How to Keep a Small Hotel Profitable in 3 Steps Without Stress  

Are you struggling with the profitability of your hotel? You’re not alone. Many small hotels face this challenge daily, which can lead to mounting debt, increased frustration, and, ultimately, exiting the industry.

Managing a small hotel is complex and requires a variety of skills from the manager, along with a clear vision from the owner.  

To maintain profitability, it’s essential to focus on labor costs, as they typically account for the highest percentage of total expenses in a profit and loss statement. Consequently, managers—or sometimes even owners—often have to take on multiple roles to keep the hotel running smoothly.  

One of the most common mistakes in hotel ownership is trying to operate as if running a large hotel. This often results in establishing multiple departments, hiring managers for each, and creating a hierarchy of supervisors and line staff. If you adopt this approach, you’ll likely face negative figures on your profit and loss statements each month.  

In managing a small hotel, it’s crucial to avoid creating department manager positions.  

If you’re inexperienced in running small hotels, this may sound odd, but it’s a reality: all that matters is delivering positive financial results.  

Without careful attention to these issues, managers risk disappointing owners with negative profits. Terminating employees can be a painful process that damages your hotel's reputation in the job market. Additionally, cutting costs wherever possible can lead to dissatisfaction among remaining team members, which negatively impacts their motivation and results in high turnover rates. High turnover directly affects guest satisfaction, leading to financial loss and a decline in review scores. Ultimately, such issues can put you out of competition or lead to bankruptcy.  

However, the good news is that it is avoidable to fit in numbers to make owners happy and keep guests satisfied; instead, you need to improve various skills. 

Solutions Step-by-Step:  

Step One:
 
Avoid hiring managers for unnecessary positions and departments:  

- No HR Department: In small hotels, you can manage HR functions yourself and hire staff independently. The hotel manager oversees all operations, and staffing decisions can either simplify or complicate your job.  
- No In-House IT Department: Contract an outsourced IT company. Many services can now be managed remotely through cloud-based systems. Ask your IT provider to teach front desk staff basic service skills, such as connecting Wi-Fi or screen mirroring devices. For more significant issues, the outsourced company can schedule time to address them.
- No In-House Security (except for night shifts):** Having security during the day is often unnecessary. Instead, consider outsourcing this service. An alert button can be placed under the reception desk; in emergencies, the outsourced security team can arrive within 2-3 minutes to handle the situation. This is often more cost-effective than employing in-house security, while still ensuring safety during night shifts, particularly for female staff at the front desk.  
- No Sales Team Needed: While it may seem unreasonable, small hotels can operate without a dedicated sales team. About 95% of small hotel occupancy usually comes from online travel agents like Booking.com, Expedia, Airbnb, etc. And ask the following questions: Will your sales team be able to increase your occupancy, and by how many percentage? If they increase your occupancy, how much will your ADR (average daily rate) decrease? If your occupancy increases but ADR decreases, are you getting more revenue than before? If not, then increasing occupancy hurts your hotel room amortization, and it has no reason to have a sales team..

Instead of hiring managers, consider employing supervisors with less experience. They often bring enthusiasm, are eager to learn, and can be trained at a lower cost. As a manager, you’ll likely be involved in all details of hotel operations, so why spend more on higher payroll costs?

Step Two:  

Invest in user-friendly, cloud-based hotel management software like MEDIATOR. This tool can help you monitor hotel operations effectively, keep guest billing accurate, and manage important information such as arrivals, in-house guests, and departures.  

Step three:

Start creating or implementing Standard Operating Procedures (SOPs). This enables managers to train new employees consistently, saves a significant amount of energy, and provides a reliable guide for the team to follow whenever issues arise. Additionally, it reduces after-work calls to you.
The team looks more professional.

By implementing these strategies, you can work towards keeping your small hotel profitable and ensuring a stress-free operation.