HOTEL BUSINESS REVIEW

October FOCUS: New Developments and Best Practices on Maximizing Revenue Management

 
October, 2014

New Developments and Best Practices on Maximizing Revenue Management

Revenue Management is the application of precision analytics that predict consumer behavior and optimize product availability and price to maximize revenue growth. The primary aim of Hotel Revenue Management is selling the right room to the right customer at the right time for the right price. The essence of this application is in understanding customers' perception of product value and accurately aligning product prices, placement and availability with each customer segment. In the hotel industry, implementing an effective revenue management strategy is a vital component of its operations. In fact, in a recent survey of nearly 500 revenue management professionals in the hotel industry, they predicted that revenue management strategies will become even more targeted and will be supported by increasingly sophisticated technology, as they are applied to other areas within a hotel. In particular, revenue management techniques are likely to be integrated into other hotel income streams, including spas, restaurants, conference/groups and golf courses. As a consequence, the revenue management function will become more crucial to hotel operations, and will likely become a separate department that is under the general manager's supervision. The October issue of the Hotel Business Review will address these significant developments and document how some leading hotels are executing their revenue management strategies.

This month's feature articles...

Paul van Meerendonk

To say that the world has changed in the past ten years is an understatement. A decade ago, mobile phones were still primarily used to make phone calls, a 'tablet' was something you took for a headache and 'TripAdvisor' was only in its infancy. Even more dramatic is the change we've seen in how hotel rooms are booked: from traditional channels to online travel agencies to making reservations from the palm of your hand. Armed with more options for booking and research than ever before, plus the ability to share their experiences in real-time; consumers are in control and it's crucially important to attract the right guest at the right time for the best rate. READ MORE

Breffni Noone

In this era of “big data” revenue managers have access to more data than ever before. However, before rushing to add yet another data source into the mix, revenue managers need to critically evaluate its capacity to provide incremental value over and above existing data sources. They also need to need to carefully consider the level at which to leverage that data source, whether for tactical pricing decisions, or as a support for more strategic revenue management-related decisions. In this article, I take a look at some of the new data sources that are receiving attention in the hotel industry, and use them to demonstrate that “more” may not always be better. READ MORE

David Hogan

As our world becomes more and more connected, the terms used to describe “Cloud-Based” computing seem to blur into abstraction. In this article, I'll clarify the terms "Cloud computing" versus "Software as a Service," often referred to as SaaS. In some ways, it's like describing two sides of the same coin. However, there are some clear distinctions, along with risks and rewards, to keep in mind. So… what is the difference between Cloud Computing and SaaS? Is there a difference? READ MORE

Jesse Ostrum

Information is the currency of all organizations. How you handle access to that information within your organization is what determines if you are an innovative leader in your industry or simply another member. Initiating a Revenue Management culture that provides free-flowing information across departmental lines is the key. Data, information and knowledge can no longer be kept isolated by department and used on a “need to know” basis. Marketing, Sales, Operations, Guest Services…all elements of hospitality are tied together and Revenue Management can work with all departments to better guide the organization through the ever changing competitive landscape. READ MORE

Matthew  Goulden

The battle to tilt a traveler's decision in favor of a specific brand - be it for a supplier or an intermediary - continues to get intense. The focus is on identifying a "lead" as soon as it emerges in the digital domain, and that's where travel metasearch engines are showcasing their prowess. A travel supplier such as a hotel chain or airline needs to plan astutely for real-time hotel inventory availability/ pricing, and optimize campaign, budget and bid management. Since suppliers are dealing with an increasing number of traffic generation sites, associated costs have gone up. No category is feeling this more keenly than hotels. And importantly, a large component of this expenditure is going into competing with OTAs, either via brand.com or other channels such as metasearch. This is unproductive since travel suppliers are paying multiple times for the same conversions! How much to embrace the metasearch phenomenon is a topic of debate at hotel distribution conferences such as those held by HEDNA in January and June of this year. READ MORE

Michael  Brownsdon

Capital allowances are a widely misunderstood routine tax relief that taxpayers regularly fail to maximise. An in-depth analysis of capital expenditure on property assets, including their acquisition, can yield HMRC approved reductions in tax. Poorly defined terms for plant and machinery in legislation gives rise to the undervaluing and misallocation of qualifying assets within tax computations. Reviewing historical and current capital expenditure can result in significant tax savings in current years. READ MORE

Kevin Robinson

Packages are valuable marketing components that increase hotel awareness, create value for the guest, and often times drive room nights over need periods. The effectiveness of the package often is dependent upon the elements associated with the overall experience as well as the price point at which the package is offered. READ MORE

Angie  Dobney

You've heard the expression - "better late than never!"... Well it appears this expression may apply to a majority of the traditional hotel industry when it comes to embracing total revenue optimization. After years of dipping its toes in the water, the hospitality industry appears ready and willing to jump headfirst into a concept that, for more than a decade now, has helped many casino-hotels take their revenues to new heights - anywhere from 5- to 15-percent increases! Below are some of the key practices of casino-hotels that are applicable for traditional hotel to incorporate- READ MORE

Klaus Kohlmayr

Since becoming an integral, almost essential aspect of daily life, social media has grown into a force with such powerful influence that business reputations can either be made or broken on the whim of a single comment. This is due in part to its ability to instantaneously spread the opinions of countless users to both existing customers and prospects. Far from being an uncontrollable force however, for hotels the ability to influence the nature of social media posts goes hand-in-hand with the quality of services that are offered, along with the level of value that guests associate with a given service. For hotel team members, the objective is therefore centered on the ability to effectively match individual guest needs with amenities that provide the most value. By understanding and applying effective up-selling strategies, hotel employees not only foster guest satisfaction while guests are on-site, they also create a positive experience that, when shared on social media by their guests, serves to strengthen brand loyalty while alerting future guests to the advantages of opting for enhanced value services. READ MORE

Marco  Albarran

How can we increase guest satisfaction scores in our establishments? The following article touches base on an opportunity that will help your establishment increase your guest satisfaction scores not just from a macro-perspective, but also from a departmental point of view. What we observed is that educating your staff and involving them in these guest satisfaction scores in more detail, will actually be able to engage your employees better and also they will be able to understand a lot of correlation of what they do, in conjunction with guest satisfaction and the service experience. By doing this, you may be able to increase guest satisfaction scores by an average of 5% overall, annually. READ MORE

Michelle Woodley

Revenue Management has been defined as ensuring the sale of the right room to the right customer at the right time for the right price. While the hotel industry has made strides in achieving the goal of revenue and profit optimization at a faster and more methodical pace than before, today's guests have a greater influence on pricing and revenue management tactics thanks to the abundance of information and tools via social media. The following discusses the growing correlation between online guest reviews and rate positioning. READ MORE

Denise  Broussard

As technology is rapidly evolving, the hotel industry is fighting an ever-changing battle to keep up, working to bring an ease of communication with travelers and maintain a positive image with customers. Heightened dramatically in the last several years, social media has become more prominent with guest reviews, ownership and content. Typically, a hotel's senior leadership is focused on overall reputation management, with the revenue management team optimizing all user-generated content, including social media outlets. READ MORE

Kelly  McGuire

The use of price and non-price information like user generated content (UGC) to make a purchase decision could vary by segment. Business travelers, for example, which represent a significant and valuable source of business for many hotels, could behave very differently than other segments, impacting how managers would price or position the hotel to attract this valuable segment. In this article, we will present the results of a study that investigates how business travelers tradeoff between price and non-price information, and compare that to a previous study in a leisure context. READ MORE

Sanjay  Nagalia

The revenue management industry within hospitality is evolving rapidly. Advancements in revenue management software have made it infinitely easier for hoteliers to understand, anticipate and capitalize on consumer behavior. Until now, however, revenue management concepts have primarily been applied to guestrooms. With group business representing up to 40 to 60 percent of revenue potential for many hotels, hoteliers know their catering and banquet profits are not as high as they could be, and that a more holistic approach to meetings and events revenues is called for. With function space revenue management systems in the pipeline, the time is ripe for hoteliers looking to optimize function space revenues to lay the groundwork necessary for effective implementation. READ MORE

Michael Sturman, Ph.D.

While it still retains its price-setting function, hotel revenue management has become more integrated with other hotel operations, including function space and restaurants. Additionally, revenue managers must take into account the industries diverse distribution channels, particularly those provided by online travel agents, which themselves offer different pricing and distribution strategies. Two other frontiers for revenue management are making use of the increasing flow of customer information from big data and managing the effects on price and demand that result from customers' postings on social media. READ MORE

Marky Moore

The Hilton Los Angeles Universal City, using a combination of tax incentives, rebates, and $7 million in financing utilizing the LA County PACE (Property Assessed Clean Energy) Program, has undergone a significant transformation, embracing energy efficient upgrades and water conservation measures. The cost of the Project was $7 million while the value of the upgrades and the additional value of added net operating income was in excess of $12.5 million and the value of the property increased by more than $30 million. Overall, the project addressed a number of concerns, including deferred equipment maintenance, compliance with the Hilton global design standards, and adherence to sustainable practices. READ MORE

Mario Candeias

The hotel sector has been booming, feeding on the rebound of the global economy. Some asset managers and hotel executives in investment forums claim the industry is peaking. Development pace is strong, funding deals seems to be a problem of the past, rolling out new brands seems to be a growing trend. With more disposable income, more information and faster and cheaper capital flows, the speed of change increases, market cycles are shorter, time to market is cut-throat. There are "new kids on the block", East and West, North and South. Stakes are high. For the army generals (Luxury Hotels), they are higher… READ MORE

Jean Francois Mourier

Anyone who has worked in the hospitality industry for any period of time would know that - in hotels of all sizes - the Director of Revenue Management and the Director of Sales are often completely at odds with one another. No matter how experienced or knowledgeable, there is generally a confrontational relationship even over the simplest pricing issues. If one says to 'offer a discount', the other says to 'raise the rates'. If one suggests a focus on group sales, the other suggests transient sales instead. No matter what the issue, it is often very difficult to get these two employees to see eye-to-eye (or rate-to-rate) and it can create a huge problem for hotels. READ MORE

Holger  Bause

The evolution of location based services and applications is changing the way that hoteliers think about revenue management. With apps that will initiate contact with the guest, hoteliers will have the ability to fully customize the guest experience, from the time the guest books a room, to after the guest has checked out. There will be a significant impact on "big data", as hoteliers will have access to their guests' habits before, during and after their stay. Revenue managers will be able to use this data to personalize offers for guests and increase revenue. Overall, it seems that location based services are very much at home in the hospitality industry, and are one new technology that every hotelier needs to keep a close eye on. READ MORE

Drew  Salapka

Revenue management continues to grow in importance across brands and independents, with hotels of all sizes. Strategies for success abound, but who is executing the strategy at the hotel level? Do the frontline staff members understand what must happen to the rate at their property from day to day, even hour to hour, in order to assure financial success? Drew Salapka maintains that you must conduct training with not only the hotel's sales they need in order to be successful team, but also the front desk associates. They must be equipped to understand and work with revenue management. READ MORE

Peter McAlpine

As unlikely as it seems, with hotel groups focusing on technology to enhance the guest experience, the time will come when the major area of competition is the energetic feel of the guest experience. This change is inevitable because the human energy field is the only untouched area left for hotels to explore. This article is in two parts and states five scientific principles, which hoteliers must know in order to create an energetic Heart-Based Hospitality guest experience. When applied, the guest experience can be transformed to new levels. The first hotel group to apply them will have a major advantage. READ MORE

Mmatsatsi Ramawela

Impressive occupancy rates and increasing hotel revenues in cities such as Abuja in Nigeria, Luanda in Angola, Accra in Ghana and Cape Town in South Africa have had a strong influence on hotel investor sentiment and overall confidence about sub Saharan Africa as a key investment destination. Now, more than ever, regional hotel brands and international operators are flexing their muscles and seeking to expand their footprint across the region. But, do we have the requisite skills in specialist areas such as revenue management? And, is the talent pool in this field large enough to accommodate the region's burgeoning hospitality sector in the long-term? READ MORE

Andrew Hoog

Smartphones and tablets are powerful devices, made more powerful through the worldwide proliferation of apps. With millions of apps available for Android and iOS devices, and with apps for every interest (personal and professional), there is a corresponding increase of the risks posed by so-called "leaky apps": Apps that may function properly, but, because of certain flaws or coding errors, can be exploited by hackers and cyber criminals. Educating individuals and businesses about these risks must be a priority. Aware of this challenge, and equipped with the right resources to identify and isolate leaky apps, hoteliers can solve this problem. READ MORE

S. Lakshmi Narasimhan

While a new hotel is most likely to have minimum repairs and maintenance in its initial three to five years, the property operation and maintenance department has its work cut out to lay out a strategy and prepare for the future years when warranty periods run out, assets get older while ensuring that the guest is served well at all times. It is not for the faint of heart and requires an intuitive understanding of machines, process and people. That should not prevent an engineer from being generally cheerful while going about his obviously onerous duties. The owners will be looking to him to maintain asset efficiency while keeping expenses down in the Profit and Loss Statement. READ MORE

Lonnie Giamela

Employees can make or break businesses in the service industry. While customer service oriented employees create a luxurious experience at a lesser establishment, employees that don't prioritize customer service can ruin a guest's experience even at the most finely-appointed hotel. However, managers and supervisors cannot always be present to recognize and reward desirable service practices, nor can they always be present identify and correct poor practices. With so many points of customer and employee interaction, surveillance is one of the most effective methods to safeguard employee safety and integrity, review employee performance, identify training points, and document “HR issues.” Of course, too much of a good thing can be a problem. Employers must understand the difference between valid surveillance and illegal intrusions on privacy rights before taking advantage of video/audio recordings. This article aims to help employers stay on the right side of that fence. READ MORE

Janet  Gerhard

Are you implementing a social media strategy or building a social business? 2013 was viewed as the year where a sense of data and integration with digital and mobile efforts were supreme. Yet, only 34% of social strategists and executives said their social strategy was connected to business outcomes. Research has shown that there are clear differences between companies that are implementing a social media strategy and those that are building a social business. Many in the hospitality industry are focused on the former. Yet, we should all be striving to develop a social business strategy that integrates social technologies into business values and goals in order to create value for customers and build long-term relationships with them. READ MORE

Laurence Bernstein

The notion that social media is either advertising or free is misguided. As is the idea that the two (advertising and social media) are interchangeable. They each accomplish very specific objectives and should be used in tandem to help guide potential customers to making the choice to stay in your property. Advertising can persuade and create a desire; social media, like a sales associate in a store, can answer questions and advise. Together they can lead customers to the purchase solution that best suits their needs. But, caution, this solution may not be the one that best suits your needs! READ MORE

Michael Koethner

Time-Out can be defined and made distinct as a voluntary or involuntary stand-still. Ideally it should be considered as a time to recuperate, heal, refocus and realign the physical, emotional and mental state. This can be applied to a single person, team, family or to a business per se. Looking at the current situation in the hospitality and wellness industry it would be very advisable and most beneficial to everyone involved, to voluntarily go into a dedicated Time-Out, an internal and external Detoxification. In the past few years the industry has been thinking and operating with the wrong fuel. It has damaged its engine. Deep scars are now surfacing. READ MORE

David Foliot

As in any line of business, the hospitality industry undergoes continuous shifts and changes. It has evolved through the motivation to offer guests unparalleled comfort and experience, by the need to be as cost effective as possible, and by maintaining the highest quality standards. In an industry where solid wood and veneer were once considered more of a necessity than the norm, mid-scale hotels have recently moved toward wood laminate furniture and its myriad advantages, not the least of which is its impressive durability. READ MORE

Tema Frank

Trust is important in any relationship, especially if you want people to sleep with you. (OK, at your hotel, maybe not exactly with you!) That's why people rely so heavily on reviews on sites like Trip Advisor and Booking.com: hearing what others have said about your hotel helps create the trust they need to feel confident making a reservation. But what if you don't have enough reviews yet to be profiled on the big sites? Or the reviewer numbers are so small that people wonder if it was just your spouse, parents and friends who wrote the reviews? That's when you need to find other ways to build trust with prospective guests. Here are 14 things you can do to build trust and get more bookings. READ MORE

Roberta Nedry

Late afternoon, lazing in our cabana chairs outside our room, next to the pool, overlooking the beach, waiting for our first cocktail as sunset approached. Our guest experience so far was dreamy and our boutique hotel setting exquisite. We loved our room, the ambiance and the feelings we were having. We were comfortable, relaxed and happy with our hotel choice. Then, a high pitched buzzing noise, the sense of something flying nearby, the disturbing sight of a black insect landing on my leg, the stinging slap to end its life, a small squish of blood, a new bump and the realization that the itching would soon begin. A MOSQUITO had interrupted my Guest Experience! And, he brought friends. READ MORE

Michelle Wohl

A few weeks ago I checked into a hotel that I have stayed at twice before. The woman checking me in was very pleasant and warmly welcomed me to the front desk. After taking my credit card and confirming the details of my reservation she asked, “Have you stayed with us before?” I immediately bristled. Not only have I stayed at the hotel before but I wrote a review of the property on TripAdvisor, which was responded to by the General Manager. And, I tweeted a day before my arrival that I was looking forward to another visit to the city and included the hotel's name. When I replied to the front-desk manager that I had stayed there a couple of times, she welcomed me back and thanked me for my loyalty. READ MORE

Max Starkov

For the ninth year in a row, HeBS Digital announces the launch of “The Smart Hotelier's Guide to 2015 Digital Marketing Budget Planning,” just in time for the 2015 budget planning season. This article outlines how to structure your budget so that you can shift more bookings to the direct online channel, better utilize your marketing dollars by increasing campaign effectiveness, and generate the highest returns possible from your property website and digital marketing initiatives. READ MORE

Eric Rahe

It is no secret that how, where, and what people are eating is changing. The dining experience matters more than ever before as evidenced by the range of custom designed signature chef restaurants being created in multiple markets. The environment in which people eat, from lighting to carpet to wall coverings to proximity to other people, sets the context for the meal that either helps it sing or just satisfy. READ MORE

John E. Thompson

A leading source of employment law liability today flows from failing to comply with the federal Fair Labor Standards Act, the wage-hour law of broadest application. The number of FLSA lawsuits and U.S. Labor Department investigations has skyrocketed. Court complaints alone total in the tens of thousands over the last decade, and the most-recent reporting year's tally of more than 8,000 new FLSA lawsuits - nearly a 5 percent increase - has continued this trend. Furthermore, since at least 2010, the Labor Department has viewed hotels, resorts and other lodging establishments as presenting a high risk for FLSA violations. It is therefore more likely than ever that an industry employer will face wage-hour claims. READ MORE

Bernard Ellis

In a Gartner survey on CIO technology priorities conducted last year, 55 percent of CIOs cited big data and analytics as the technologies they thought were most likely to be disruptive.1 This trend has continued into 2014 and many businesses, including gaming companies, are looking to information as the next frontier for competitive differentiation. Data has been critical to building market advantage for a long time, but until recently, most gaming companies focused almost exclusively on player value databases to guide differentiation strategies. READ MORE

Bonnie Knutson

In today's 24/7 interconnected media world, sustainability (or conservation or greening) and public relations go hand-in-hand. In recent years, environmentalism has move from a being fringe issue to becoming a mainstream issue. Whether driven by the bottom-line, government policy, or consumer sentiment, sustainability is at the forefront of most - if not all -- our collective business decisions. And it has moved from being desirable to being necessary for successful property management too. Is this article, find six tips for optimizing your PR green strategy READ MORE

Sherry Heyl

Today, when we need an escape, we turn to the mobile apps on our smart phones and the Internet. When we need a mental break from work, we turn to our social networks. When we need to escape boredom we turn to our news feeds. When we need to avoid an awkward moment we face one of our many digital screens. So it should be no surprise that when we need a break, an escape, a getaway we turn to our social networks, news feeds and various digital screens to plan a vacation. READ MORE

Kathleen Pohlid

Record keeping did not make OSHA's Top Ten list of most frequently cited violations in 2013, nor in 2012. However, when the proposed record keeping changes go into effect, establishments will have significant incentive to ensure they are complying with OSHA recordkeeping rules and maintaining a safe workplace. Record keeping information provides an important safety and health summary for establishments, alerting them as to potential serious problems and serving as an opportunity to identify potential violations for correction before OSHA arrives and which may lead to other injuries, or worse, fatalities. Soon this information will be available to the public. READ MORE

Larry  Mogelonsky

The OTAs have become entrenched in customer hotel purchasing habits and this can have very harmful long-term effects. Firstly, the commissions they take squeeze a property's margins until it has no choice but to cut services in order to stay in the black. Next, the OTA marketing machines are especially powerful, shifting guests away from hotel brands to the point where consumers are no longer loyal to one particular brand and no longer aware of each brand's unique points of differentiation. This article will address the issue through three broad steps as well as actionable tactics to reengage consumers. READ MORE

Coming up in March 1970...