How To Measure ROI on Hotel Technology? [Complete Guide]

Whenever you decide to get your hands on a hotel technology, your first and foremost question will be,

“Will it be WORTH the investment?’’

I totally agree with you. If it is not going to contribute to your business growth, then what’s the point of having technology? 

So, to answer your question, in this blog we will discuss how to calculate returns on investment (ROI) of a hotel technology, what factors are to be considered and other things around it. 

Now, when I talk about ROI, it doesn’t necessarily mean to bring back the invested money. It is much more than that. Let us dig deeper and understand,

What is ROI on hotel technology?  

Basically, the return on technology investment is the ratio between the net profit you get (from the day you have implemented the hotel software) and investment cost. 

The logic is simple. Whenever you implement high-end software to get something done, you expect it to improve efficiency as well as accuracy of operations, reduce manual efforts and several other benefits. 

When you measure ROI, you get a clear picture of whether your hotel software has met your expectations or not. 

Measuring ROI becomes mandatory, when a hotel software is not only accounted for improving your operational efficiency, but also improving your guest experience and growing your business.

You may think that all these facts are right, but;

What is the formula to measure ROI on hotel technology?

Well, as I mentioned earlier, hotel software is no longer limited to improving operational efficiency, these days it is influencing guest engagement to a great extent. 

Therefore, the fundamental formula to measure ROI in the hotel industry is:

ROI on technology = Net gain on technology / Cost incurred to implement technology.

Now, let’s come to the most important segment,

Which factors affect the ROI on hotel technology?

You see, in this era of on-hand details and enhanced analytics, the ultimate benefit is not saving costs. As a famous saying goes, 

Primary business benefit is not doing more work with fewer people. Instead, the main benefit of these new technologies is reducing the probability of bad business outcomes, and increasing probability of good business outcomes.

You see, there are some factors as well that affect the ROI on hotel technology. Now, if these factors are dealt with carefully, then they can definitely improve your ROI to a great extent. Now let us understand which are those factors:

1. Revenue and Sales

This is the most important and primary factor. Naturally, the effect of your technology investment should directly reflect in your profits (which MUST increase). However, by increase I don’t mean a one-time gain, but a continuous flow of income. 

Let’s see how a complete suite of technology increases your sales and revenue:  

  1. Reports and analysis: A hotel software provides you with a wide range of reports, through which you analyze your business sources and further strategize accordingly. 
  2. Inventory distribution: Besides, a channel manager automates your rate and inventory distribution on different platforms. So you can enlist your inventories on as many platforms as you want and thereby maximize your online reach. 
  3. Direct bookings: A booking engine attracts your website visitors with a wide range of plug and play widgets, so they would book directly with you. Thus increasing your commission-free bookings. 
  4. Review Management: A review management software lets you collect, monitor and respond to all your online reviews from one place, so your online reputation is taken care of. 

Thus, a right suite of hotel technology can surge your ROI significantly.

2. Time efficiency

Second most important factor is TIME. 

A right suite of technology should help you save a considerable amount of your working hours.

You need to observe that to what extent your time spent after handling different front desk activities, managing housekeeping, guest billing and so on is reduced. 

Are you able to optimize the time in such operations?

When all your routine operations are handled smoothly in an organized workflow; then you and your staff can utilize the saved time in working upon other aspects of hotel management. 

Thus with the optimized time, you can have a healthy ROI.

3. Error reduction

Losses and blunders due to errors should be INEVITABLY resolved by the hotel technology. 

Generally mistakes happen in two cases:

  1. While handling operations
  2. While collecting data

Let’s first talk about operations. 

When you deploy a technology, I’m not saying that it will give you 100% accuracy. (Reason being, lastly they are humans who are going to operate it).

But at least, a minimum of 85-90% of accuracy should be achieved. 

Coming on the data part, you should never make the mistake of thinking that data is simply details about guests who have checked in at your hotel. It is MUCH MORE than that. 

A hotel technology analyzes that data and derives precise INFORMATION such as peak and weak season of your hotel, your most profitable room rates, your best performing promotions and other important details. 

You can use this information to strategize for a better business. 

Thereby, a RIGHT suite of hotel technology guides you towards better business and higher return. 

4. Guest experience

It is very important to see that by deployment of a hotel software, the overall guest experience is improved. 

As you know, ours is an industry that is driven by our guests. They hold the power to make or even break our business. Therefore, their satisfaction and experience should be the top most priority of any hotelier. 

On the other hand, a happy customer is the best business strategy. 

That’s why they have a significant influence on your ROI.  

Now, let me explain to you how.

Impressed with efficient operations and better guest services, your guests are more likely to  visit your hotel next time.

And as you now, 

Repeat Customers = Better Business

You may like to read: 8 Practical Methods to Increase Repeat Guests at Your Hotel

Other than that, your happy guests will definitely give you good reviews. And you know one positive review possesses the power to draw 100 more guests. So with that, you can drive more revenue as well as bookings. 

The correlation between favorable guest reviews and positive economic outcomes is OBVIOUS.

So this was all about how you can measure ROI on hotel technology. 

Having explained all of this, now let me tell you, 

Which hotel technologies can maximize your ROI?

These days, the modern hotel software is fueled with numerous functionalities to make hotel management a piece of cake.  

The latest technology has bestowed your guests as well with smartphones, mobile apps, social media, and most importantly modern traveling  websites or portals (TripAdvisor, Trivago, and such likes), that give them access to tons of information on a click. 

Having said that, you should adopt a hotel technology that helps you walk hand-in-hand with the latest technology trends; to get you higher ROI.

1. Which are the basic types of technology for hotels?

Now as you know, there are various types of hotel management systems developed recently with the advent of technology. Of which, some are:

Now, since these days cloud technology is ‘IN TREND’, doesn’t mean that you should also opt for cloud technology only.

You should consider different factors such:

  • Budget 
  • Requirements 
  • Number of staff members using it
  • Convenience

After considering all these parameters, decide on the technology that suits the best for your business. 

2. Secured

This should be a clear priority for you. Investing for data security provisions in cloud environments not only protects your privacy but also gives you a strong edge against any worst case scenario of data loss. Secured data provides you with anytime backup and easy restore options.

Always look for a hotel PMS that is PCI DSS (Payment Card Industry Data Security Standard) certified or GDPR (General Data Protection Regulation) compliant.

PCI-DSS: It is an information security standard for organizations that handle branded credit cards from the major card schemes. Get more information here. 

GDPR: It is a regulation that requires businesses to protect the personal data and privacy of EU citizens for transactions that occur within EU member states.

Besides, go for a hotel software that has solid security measures such as IP-based login (any of your staff cannot access it from other devices) and two way authentication to run your operations in safe environment.

3. Guest-facing

Having guests as the center of your business, a technology that facilitates them is a MUST-HAVE. 

Nowadays tech-savvy guests expect you to cater them in their way, i.e tech-way. For that, you can have hotel software that can equip them with a mobile guest portal and they can perform the self-check-in/out, fill up details from their smartphones, request for any extra amenities, oversee their bills  and more. 

You can also have self-check-in kiosks to improve the hotel check-in process.

Besides, you can also have advanced IOT solutions such as smart thermostats that lets your guests adjust the temperature in the room, smart lighting and many others.

You can explore more such ideas from here

4. Integrated

Other than that, you should opt for hotel software that is completely integrated. So you can perform all your  operations under one roof. 

Choose a hotel PMS that offers integration with your other systems as well. Basically, integrating your hotel PMS with your existing hardware or software tools is the key to streamline your operations. Viz. PABX, door locking system, cash drawers, payment gateways, or ID scanners. 

For example, integrating your payment gateway with PMS allows credit/debit card payments to be processed directly through the system.

Automating such cross-system processes saves a lot of time, effort, and eventually increases your profits. 

But, how would you know whether your current or any hotel software is best fit for your property?

Here’s a complete buyer’s guide to hotel software. It has 50+ parameters that an ideal hotel software must have.

You can use it as wither as a buyer’s guide to purchase a hotel software or use as a comparison tool to compare your current software with the ideal one.

Conclusion

So, this was all about how you can measure the return on your technology investment, how you can maximize it, and which type of technology you should adopt

You see, there is no one-size-fits-all technology. Numbers on paper can only give you the calculation of returns on tech purchases. But real ROI on hotel technology comprises performance, analysis, and informed decision-making.

Technology cannot work per se. You have to select the right technology and make it work for you.

In a nutshell, you should watch over market trends from time to time, stay abreast of the latest technology, stick to what works best for you and deliver nothing but THE BEST guest experience.  I bet you’ll be rewarded with all-time high returns on investment.

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