RevPAR Growth vs. Margin Compression.
Introduction
For many there is a concern that a constant drive for RevPAR growth is not realising equivalent growth in yields.
HYVVU addresses this tension by taking a much more holistic approach. Touch of a spider’s web anywhere, and it will be felt across the web. Every decision, every action, every outcome has consequences. Accepting this from the beginning HYVVU watermarks this understanding into its design through to its delivery.
A senior international hotel executive once asserted that “…without a great topline you can’t have a great bottom-line…”.
With the words VP and Sales and Marketing on his business card it is not hard to see where he was coming from. To ensure this was validated, ironically, he was driving for 18% of total revenue to be allocated to Sales and Marketing.
Of course, revenue yield management must be sophisticated and effective but so is ensuring that every transaction is a profitable one, or one that supports margins.
Investors are focused not just on topline revenue growth, but whether rising labour, insurance, utilities, and property costs are eroding profitability.
HYVVU recognises these concerns and, beyond design, fiscal modelling is used to identify weaknesses in yield and influence operational adaptations and revisions.
Benchmarking
Benchmarking is the process of comparing a company’s performance, processes, or products against industry leaders or competitors to identify areas for improvement and drive strategic growth.
The primary goal is to identify performance gaps, optimize operations and set realistic, data-driven, goals that enhance efficiency, effectiveness, and profitability.
It acts as a business compass, helping organizations understand where they stand relative to competitors and industry standards.
For investors benchmarking is important to evaluate business opportunities and for operators to validate or otherwise performance.
However, benchmarking has many underlying flaws such as a lack of context, inconsistencies and accuracy of data. Also there is the broader assumption that competitors are performing to their best and have robust business models.
Achieving 10% more RevPAR than competitors may result in much back slapping, but that metric does not establish that our business is performing to its optimal best. Indeed, perhaps we should be 12% above the current market performance given the investment in Sales and Marketing.
Let us not forget that all of the business models that are currently being benchmarked are based upon brands, operating models and investor experiences that are at least five years old and in most cases significantly older.
HYVVU has been created for today’s paradigms, anticipating tomorrows.
The HYVVU Model
The starting point for the HYVVU model is establishing the aims and objectives of the investor or owner and then developing a concept and customer journey that establishes exactly what the project is. This always flushes out inconsistencies, tensions and competing visions but becomes the basis for the fiscal model.
While being cognisant of the potential flaws of market research and benchmarking, they are used to establish a baseline from which to work but are rarely fully reflected in the final model.
The fully developed model establishes what the agreed concept, in that location, in that market can achieve in terms of yield. This in turn informs how much capital it can support and in basic terms provides viability and risk reassurance. Should the numbers prove not to be acceptable then we reconsider the operational assumptions and concept but also explore other capital solutions.
HYVVU anticipates the potential for margin compression and addresses it by design. Building methods, building materials, intelligent technology and its deployment are key elements. People, processes and constant review of performance to standard are equally important.
As the man should have said “…with a great top line you should get a great bottom-line.”
Why now for HYVVU?
Hospitality is at a crossroads.
What passes for distinction is increasingly spectacle without substance.
Guests have moved on. Luxury today is measured not in ostentation but in significance, in places that transform rather than simply indulge.
For the course that HYVVU is metaphorically sailing the numbers are clear.
More than 80% of travellers now say they prioritise sustainable stays.
Wellness tourism has already become a $651 billion market, growing at 7.5% CAGR, while the wider $4.3 trillion wellness economy expands at nearly 10% each year. Seventy percent of luxury travellers actively seek authentic local experiences.
Scarcity fuels desire: a sanctuary of thirty keys is rare enough to feel intimate and precious, yet sufficient to operate with resilience.
Capital is already rotating in this direction. Investors are moving toward smaller, identity rich assets with staying power, as pipelines of generic hospitality lose traction.
HYVVU exists to meet this demand, drive RevPAR and protect against margin compression.