Increase Revenue In 6 Simple Steps

James Manion, MBA
Revenue Manager, Magnuson Hotels

As a final project in graduate school, I produced a case study on the hospitality industry, in which I investigated external factors that might influence a server’s tips.

The first part of the study analysed the correlation between the gender of the server and the tips they received, as well as the time of day and week of the meal. While the results demonstrated no positive correlation between the gratuities and the gender of the server, the latter study did.  Customers were proven to tip more in the evenings when the value of the bill was comparatively higher.  They also consistently spent more money on the weekends rather than weekdays, which in turn drove up the value of tips.

We also analysed a study conducted by Cornell University’s School of Hotel Administration, which investigated variables in customer service and the impacted gratuities from guests.  The results showed servers who addressed tables with a small smile received an average of $0.20 in tips.  Those servers who approached tables with a larger smile received an average of $0.48 in tips.  That equates to a 140% increase in tips from simply smiling.

Another variable looked at was the use of introducing yourself by name. When done correctly, the perception of the guest about you is that you are polite and friendly.  This leads to more empathy towards you and increases the outlook of the guest experience.  In the experiment, servers who did not introduce themselves by name to the tables saw an average tip amount of $3.44.  When the server used his/her name when introducing the table, the tips averaged $5.44 – a huge 53% increase.

We were then asked about other things which could lead to higher gratuities for servers, which were not compared.  Coming from a restaurant background, the easiest answer to this question was…SERVICE!  It wasn’t based on gender, nationality, time of the day, day of the week, or any other criteria.

To illustrate this, think of the ingredients of a simple quesadilla, you would notice it is only tortillas and cheese with a couple of sides.  If you break it down to a cost level, then you will notice it costs roughly $1 to make a quesadilla at home.  So, why would someone be willing to pay $7.50 at a restaurant for the same item and still provide a $2 tip to a server?

The answer is simple, they did not want to make it themselves and, they wanted to be served.  They wanted to be treated as a guest from start to finish.

These findings are easily transferrable to all sectors of the hospitality industry, after all, the true definition of hospitality is good customer service.

Below are 6 simple learnings that can increase your revenue:

  •  Treat people as guests… not customers.  It is a different mind-set that can set your staff apart.
  •  Be attentive.  Not everyone is the same.  The key is to listen, acknowledge, and address any issues in a timely fashion.
  •  Follow-up on guest issues to ensure they are resolved.  It can prevent any further implications going forward.
  • Ask them about how their stay was when they check-out. You may find some areas you can improve upon, but also rectify any issues before they leave your establishment.
  • Thank them and welcome them back on their next stay – they may bring other people! You can even ask them to spread the word, previous guests are the most reliable form of advertising.
  • Go that extra mile. What makes you different from any other hotel they can stay at? Service is the key to set you apart from your competitors. Be thinking with every guest, how can you give that little bit extra to make their stay stand out?

Follow these 6 simple steps and watch the trigger effect it can create, from increased reservations to higher ADRs.