developers, please remember this – guests aren’t going to simply show up because you’re building a shiny new hotel. They’re not going to book their stay with you because you have a unique lodging concept. These things alone won’t get them through your doors. You need the right strategy and plan in place to attract them.

Tactics Without a Purpose

You may be tempted to start thinking about business and marketing tactics that might give you measurable and trackable results related to improving your RevPAR, Average Occupancy Rate, and ALOS. Or, you could be thinking about hiring the best architect and interior designers to ensure that your hotel creates the best guest experience.

No doubt those things are all important, but before you begin spending too much time and money creating reports and spreadsheets, hiring consultants, paying for hotel booking platforms, hiring digital agencies, and installing expensive signage and infill – here are four things that should be at the top of your priority list when planning your hotel.

Before you do anything else do the following:

  1. Determine Your Perfect Position
  2. Discover Your Ideal Guest
  3. Define Your Powerful Message
  4. Develop Your Game Plan

1. Determine Your Perfect Position

Positioning is vital to independently owned luxury and boutique hotels due to the competition being so fierce. There are likely many, many options to choose from when a guest is planning their trip. What sets yours apart? What makes yours the clear choice?

Without a clear positioning in the market, you won’t have these answers. If you can’t find a clear and compelling reason why someone should stay with you, then it’s very likely that travelers will validate your findings.

If you can’t find a clear and compelling reason why someone should stay with you, then it’s very likely that travelers will validate your findings.

A hotel’s position can be seen in two ways, the perspective of the hotel’s management and that of the guests. The hotel’s management needs to have a firm concept of the position set-forth. Its marketing and advertising efforts must clearly articulate not only what the hotel offers but also how it’s offerings are unique from the competition.

For example, a hotel may offer a luxurious package of services, perks, and amenities in an effort to attract business travelers. However, if the room rate is higher than travelers are willing to pay, that brand is not positioned for properly for the majority of business travelers. Instead, it may attract guests who are price insensitive, or it may attract luxury-minded guests traveling for leisure.

In another example, if a hotel has positioned itself as the best conference hotel in the market, guests will expect meetings to be hosted and executed flawlessly. Should that not occur, the hotel’s position— from the customer’s perspective— will, in reality, be “an average conference hotel” or worse.

To sum it up, if you need to have a truly unique position in your market. But not only that, you need to be able to back it up with the right actions as well.

2. Discover Your Ideal Guest

Around here, we love the saying, “people do business with people.”

No one wants to do business with a boring, lifeless, and dull business. People talk to people. People have fun with people. People enjoy other people. People trust people. And hotels, especially, are people-centered businesses. So even more-so, you need to know who you are talking to.

Who is your ideal guest? What do they look like? What car do they drive? Are they blue-collar? White-collar? Traveling for business or leisure? What motivates them? What are they looking for when booking their stay? What fears do they have associated with their travel arrangements? What are their underlying reasons for making purchasing decisions?

Seek to intimately understand your guests on a human level, not a transactional level. They aren’t just a number on a page. These are real people you’re talking to. Find out what resonates with them, and how you can best serve them.

3. Define Your Powerful Message

After you’ve discovered more about who your ideal guest is, you can craft a brand message focused on them. Keep in mind, your message should be focused on your guests, not on you. This simply means that you should talk less about how great your hotel is, and more about how your hotel can make your guest feel great. And to be honest, no one wants to hear about how great you think you are.

No one wants to hear about how great you think you are.

Your messaging must be simple and concise. Focus on the problems your guests are facing and present your hotel’s services, prices, amenities, and accommodations as a solution to their problem. People buy things that are easily understood. The reality is, your hotel may be better than a competitor, but if you’re unable to communicate that in a way that resonates with your guest’s needs, you’ll lose almost every time.

4. Develop Your Game Plan

You can have the most unique position and compelling messaging, but if you don’t deliver, your hotel will never be healthy. A healthy brand centers around the idea of “promises made, promises kept.” As a final ingredient to building a healthy brand for your hotel, you need to be consistent in your brand’s execution. Your positioning and messaging are extremely important, but what you do will always hold the most weight as you build your reputation.

This should be common sense, but I’ll say it again – don’t try to be something you’re not. If you’re making promises and claims, be sure you can deliver on them. Go to great lengths to ensure that your guests know exactly what they’re getting when they book with you. If you claim to have the most impeccably clean rooms, and you have loads of 1-star reviews saying otherwise, your reputation will be hurt. You can’t earn the trust of people if you’re not keeping promises.

You can’t earn the trust of people if you’re not keeping promises.

Why Many Independent Hotels Will Fail

Experienced independent hoteliers understand that owning and operating a hotel is a business. It’s not a weekend hobby or side project. Hotels are open year-round, 24 hours a day, seven days a week. They require expert management, hiring and training, expensive marketing and advertising costs, accounting, and customer service. And with new guests coming through your doors every day, there will always be new challenges you face to ensure you’re providing the best experience you can.

With the sheer complexity and nature of how hotels operate, it’s inevitable that many independent hotels will fail. One of the biggest reasons most hotels will fail is due to a lack of proper planning, positioning, messaging, and identity. For many independent hotels, failure can be avoided if you act fast and with clarity and confidence that comes with a brand strategy. It’s better than seeing your dream slowly die, and simply hoping things will get better.

You need a game plan to get you to where you want, and that is exactly what we can help give you with BrandGPS. Find out more about how we’ve helped many people transform the way they do business.

 


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