Optimizing your Bed & Breakfast Inn Business With Metrics

With a clear downturn in the economy facing us, it is really time to put your Inn’s business practices in order. Metrics is the study of measuring past performance so that you can improve your business. The basic concept is that you cannot improve the future without looking at what happened in the past. Simply put, “you can’t control what you can’t measure”(Wikipedia definition of “metrics”).

Probably the most important information that you need to have to improve your business is the detailed results from prior years’ room sales. But not just your occupancy and average daily rate for the prior year! You need to know on a daily basis what your room sales were for prior years. Only through detailed record keeping are you able to compare year to year changes in your Inn’s sales performance in time to do something about it. For example, if you are being impacted by discounting from neighboring Inns, it will likely be too late to do anything about it if you only look at sales data on a monthly basis.

Daily record keeping is not hard, but you have to be organized to do this. Most PMS systems now have a Quickbooks interface which allows you to post room sales on a daily basis. Even if you don’t do this automatically, you can develop a simple Excel Spreadsheet for daily posting, allowing you to balance your sales and payment accounts and then post them in Quickbooks every day. Quickbooks then allows you to run either Year-to-date or Month-to-Date comparison reports with last year. If after the first few days of the month you are falling behind last year’s sales, then you at least are warned that you may have to do something about it to catch up or exceed last year. Even better would be if you had a complete budget for the current year by month showing where you expected to be at that point in time (Quickbooks averages each day within a month for daily analysis). This would help to analyze the data based on past results but having factored in changes in plan made for the current year (such as a rate increase).

Now let’s take the sales analysis one step further. You also should be tracking advanced deposits and advanced reservations on a daily basis. In this way, you can tell a few months out, then a month out and then two weeks out from a given date how your reservations are progressing against the same period last year. Again, this gives you much more ability to change your sales practices to overcome deficits in advanced sales well before it is too late to make a difference. At that point you can decide whether to run rate favorable packages or specials to catch up to last year’s advanced reservations or your current year’s budget plan. In other words, you can attempt to control your own destiny, rather than waiting and watching what happens. Tie this into a program of aggressive email marketing and yield management for rate changes, and you are doing your best to maximize sales.

This is just one example of how you need to use financial data (Metrics) to improve and impact results. Another example is making sure that you are tracking source data for your guests. You need to know income by source (what are the sources of your room sales), but also where are your guests coming from and why are they coming. A lot of this is just asking the right questions when they call (the old “how did you hear about us?” still works well). But in this age of Internet reservations, you must also carefully analyze your web site tracking data and also make sure to analyze the data that is available to you as a subscriber to the various web inn directories. This is all critical information to know who your guest is and then to determine among the many, many options available to reach that exact guest. Why, for example, advertise in the August edition of a popular tourism magazine, when you have 90% occupancy for that month. Likewise, why continue on with certain web directories when your returns from them are below average. Unless you are tracking results you can never answer these questions and improve your bottom line.

In sum, tracking financial results will always be the best way to optimize your Inn business. This is the quickest way to improve your results and to add long-term, sustainable value to your business.