Simple Math for Hotels...I Think...

Let’s do some simple math comparing a weekend of potential Food, Beverage and Entertainment revenues at a hotel with “desirable” restaurant, lounge and spa properties --- VERSUS the number of rooms needed to be filled to acquire the same amount of money.

Admittedly these are under-estimated dollars, and represent gross revenues only, but you never know these days. A little swine flu, rain or a Cubs game might slow things down a bit…

Hotel Restaurant on a Friday:
250 covers X $30 check average = $7,500
Repeat on Saturday = $15,000 for the weekend

Hotel Bar/Lounge/Rooftop on a Friday:
250 covers X $30 check average = $7,500
Repeat on Saturday = $15,000 for the weekend

Hotel Spa on a Friday AND Saturday:
100 covers X $50, 30 minute massage (only) = $5,000

Subtotal for FBE gross revenues from one weekend only: $35,000

If the rest of the week in total only generates half of the projected weekend revenues: $17,500

Annualized: About $2.5 million (again --- likely under-estimated…)

COMPARE TO:

Average downtown Chicago weekend rate for 5/15/2009-5/17/2009: $300 (presuming this is AFTER fees due to marketing sites like Hotels.com, Expedia, Orbitz, etc.)

Hotels would have to sell about 175 rooms per week to equal the same $52,500 - revenues from some customers that (inevitably) won’t be back anytime soon to spend that same money again.

Maybe 175 rooms per week are easy to fill these days. Maybe they’re not.

Maybe getting $300 per room is realistic in a recession. Maybe it’s not.

Maybe the economy will magically turn around and, in celebration; thousands of consumers will all book leisure travel and reschedule previously cancelled meetings and conventions. Maybe not…

Bottom line: choosing not to market and position dining, bar and leisure/lifestyle offerings as effectively as possible to locals --- who are spending money on these offerings in the same market every single day --- is simply walking away from revenues and publicity essential to growth and prosperity, and revenues that are equally viable in various economic settings.

At least by my math…

Marc-Portugal