A legacy term, an American Plan (AP) is common parlance for the inclusion of three meals per day included in the rate. As we put the pandemic behind us, the obvious target for inbound travel to Canada will be the U.S., so an AP should be considered to guide your strategy for maximizing revenues from our large southern neighbour. The summer and peak season ahead for many domestic destinations will not only need a solid marketing plan for the U.S. put in place relatively quickly, but also a thorough understanding of why APs can help you attain profitability from fewer overall guests.
The core of why APs were so popular was that meal inclusions offered convenience, as well as more perceived value. This sense of convenience still applies today and the fundamentals for why such packaging worked are critical for re-building revenues.
Today, we outwardly talk to prospective customers about ‘B&B deals’, ‘bundles’ or any other phrasing from the marketing Rolodex, but behind the scenes, the lynchpin term for hoteliers is TRevPAR (Total Revenue Per Available Room, which looks beyond heads in beds and aims, through data integrations, to decipher which types of guests spend the most so you can synchronize and maximize all revenue verticals. In this sense, AP helps by automatically building a solid base of F&B during the pre-arrival stage of a guest’s journey.
Hoteliers are trained to think about RevPAR as one of a handful of measurements to gauge a property’s success, particularly for revenue managers who must accurately assess market position and occupancy compared to the comp set, then adjust rates to steer RevPAR towards a broader objective. Unless your property is limited service, optimizing TRevPAR will be of better use for building profit margins in 2022 because revenue per guest is maximized and your property will achieve better customer satisfaction.
TRevPAR is critical to targeting the best possible lookalike demographics and origin markets, as well as figuring out loyalty incentives or even CapEx allocations to a given operation. Consider two simple examples.
Guest ABC: Purchases suite at $400 per night for two nights at BAR and double occupancy; arrives and departs hotel by Uber; dines entirely off-property; has no additional purchases onsite; TRevPAR stays at $400 per night.
Guest XYZ: Purchases deluxe room at $250 per night for two nights at B&B rate and double occupancy; uses valet and overnight parking for a sum of $50 during the entire stay; eats breakfast (included) as well as dinner à la carte on-property for an average spend of $150 each night including alcohol; uses the spa with a treatment purchase total of $150; TRevPAR is $500 per night.
The lower room-rate guest (XYZ) ends up spending more overall, giving them a higher TRevPAR, with the B&B package acting a bit like a Trojan Horse for more ancillary spend. At first glance, when you aggregate all the various income streams, it would make sense to start looking for more customers like XYZ ahead of ABC.
To play devil’s advocate, those ancillary operations may come with additional OpEx and therefore elicit lower margins than from just rooms. When you factor in labour costs, XYZ puts more on the topline but may still equal out to the same bottom line as ABC.
Group and corporate segments are going to take a long time to return, so the focus has to shift to maximizing revenues from leisure, and largely weekend, visitors. For this, a shrewd TRevPAR analysis becomes paramount.
Where the American Plan comes back into play is for those properties that don’t have many other activities or onsite experiences to offer besides F&B. For these, and all other hotels, the packaging of three meals per day is an attractive offer to many customers, especially as part of a bundle you sell to those traveling from the U.S.
Larry and Adam Mogelonsky are partners of Hotel Mogel Consulting Limited.You can reach Larry at [email protected] or Adam at [email protected]
