Small hotels, defined as those with less than 50 rooms, can vary greatly in terms of revenue and profitability. According to a study by STR, the average revenue per available room (RevPAR) for small hotels in the United States was $63.44 in 2020. However, this can vary depending on factors such as location, amenities, and occupancy rates. Additionally, a small hotel in a beach location, for example, had an average occupancy rate of 80% and an average daily rate (ADR) of $150, which resulted in a RevPAR of $120. The hotel's profit margin was 15%, which is considered a good margin for small hotels with a high seasonality.
In terms of profitability, small hotels can also vary greatly. According to a report by the Hotel and Lodging Association, the average profit margin for small hotels in the United States was 7.7% in 2019. However, this can also vary depending on factors such as operating expenses, marketing costs, and competition. One example of a small hotel that has been successful in terms of revenue and profitability is the 20-room Hotel Veritas in Cambridge, Massachusetts. The hotel has a RevPAR of $174 and a profit margin of 30%. The hotel attributes its success to its prime location, personalized service, and strong online presence.
Return on Investment (ROI) is a key metric for small hotels as it is important to measure the performance of the hotel in terms of its profitability. Small hotels that have a high RevPAR and profit margin generally have a better ROI than those with lower numbers. Small hotels that have a high ROI are able to invest in improvements to the hotel, such as renovations or new amenities, which in turn can further improve their ROI.
In recent years, the rise of home-sharing platforms like Airbnb has also had an impact on small hotels. Many small hotels have seen a decline in revenue due to the increase in competition from private rentals on these platforms. According to a study by Airdna, a company that tracks Airbnb data, the average Airbnb rental in the United States generates $924 per month in revenue. This is a significant amount of revenue that small hotels are missing out on.
There are several reasons why private rentals on Airbnb are getting some of the revenue that would have gone to small hotels. One reason is that Airbnb rentals often offer more affordable rates than small hotels, making them a more attractive option for budget-conscious travelers. Additionally, many Airbnb rentals are located in residential areas, which can be more desirable for travelers looking for a more authentic and local experience. Furthermore, Airbnb rentals offer more flexible booking options, such as short-term rentals, which can be more appealing to travelers looking for a more flexible and customizable experience.
Another reason why Airbnb rentals are getting some of the revenue that would have gone to small hotels is that many small hotels do not have a strong online presence and are not effectively utilizing online booking channels. Furthermore, many small hotels are not effectively using social media to promote their hotel, events, and packages. By not utilizing these tools, small hotels are missing out on potential guests who are looking for hotels online and through social media.
To compete with Airbnb rentals, small hotels need to focus on creating a unique and personalized experience for guests. This can include offering unique amenities, such as a rooftop terrace or a complimentary breakfast, and providing personalized service, such as a concierge service. Additionally, small hotels need to focus on building a strong online presence and effectively utilizing social media to promote their hotel and attract guests.
In conclusion, small hotels can vary greatly in terms of revenue and profitability. However, by effectively utilizing social media and technology, small hotels can increase their visibility and drive more bookings and revenue. It's important for small hotels to have a strong online presence, and use social media to promote their hotel and attract guests. By doing so, they can increase their visibility and ultimately drive more bookings and revenue. Additionally, small hotels need to focus on creating a unique and personalized experience for guests to compete with Airbnb rentals.