Return to our Home page Search
Click here for the hotel and hospitality news from around the globe Hotel, Travel and Hospitality Articles Videos and in-depth Interviews
CONCIERGE DESK
Read more now
Read more now
Read more now
Shift in Hotel Retail Impacts Revenues and Profits.
By Robert Mandelbaum and Gary McDade
Thursday, 27th March 2014
 

Hotels provide retail operations primarily for guest convenience and satisfaction, and are, in general, only a small part of total hotel revenue. 

Of the properties in the Trends® in the Hotel Industry database of PKF Hospitality Research, LLC (PKF-HR) that reported retail sales and expenses, retail sales made up just 0.9 percent of total hotel revenue in 2012. 

Retail operations vary greatly depending on the type of hotel. The retail department at large full-service, resort and convention hotels often includes clothing stores, gift shops and newsstands. 

Limited-service, select-service, and extended-stay properties frequently operate just a kiosk or mini-mart located next to the front desk that sells items mainly for the guest’s convenience, such as snacks, drinks, and microwavable food.

To examine the financial impact of retail operations on U.S. hotels, we analyzed the 2012 revenues, expenses, and income provided by 2,037 properties in the Trends® in the Hotel Industry database of PKF-HR that reported retail sales and expenses. 

We also analyzed the annual revenues, expenses and income of 435 properties that reported retail sales data for each year from 2007 – 2012 (most current data available) to gain an understanding of historical trends.  All of the properties analyzed managed their own retail operations.  Properties that leased their retail operations were excluded from the analysis.

Sales Still Down

Retail revenue for all hotels in the survey sample averaged $1.80 per occupied room in 2012 which is still 27.4 percent below 2008 levels. 

This is consistent with the results we have seen for other non-room related revenue.  As noted in previous PKF-HR studies, while room revenues have steadily increased since the depths of the 2008/2009 industry recession, revenues from food and beverage, other operated departments, and rentals and other income have not grown concurrently.  This is, in part, due to guests and meeting planners’ need to control their spending in light of higher room rates.

Resort hotels generated the highest retail revenue in 2012, measured on both a dollar per occupied room ($7.47) and percentage of total revenue basis (1.7%). 

Although retail offerings at convention properties are similar to those at resort hotels, the volume of sales at convention properties was much lower than resorts on both a dollar per occupied room ($1.56) and percentage of total revenue (0.6%) basis. 

The ratio of retail revenue to total revenue among the other property types ranged from 0.4 percent at limited-service properties ($.39 per occupied room) to 0.8 percent for full-service properties ($1.43 per occupied room).

Profits Almost Back

In contrast to the decreasing sales volumes, retail outlet department profits, while still below, are much closer to pre-recession levels. 

Profits per available room were $149.51 in 2012, which is much higher than the 2009 amount of $116.57, but slightly below the $156.96 earned in 2008.  On a per occupied room basis, retail outlet department profits were $.59 in 2012.  This is still below the 2008 level of $.63, but improved over the 2009 value of $.51 per occupied room.

Profit margins for retail outlets have increased above the 2007 level of 28.5 percent of department revenue.  In 2012, after deducting direct operating expenses for cost of goods sold (47.6% of department revenue), labor costs (15.2%) and other direct operating expenses (4.1%), retail departments returned an average 33.0 percent of department revenue to the bottom line. 

The primary reason for the increase in retail department profit margins is the 14.6 percent decline in labor costs that occurred from 2007 to 2012.  We attribute this decline to the growing number of hotels that have replaced their gift shops with kiosks that are staffed by front desk personnel.

The profit margins for limited-service, extended stay and full-service hotels were higher than the margins at resort and convention hotel retail outlets. 

Limited-service, extended stay and full-service hotels averaged a 39.3 percent profit margin in 2012, while profits for the more extensive operations at resort hotels were 25.1 percent of department sales. 

The greater profit margins at limited-service, extended stay and full-service properties are attributable to the nature of retail operations associated with these property types.  Their retail operations are generally smaller in scale than resort and convention hotels and require little or no labor resources to operate. 

Retail operations at resort hotels are generally more extensive than those at other property types and often include clothing, souvenirs, news periodicals, books, and other items.  These outlets are separate from front desk operations and require their own dedicated staff to operate.

Adapting

Hotel owners and operators continually alter their operations to meet the changing requirements of their guests.  Stimulated by the growing desire for quicker and simplified retail outlets, properties have abandoned the traditional “newsstand/gift shop” in favor of kiosks and mini-marts. 

This transformation has occurred in both large and small hotels.  These new retail operations have proven to be well received by guests, and highly efficient.

4Hoteliers Image Library

4Hoteliers Image Library

4Hoteliers Image Library

4Hoteliers Image Library

Robert Mandelbaum is Director of Research Information Services for PKF Hospitality Research.  Gary McDade is a Research Analyst.  Both work in the firm's Atlanta office. To purchase a copy of the 2013 Trends® in the Hotel Industry report (2012 data), please visit www.pkfc.com.

Advertise with 4Hoteliers.com ...[Click for More]

~ Important Notice ~
Articles appearing here contain copyright material. They are meant for your personal use and may not be reproduced or redistributed. While 4Hoteliers makes every effort to ensure accuracy, we can not be held responsible for the content nor the views expressed, which may not necessarily be those of either the original author or 4Hoteliers or its agents.

Learn more about DigiJames - in room technology
Advertisment  
 Related Articles  (Click title to read)
Turbocharge Your Strategic Account Management.
Spa and Wellness Trends Forecast for 2014.
Do Your Customers 'Like' You?
The Price is Right: Incentives That Stimulate Switching Behavior.
 Latest News  (Click title to read article)
TravelDaily China Travel Distribution Summit
Monday, 28th July 2014

Vacation equality project brings attention to inequality of paid vacation
Monday, 28th July 2014

Visa-Free Travel to Mongolia
Monday, 28th July 2014

Tourism record in Georgia: several new hotels are planned
Monday, 28th July 2014

ME IBIZA, first 'Leading Hotel of the World' in Ibiza
Monday, 28th July 2014
 Latest Articles  (Click title to read)
South America's 'Fauxtels': Argentine Hotels that Borrow Big Names
Monday, 28th July 2014

Five Ways the New Facebook Layout Affects Hotels
Monday, 28th July 2014

Don't Let Technology Drive Your Business
Sunday, 27th July 2014

Holographic Customer Service: A Real Vision or a Hollow Claim?
Saturday, 26th July 2014

Customer Conversations: Identifying Revenue Opportunities Using Customer Analytics
Friday, 25th July 2014
 Most Read Articles  (Click title to read)
Global Update: Who's Where and Doing What - April 2014
Is Google the New Hotel Booking Tool of the Future?
Global Update: Who's Where and Doing What - May 2014
Marriott Offering Rewards Points for Social Media Posts
New HR Study: Candid Recruitment Experiences with LinkedIn
 Useful Links  (Click company to visit)
A-Listings - Exclusive Links Section @ 4Hoteliers
www.4hoteliers.com/4hots_mshw.php?mwi=9

AETHOS Consulting Group ~ Overview and Articles
www.4hoteliers.com/4hots_mshw.php?mwi=72

Book Hotels & Travel
www.hotelscombined.com/?a_aid=105951

Connect with us at LinkedIn
hk.linkedin.com/in/4hoteliers

Customized Hotel & Restaurant Equipment
www.forkandchopstick.com

Digital Innovation Asia
www.digitalinnovationasia.com

Follow us on Twitter!
www.twitter.com/4hoteliers

Hospitality Consultants ~ Lifestyle Concepts
www.lifestyle-concepts.com

Hospitality IT & Technology
www.nonweiler.com

Hotel Opening Processes: Exploring better ways to open new hotels.
www.hotelopeningprocesses.com

ITB 2015 Marketing
www.4hoteliers.com/news/story/9725

Private, luxurious holiday villa in Valbonne
www.villa-valbonne-biot.com/en

Sayang - For True Wine Lovers
www.sayangwines.com

TravelDaily China Travel Distribution Summit
event.traveldaily.cn/23/index_en.aspx

TV4Hoteliers.com - Live Interviews
TV4Hoteliers.com

Wynamics ~ Working the Dynamics of Wine
www.wynamics.com

ZIXI - Your Asian Partner: Advisory - Sourcing - Project Management - Market Entry
zixi.hk


© Copyright 4Hoteliers 2001-2014 ~ unless stated otherwise, all rights reserved.
You can read more about 4Hoteliers and our company here

Use of this web site is subject to our
terms & conditions of service and privacy policy