Melbourne is a brilliant city to visit, and every year, around 10 million people come here to experience its world-class attractions, superb nightlife, incredible dining scene, amazing beaches, and fantastic sporting culture.
However, many of them visit on a seasonal basis, with summer being by far the busiest time of the year – in particular, the period between the Boxing Day Test and the Australian Tennis Open.
By contrast, visitor numbers tend to drop in the colder months and during the school term time in general. Additionally, people are often far less inclined to go out in the winter period.
This can present a challenge for hospitality business owners, as they will need to maintain their cash flow sufficiently throughout the year to meet their financial commitments.
So, how do Melbourne’s hospitality businesses handle seasonal fluctuations?
Here are six strategies they can adopt to ensure they remain profitable and sustainable all year round.
1. Understand the seasonality of your business
One of the first things you should do is take the time to understand the impact of the seasons on your business.
Knowing exactly how much you expect to make in any given week, month, and quarter would make it easier to absorb any temporary decline in sales over a particular period.
It would be a good idea to engage the services of a Brainiact business coach in Melbourne who can help you crunch the numbers on your company’s performance throughout the year.
In doing this, they will be able to identify trends that may need to be addressed or capitalised on and strategies to manage short-term losses. They will also be able to pinpoint opportunities for further growth and even introduce you to third-party suppliers or partners that can make your business more robust.
2. Build up a cash reserve
It’s never a nice feeling when the bills keep coming, but the customers don’t. So, to avoid situations like this, it is a good idea to try and build up a cash reserve when sales are good.
Ideally, you should try to save a minimum of 10% of your profit every week and aim to have at least six months of operating expenses in reserve at any given time.
If you are able to do this, you’ll go a long way towards protecting your business from the effects of seasonal downturns.
3. Spread your cash flow
In addition to saving money on a regular basis, you should try to spread your cash flow throughout the year.
A good way to do this is to reduce some of your monthly costs, such as those for internet and business and car insurance, by paying for them on an annual basis. Just make sure you do this during a month of high sales and profitability.
You could also set up monthly direct debits for things like utilities to avoid big quarterly bills and put some money away in a separate tax account (as distinct from your six-month savings buffer) to better help you cope with any surprises come tax time.
During the quieter months, some seasonal hospitality businesses improve their cash flow by lowering their operational costs. Clever ways of doing this include reduced opening hours, rostering less staff, and streamlining the amount of inventory they have to buy.
4. Diversify
There is a school of thought that suggests seasonality is not something a hospitality business should be afraid of. Instead, it is something to be embraced.
Subsequently, the more steps you take to diversify what your company offers, the more you will be able to ride out any storms related to seasonal drops in sales.
Restaurants, for instance, can offer catering for private functions, while hotels open themselves up for weddings, conferences, exhibitions or corporate training.
Although it deviates from their core business, with a little imagination and thinking outside the box, these organisations can secure themselves additional income streams during quieter parts of the year.
5. Increase the advertising
During the busy months, many companies within Melbourne’s hospitality industry spend a lot of money on advertising. However, their outlay often tails off come the quieter months of the year as they look to reduce costs.
However, if you look to do the opposite, you could find yourself benefiting from increased market presence and, subsequently, sales.
The key is to advertise something that will instantly capture people’s attention. So, consider running campaigns that promote an unbeatable special offer or sale.
6. Find new customers
Customers are the lifeblood of any business, particularly one in the hospitality industry. Therefore, it is in your interest to find as many new customers as possible.
Thankfully, Melbourne provides plenty of opportunities to do just that, given that there is always something going on.
A great way to do so is to harness the power of social media and blogging to get your business noticed by those who plan to attend them.
For example, when Taylor Swift performed three gigs at the MCG in February of this year, many tour operators, hotels, and restaurants focused their promotional activities around this particular customer base.