Media 4 Hotel (M4R) helps Hotels conserve cash flow and capital. We help Hotels buy advertising in a way that allows them to pay with their own unsold rooms rather than money from their limited bank cash resources.
The accommodation market could not be tougher than it is today. In recent years the high street has been under pressure as online platforms have been taking eating into hotel profits. Now with Corona Virus in the mix travellers are either too scared to leave their homes or there are no flights available to their destination.
Traditional way: Hotels buy advertising from cash flow or working capital
Let’s consider an example where a Hotel wishes to purchase £40,000 of advertising. The traditional method that has worked for years relies on cash flow funding or access to working capital.
Now, in order to have that cash in the bank in the first place, the Hotel must have made sales in excess of £40,000 leaving them with a clear £40,000 after they paid to reinstate the room (launder the linen, clean the room replace the soap, tea and coffee etc.
In this example we assume the Hotel has a 15% cost of sale to reinstate the room. Therefore, to have £40,000 cash available they must have sold at least £46,000 in rooms in the past.
The Financial impact and result of the traditional way is:
- £40,000 advertising campaign is produced with no guarantee of a return on investment, it may not attract a single customer
- Bank account has been drained of £40,000 working capital
- The risk of 100% failure is very high
M4R way: Hotels buy advertising with some cash and some room nights
The M4R method allows the Hotel to pay between 50% and 100% of their advertising with their unsold room nights. This immediately conserves cash flow and reduces the drain on working capital. In the example below we show the impact of paying 50% in cash from the bank and 50% in room nights.
The Hotel will need to release £20,000 cash from the bank to part pay for the advertising, leaving the other £20,000 for other uses. They will then issue £20,000 of gift cards and vouchers that may be redeemed against their “stock of unsold rooms” to complete the payment of £40,000 for the advertising.
The advertising will run and be exactly the same advertising as that would have received under the traditional way.
The Financial impact and result of the M4R way is:
- £40,000 advertising campaign is produced and before it even commences the Hotel has a forward sale of £20,000 in room nights, this is a 50% return on investment from the outset.
- Bank account has not been drained and still has £20,000 cash in it
- Customers contact the Hotels and book, quoting the voucher number.
- Generally customers will purchase up to 30% more than the face value of the voucher as they will also use other Hotel facilities
- Should none of the vouchers ever be presented then the Hotel received the advertising for free
- If the advertising works then it will drive additional travellers to the Hotel directly or via their online platform
- The Hotel saves even more because the cost to reinstate £20,000 of rooms is only £3,000 (15% of the price of the room)
- The risk of 100% failure is zero as £20,000 of rooms was committed to up front.
- The bottom line for the Hotel is, extra rooms nights sold, extra cash flow and extra profits
In every instance Hotels should try to buy advertising with unsold rooms on hand and not cash in the bank.
Which Hotels are best suited for the M4R way?
The Media 4 Hotel platform is suitable for almost every Hotel. The only requirement is that they have a need to advertise. Certain Hotels are more suitable than others and each is reviewed for its suitability on an individual basis. Some will be able to buy advertising with 100% payment in room vouchers and for others it may be only 50%.
Every case is different and it depends on the type of Hotel, its location and standard.
The best way forward is to make an enquiry. We will be able to tell very quickly if M4R will work for your Hotel.
What types of Media are available?
We are able to supply almost every form of advertising with at least 30% payable in unsold room nights. The media includes:
- Print news and digital news
- Sunday paper inserts
- Main stream digital, google and face book
- Bill Boards, paper and electronic, 96 sheet, 48 sheet, bus shelters and phone boxes
- Taxis and buses
- London underground, tube, posters, escalators
- If we haven’t got it we will try to get it
Please ask yourself these two questions.
- “If I stop advertising now and keep the cash in the bank, how long will my hotel survive?”
- “Would I rather buy advertising with cash from the bank account or pay with my unsold room nights?”
M4R provides a strategy that allows the Hotels to have an each way bet, we fill empty rooms, create extra cash flow and deliver extra profit, guaranteed!