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Wednesday, October 8, 2014

Why hotel minibars are becoming commercially unsuccessful

Hotel minibars no longer serve hotel guests' best interest according to market research and hotel personnel. According to CNN, between 2007 and 2012 revenue from these hotel amenities fell 28 percent indicating a declining financial advantage of minibars. The data indicates much of the U.S. hotel industry is commercially influenced by this trend. Hotels, including Hilton and Marriott, have already reduced or eliminated their mini-bar services to better make use of their corporate assets.  

Hotel resources

Commercial hotel management
Hotel minibars are less profitable than in previous times
Since minibar re-stocking takes time and resources, utilizing those assets in other ways has the potential to provide a higher operating profit margin. Billing disputes, theft and expired snacks add to the cost and inefficiency of minibars per the Wall Street Journal. In light of this, re-directing hotel budgets toward potentially more profitable services such as enhanced lobby entertainment and improved dining services is a worthwhile consideration. In addition, if the elimination of minibars reduces the need for hotel staff, then hotels can also reduce costs or improve revenue per employee by trimming or re-allocating their human resources expenses.

Internet access

Several additional reasons are cited for the decline of the hotel minibar. More specifically, according to The Economist magazine, hotel guests place a premium on other services such as wireless Internet access. Presumably, high quality and fast Wi-Fi access offers more benefit to hotel residents. When minibars first became available, Wi-Fi did not exist, meaning hotel guests may have viewed the minibars as a form of entertainment or a pastime that was replaced at least, in part, by Internet access.

Guest spending

Another reason why hotel minibars are being removed or phased out by some hotels is because corporate expense accounts and guest budgets have become tighter in a leaner economic environment. The availability of cheaper alcohol in neighboring retail locations is also stated to be a reason for the decline in demand and lower associated profit per CBC News. The advantages of the hotel minibar are not mutually exclusive, but rather interdependent for hotel clients and management. In other words, when clients see less use for minibars, so does the hotel.

Parking surcharges

Hotels have also turned to parking services to leverage their profits. According to MarketWatch, parking fees provide an attractive opportunity to increase revenue. Moreover, research has shown hotel parking to have increased revenue by almost 19 percent between the same years that minibar revenues declined. The higher revenue does not necessarily have to cost guests more either. To illustrate, if the removal of in-room services and amenities such as movie rentals and minibars lowers room costs, but parking provides a higher return on investment, then the shift to more profitable services makes sense for both parties. 

Times change and so do preferences. The hotel minibar is becoming a relic of a time when drinking overpriced beverages and snacks was considered a desirable choice, whether it be for the feel of luxury or the convenience of quick access to alcohol. Now, the appeal of minibars has been replaced by alternatives such as Internet connectivity. Hotels have responded to the decline in demand by finding other amenities that have a larger impact on hotel revenue and that make better use of financial resources.

Image license: Richard Moross; "Park Hyatt Whisky Minibar"; CC BY 2.0