Where Did All the $ Go? 5 Mistakes Killing Hotel Pantry Profits

August 29, 2016

 

Everyone agrees that a well-stocked pantry has the potential to increase guest satisfaction and add revenue to a hotel’s bottom line, but most GMs admit that the pantry has become a Cost Center rather than the Profit Center they hoped it would be.

We analyzed 25 Select Service hotel pantries from 6 brands to see where the profit impacting mistakes are being made. Here’s what we found and some tips to fix it:

 

#1 Pricing for unProfitability. The average Hotel Pantry is under-pricing their retails by nearly 25% in an effort to avoid the flinch factor. You know…that “ouch” look a guest makes when they arrive at the front desk to find they are buying a $6.00 candy bar? We want to avoid that scrunchy face without giving up profit. But found most hotels are actually pricing on the low end, not the high end that impacts guest experience.

 

TIP: Nothing in the store – nothing - needs to sell for less than $2.00. Not Q-Tips, Granola bars, Tic Tacs, a bottle of water or a men’s comb. Nothing. There is absolutely no flinch at the $2.00 range, so that should be your minimum price point no matter what zip code you are in! Promise.

 

#2 Market Basket Myths. Guests visit your pantry for convenience – not for a bargain. They don’t want to GPS themselves to the local Walmart to save a dollar. They want two Tylenol and a Coke. Right now! It’s been a long day. So unless you have a Walgreens or a 7/11 in your parking lot, that is not your competition.

 

TIP: If you want to do a market basket comparison to determine what your guests are willing to pay, visit your local airport gift shop. That is a far more accurate retail comparison for most hotels than the local grocery store.

 

#3 Ignoring Inflation. Inflation is real. Chocolate products have increased nearly 35% in the past 24 months. So when was the last time you updated your front desk price sheets? Failing to acknowledge the changes in your cost will quickly eat at your bottom line. Let’s say the King Size Snickers you sell cost you $1.08 when you made your price sheet, but now you’re paying $1.55. Are you still charging $2.50? Goodbye, profit.

 

TIP: Keep a spreadsheet with your Cost of Goods and Retails. Do a quick check each time you receive an invoice and update the spreadsheet. If cost has increased more than 10%, adjust your Retail Price.

 

#4 Front Desk Math Quiz. There’s a line of guests waiting to check in, the phone is ringing, and someone brings two sodas, three candy bars, and a set of nail clippers to the counter for purchase. The Front Desk Associate panics, has a 7th grade math quiz flashback, tries to calculate a rough sales total, and – more often than not – ends up undercharging the guest.

 

TIP: Get a Pantry Point of Sale System that automatically retrieves price and calculates the sales total for you. It’s an absolute must if you want to stay on top of your retail profit. Don’t let your front desk associate’s on-the-fly, mental math skills cost you dearly. At minimum, keep a calculator at the front desk and make sure they use it.

 

#5 Sacrificing Sales Tax. There are a few states left that don’t charge Sales Tax, but not many. It’s a necessary evil that we all expect to pay when we buy something. If you are backing out tax from retail to avoid making change, you’re losing 6-10% right off the top on each sale (Ouch, Memphis… 10%... Really?).

 

TIP: If you love those round numbers, ADD the tax to your Retail Price and round UP, not down. If you have a POS system, it will do it for you. Charge guests tax. They expect it, and it makes a big difference in your bottom line.

 

Need Help? We are hotel retail fanatics. We test this stuff all the time in 100s of hotels – from Urban, to Suburban to Airport to Interstate. It’s a geeky experiment to figure out where you can increase .25 and where you can’t, but we do it. If you would like help pricing your specific assortment, that’s what we’re here for.

Hotels using our Recommended Retail Prices average 62% profit margins. That’s a lot of extra cash on hand for that project you thought you didn’t have budget for.

 

Sign up for ImpulsePoint and Solve MIstakes # 1 - 5 with Total Data Driven Retail Automation to simplify pricing, taxation, inventory, and replenishment!

 

 

 

Give us a call. We love this stuff. 888.306.3252

 

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