Diversification: the best insurance policy against a tourism slump

The Covid-19 pandemic was a brutal lesson that travelling, the lifeblood of the tourism industry, can come to an abrupt halt due to a range of unforeseen disruptions, including natural disasters such as droughts and floods, political unrest or international squabbles.

Today, five years after the Covid-19 pandemic, thousands of tourism businesses that managed to survive are still struggling to make up the revenue they lost. The best insurance policy for tourism accommodation owners against disruptions such as these is diversification, says Friedrich Meisenholl, regional investment manager at Business Partners Limited.

Diversifying income streams can be advantageous for tourism accommodation businesses. For guest houses in particular, it presents an opportunity to break through the hard ceiling of profitability set by the number of rooms. Tapping into alternative revenue sources can help owners safeguard their bottom line against the huge increase in competition in the tourism accommodation market, a trend that has accelerated because of platforms like Airbnb.

Offering a broader range of services can make a guest house more attractive, boosting occupancy rates. The key lies in reimagining the potential of your existing facilities and thinking creatively about how to utilise the environment around your establishment, says Friedrich.

He lists the following practical ways guest house owners can transform their establishments into more resilient, profitable and diverse businesses:

1. Maximise your kitchen facilities: Most guest houses have kitchen facilities that are underutilised for most of the day, especially when limited to bed-and-breakfast services. Think about how your kitchen can serve a wider market, such as catering for outside events or providing ready-made meals to a local retailer, turning a dormant asset into a productive revenue stream.
2. Optimise your dining, bar and lounge facilities: These communal spaces can be transformed into a restaurant, coffee shop or bar, extending your reach beyond its overnight guests. Even a small extension can turn an underutilised facility into a pleasant, low-key meeting place for locals, creating a new customer base and increasing foot traffic.
3. Position your guest house as an event venue: Another way of increasing the utility of your dining and lounge facilities is to host events such as weddings, birthdays or private functions. These gatherings not only generate additional revenue but also encourage attendees from out of town to conveniently book accommodation, increasing your occupancy rate.
4. Develop conferencing facilities: Even a modest space can be turned into a functional meeting venue for outside organisations that often seek pleasant, secluded spaces for small groups to do undistracted teamwork sessions or workshops. Carefully assess your property to identify possible underutilised areas that can be enhanced into a conference facility. Investing in good sound, lighting and presentation facilities can enhance the appeal of your offering.
   As with events, such an extension of your guest house can increase your room occupancy levels as attendees from elsewhere stay over as well.
5. Explore retail opportunities: You don’t have to add a fully-fledged shop to your establishment to profit from selling items. A carefully curated selection of items arranged in a low-key display in your lobby or reception area can be made available for sale to your guests, and to a wider clientele online. These can range from towels, slippers, accessories or locally made arts and crafts that guests can buy as souvenirs.
6. Tap into the wellness trend: With growing interest in health, fitness and wellness, your guest house will be a more attractive place to stay if it has a gym, sauna, spa or pool facilities. Each such facility is also an opportunity to attract locals as paying day-users.
7. Create remote workspaces: The rise of remote work presents a new opportunity. By setting up quiet work stations with reliable Wi-Fi, whether indoors or in tranquil garden spots you are opening up your business to digital nomads and professionals seeking a peaceful place to work.
8. Stay aware of local events: Something as simple as a weekly park run near your establishment can be leveraged creatively. For instance, setting up a pop-up coffee stall that makes use of your existing kitchen facilities can draw in foot traffic and raise awareness of your brand.