#8: Valuing Hotel Amenities

Metric Type                                                      Level
     SAVINGS: Yes                                              MASTER
     SERVICE: Yes                                               ADVANCED
     SAFETY: No                                                   BASIC
     SUSTAINABILITY: No

Description
Okay. You've negotiated the best daily rate you could at a hotel. You then negotiate to include free breakfast and free WiFi. How do you realistically account for the savings generated by these 'free' extras?


Formula
Regular cost of amenity x % of population likely to use it x Room Nights = Projected Amenity Savings

For example, let's say the cost of WiFi, in the absence of your agreement, is $9.95 per day. You project that 80% of your travelers would have otherwise purchased WiFi access (and expensed it). You put 300 room nights into this hotel under this agreement.

     $9.95 x 80% x 300 = $2,400 in WiFi savings

Do the same for breakfast, airport shuttle service, and any other amenity that replaces costs that would have been spent otherwise.



Process
How do you come up with the percentage of travelers likely to purchase and expense these amenities? 

You could dig through a representative sampling of expense reports to come up with an answer. Depending upon how detailed your expense reporting requirements are, you may find this information challenging to sift through.

Ask the sales manager at the property what their take rate is for each amenity. I typically use this as my first data point. 

Then I augment what I've heard from the property by asking the travelers. A quick, targeted survey, done annually with your traveling population, can help you establish baseline percentages for your assumptions. (TIP: you may want to offer something in return for responses like a drawing for a free weekend stay at a hotel to ensure a strong enough response rate). 

I take what I've learned from these sources, drop it down a little to be conservative, and use the resultant percentages in my calculations. 

I usually see about 80% for WiFi usage (although this is dropping with greater use of smartphones that can access emails via cellular networks). I put breakfast at about 25% (or 0% if it's not reimburseable). The shuttle service can be a big savings, but it's very dependent upon location (i.e. do people still have to rent cars to get to the destination or is the hotel very close?). 



Usage
Let's assume you did a great job at negotiating a rate of $25 under the standard corporate rate at the hotel in the example above. You put 300 room nights in there for a rate savings of $7,500. Without adding in the value of the amenities you negotiated in as well, you are under-counting the value you created. You can add the $2,400 for WiFi savings, and maybe $1,000 for breakfast as well. That just improved your savings figure by almost 50%

Do this exercise for each of your top properties (in terms of room nights) and make conservative assumptions for the other properties that mirror percentage-wise what you're saving in the top hotels in your program. Add this savings figure to the total you report to senior management, your boss, and the traveling population.