Pop-ups, specialty stores, even a shelf can transform under-utilized public spaces into five- to seven-figure contributors to hotels’ top lines.
ATLANTA — Hotel owners shopping for incremental revenue should take a closer look at retail, according to Paul Breslin, managing director, Horwath HTL Atlanta – USA.
“Because of its flexibility, retail can drive the activation of the entire public space—regardless of the actual square footage or the structural design hurdles,” said Breslin, a member of the Hospitality Asset Managers Association (HAMA) and the International Society of Hotel Consultants (ISHC). “It’s obvious that a mega-resort with 27 or more shops could expect a multi-million-dollar lift to top-line revenues. But, done right, retail typically could open up a five- to seven-figure incremental revenue stream even for more standard hotels.”
Breslin outlines some key strategies for cashing in on the under-utilized upside of retail spaces.
1. No space is too small to generate retail sales. “At one New York City hotel, the general manager and I walked by a closet that was, maybe, 500 sq. ft. I told the GM we could rent out that space and make money in that closet. At that time, the hotel had a Shula’s restaurant that was hard to find. So, the GM suggested we sell team-related memorabilia in that space. This created traffic close to the signage that led people down to the restaurant—which was exactly what they needed to establish a program flow that invited people to explore other venues. The shop drove sales and the restaurant benefitted from better visibility. It was a win-win.”
2. Temporary pop-ups can have permanent upside. Breslin recommended training hotel team members in end-to-end management of pop-ups or outsourcing the management of these ephemeral event spaces to experts who can coordinate them to leverage the impulse-buy appeal of souvenirs, local specialty products, sports games, signature area festivities or tie-ins with aspirational consumer brands—as in a product drop for hard-to-get trainers or the impossible-to-find, must-have holiday toy. “On any given day, you can have five to 10 different venues in operation to play on guests’ various reasons for their trip,” Breslin said. “During a major sporting event a downtown hotel can outsource a pop-up to a group that can bring in team-related memorabilia. The property can pick up $200,000 in three days day, which could add $30,000 to $40,000 on the bottom line. That's all incremental revenue that didn't exist before and it’s delivered with no extra cost [after the outsource payment].”
3. A hallway has the potential to be a mall-way. “I worked with a hotel that did a very good Sunday brunch business, even among locals. People had to go down a fairly long corridor to get to the restaurant. So, we monetized that by setting up high-quality retail venues that sold unique local pieces such as small works of art, jewelry, locally made colognes and a specialty clothing line with garments not available elsewhere. That drove business from guests who wanted to take home a tangible part of the experience, but the curation of items and the location in that corridor also attracted a lot of the local brunch business,” Breslin said.
The property can pick up 200 grand in three days, which can add $30,000 to $40,000 on the bottom line. That's all incremental revenue.
Paul Breslin
4. If the public space footprint is tight or sightlines are challenging, stretch the retail offer into the cloud. “At one boutique hotel, we put up a shelf displaying very high-end jewelry, then directed guests and shoppers to the property’s website to make their purchases. The added benefit was increased traffic to the website and further opportunities to engage consumers,” he said.
5. How to write the right concession agreement. “What we try to do is put all of the burden on the on the vendor. You have to strategize to allow some groups to compete. It’s optimal if you can get them to submit part of the RFP and include that their actual agreement,” Breslin said. “Tell them you want it to be plus neutral, meaning an aggressive agreement that incorporates their liability. They have to have the crime liability policy. They have to carry the employees’ workers compensation policy. They have to have risk avoidance strategy policies, which I think is also the best practice. It's extremely important that whether you're looking for a long-term vendor who's going to work with you throughout the years or over the short term, you make sure that you discuss and have very, very clearly written agreements of where the liability and the responsibility fall.”