HOTEL BUSINESS REVIEW

October FOCUS: Revenue Management

 
October, 2015

Revenue Management: Optimizing Income Streams Across All Avenues

The role of Revenue Managers, within their profession and the organizations they serve, continues to evolve. A significant portion of the change is driven by technological innovation which, given its magnitude in today's markets, also redefines their standing on the hotel team. Revenue Managers are moving away from being exclusively spreadsheet-centric and finding better ways to share their data. This shift also requires them to engage more directly with their sales, marketing, and operations departments. Part of this development is due to a reassessment of their metrics for success. Revenue was previously the sole factor by which success was determined but now there is a greater emphasis on price optimization, profitability and flow through. Managers are combining sales, marketing and revenue management, and then adopting a data approach to optimize their income streams across all avenues. This metric evaluates performance in all revenue streams and then calculates the gross operating profit per available room. Hotels are now measuring everything a guest does - and spends money on - from the time he books until the moment he checks out. In addition, Revenue Managers will soon be able to shift their focus from room availability to the guest and his ability to pay. A future revenue management system might take into account things like weather forecasts, the recent online activity of the guest, the guest profile and persona, time of booking, the mode of travel and the fare paid. It might also calculate all the previous stays for this guest, and how much was spent on their room and in the hotel. All of this will be compared to millions of other potential future reservations to determine a unique room and rate for a specific individual guest. The October issue of the Hotel Business Review will address all these developments and document how some hotels are executing their revenue management strategies.

This month's feature articles...

Kristie Dickinson

As hotel asset managers, we ask a lot of questions. Separating the average asset managers from the indispensable ones, is the ability to ask the right questions. What are the right questions, you ask? The right questions do a number of things…for one, they challenge the status quo, shake things up and really make people think - why are we doing it this way, how else might this be done, is it working and what should we change? Questions should also evoke discussion about where you are today, but more importantly where you want to be in the future and how to get there. READ MORE

Elizabeth Churchill

After beginning a process of integration more than a year ago, Aqua Hospitality and Aston Hotels & Resorts rebranded this year as Aqua-Aston Hospitality. In addition to the new name, the group - which manages more than 50 properties across Hawaii and the U.S. mainland - also unveiled a new look, and further distinguished what its five hotel brands offer travel partners and consumers. The result: one of Hawaii's leading hotel management groups is in a stronger position to achieve sustainable growth through strategic revenue management. READ MORE

Amy Bair

Thanks to the Age of Technology, Revenue Management has risen to the top of the Agenda for virtually every hotel Executive Committee meeting. The question to be answered historically has been “How do we maximize our revenue stream?” But that question has been expanded to “How do we maximize our revenue stream and ensure that dollars coming in on the top line survive the journey to the bottom line?” The simple answer is focus on optimizing room rates. The numbers make the case. READ MORE

Tammy Farley

As the art and science of revenue management evolve, the focus sharpens on finding custom solutions rather than selling products to hotels, resorts and gaming establishments. As sophistication grows, the target broadens to maximization of total guest revenue. This article provides a roadmap - and cites best practices -- for optimizing revenue, regardless the type, size, or makeup of a property's business. READ MORE

Brian Tkac

The revenue management landscape has become more complex, requiring a strategic road map that navigates a property or organization through a journey meeting the horizon of optimal profit levels. How should a hotel company support these initiatives and nurture an authentic culture? Which stakeholders should be involved in the process and where should they expect all of the needed tools and resources to deploy effectively? As costs of distribution, acquisition, talent retention and costs per occupied room continue to escalate, what does a hospitality executive or asset owner need to perform in total revenue management to deliver a solid POGR (profit per occupied room) and deliver holistic performance objectives? READ MORE

Steven Pinchuk

At its inception, Revenue Management (RM) was a management science that created techniques which applied micro-economic theories. These micro-economic theories were implemented using advanced predictive analytics and robust optimization, that defined and optimized the availability and pricing of inventory. These economic theories created many slightly differentiated “products” for a company from their inventory. I believe RM is a true and noble management science that has become corrupted by predatory and baseless sales and booking rules that companies are masquerading as RM. To explain my position, we need to share some common vocabulary and understandings of the theories and implementations of RM. READ MORE

Sanjay Nagalia

The competitive landscape in today's hospitality industry is more intense than ever. Hoteliers need new ways to differentiate themselves in the eye of the customer to provide world-class service, while still driving profitability across every segment and business unit. But despite the fact that almost every hotel manages multiple revenue streams, team members within each stream still tend to make pricing decisions based on the impact of their line of business only, which is a losing strategy. This article will discuss the benefits of holistic revenue management and the strategy of Total Revenue Performance. READ MORE

Yatish Nathraj

The hotel and service industry evolves in the front of the house all the time to meet the ever-changing expectations of our guest. Sometimes these expectations can start eating away at the bottom line, which good managers adapt to and change these environments to encourage a good rapport. But we have seen a change in the business aspect of the hospitality industry. Not only have guest's demands sometimes become unreasonable, our service supply change is being disrupted by ever increasing back of the house costs. The standard percentage of goods, labor and debt on our Profit and Loss statements are obliterating the Net profit line. This has been concerning investors and managers, making our careers as managers of revenue, a juggling act. READ MORE

Marky Moore

Hotel owners wrestle with numerous costs in the operation of their businesses, from staffing to paying sales taxes to expenses associated with maintaining the building. Fortunately, the federal tax code equips businesses in the hospitality industry with an array of incentives and strategies to help offset these costs. However, these potentially lucrative opportunities for tax savings are often overlooked by businesses that are unaware how to capture them. By reexamining their tax-planning strategies, hoteliers may uncover substantial savings that will reduce their tax burdens and improve the cash flow of their businesses. READ MORE

Nicole Adair

As a revenue management professional, it can become all too easy to get bogged down in focusing on rooms revenue in efforts to increase ADR and drive RevPAR. After all, these are the metrics by which we compare against our comp set on weekly STR reports and, quite often, the numbers used to grade our performance. However, as the practice of revenue management matures, and an increasing number of technology companies are providing the industry with newer and more optimal functionality, the focus needs to shift from primarily revenue generation to optimizing total profitability of the whole hotel. READ MORE

Bernard Ellis

Classical and even more current revenue optimization practices and technologies have focused too narrowly on maximizing room revenue, and more recently, to minimizing the distribution and marketing costs associated with that revenue. Expanding the same practice to other revenue streams has been a natural next step for some revenue managers and systems, but the higher that revenues go, the more profit margin that seems to leak out of the balance sheet. A new practice called Hospitality Enterprise Optimization, using the proven analytical abilities of revenue managers and the systems at their disposal, will go a long way to finding that lost profit. READ MORE

Rhett Hirko

The ever changing distribution landscape can be challenging to maneuver. Costly connectivity solutions often result in some degree of manual management of varied channels, which is time consuming. The good news is that a hotel usually finds a way to get content, rates, and availability out to the customer in some way. The bad news is that, often, this information is not optimized for particular customers, which can result in a lost booking. Understanding more about which customers book what sites and delivering the content and availability optimally to them is critical to a hotel's success at any distribution point. READ MORE

Stefan Wolf

The act of providing accommodation to travelers has been around for a very long time. But whilst actively selling and marketing hotels and resorts have been going on for some time already, revenue management in that context started only recently. In addition to being a relatively new function in the industry, the scope of revenue management has changed and increased at an incredible speed. In the past, revenue management focused on optimizing RevPAR using the right time, with the right price, right product, for the right customer and with the right channel approach, in isolation of other functions. This is no longer sufficient today. READ MORE

Jon Higbie

Hotels are no strangers to Revenue Management (RM). They were among the first industries to embrace Revenue Management, albeit by focusing exclusively on yield management. Retailers took notice and decided they, too, should employ Revenue Management, but weren't certain how to do it since they didn't have perishable inventory like hotel rooms. Instead, retailers zeroed in on price elasticity, giving birth to price optimization. However this time it was hotels that took notice. By the early 2000s, they were swiftly adopting price optimization of room rates and again transforming their industry. While this strategy has paid handsome rewards, it's time again for hotels to emulate retailers - and even consumer goods companies - if they want to conquer the next frontier of Revenue Management. READ MORE

Bill Linehan

Disrupters and brand loyalty are the jargon de jour among retail based industries. Even loyalty is making its metamorphosis into the more descriptive recognition. The jargon is evolving in an attempt to keep pace with its ever-changing environment as brands struggle to gain and retain the fleeting attention of consumers bombarded with messaging. Retail sales is more than the sum of its product. It is a masterful and complex interlinking of imagery and awareness that lead the consumer to purchase and advocate within their social circle. You are what you buy. The hotel industry is a retail based industry and savvy marketers are using retail based modeling to grow consumer's share of wallet and brand loyalty. READ MORE

Klaus Kohlmayr

Technology is having a huge impact on how revenue managers generate and optimize revenues at hotels. At the same time, it's clearer than ever that the “human touch” is indispensable: Without capable front desk, sales and revenue professionals at the helm, the possibility for generating meaningful ancillary revenue is limited. Equally, with an increasingly demanding and diverse generation of travelers coming to market, it's critical to be able to match the right kinds of accommodations with the right guests. This article examines the intersection of technology and human interaction in ancillary revenue generation at hotels today - with an eye not only toward enhancing revenues, but building guest experience and satisfaction as well. It pays special attention to the role of upselling, as a central piece to this puzzle. READ MORE

Loulu Lima

As I write this article, we are on the heels of HSMAI ROC and HITEC here in Austin, TX. What an amazing learning experience it has been; industry colleagues discussing Revenue Management and how to take it to the next level while keeping it simple. It used to be that revenue management was just about room revenue and how to make each distribution channel add incremental revenue to your bottom line. Now we speak in terms of revenue strategy, optimization of the entire house. Industry leaders are discussing newer terms such as: Total RevPAR, Profit RevPar or GOPPAR, Net RevPAR, Total ADR, etc. and questioning the cost of acquisition, who is tilting the scales now, where does group fall into this new landscape, etc. READ MORE

Mario Candeias

Amidst continued and foreseeable growth in Tourism and solid numbers in hotel operational performance and investment profitability, are the underlying causes sustainable in the long run? Are the tectonic forces of the online and off-line distribution world adjusting to bring Tourism to the next level? How is the hotel sector faring in increasing its weight in the value chain of Tourism? Focused, well informed and permanent action is needed to stay ahead in an endless fight for value and relevance READ MORE

Trevor Stuart-Hill

Pricing, per se, is not a new concept within the hospitality industry, but how we think about pricing and how we deploy pricing to relevant audiences is about to change dramatically. From early stages of fixed rack rates to variable pricing and through today's dynamic pricing, conditions will be just right for an entirely new method to emerge-one that is based on guest value. We call it target pricing. READ MORE

Robert Rauch

This year has been named the best that the industry has ever seen, however, the growth in distribution costs as well as other operating costs such as health care and the minimum wage increases can stunt profit growth if not managed properly. This means that reliance on the online travel agencies (OTAs) can impact the bottom line in a significant way. By directing guests to your hotel's website and telephones, the savings are abundant. The digital distribution costs are soaring and the number of players entering the market to compete with OTAs is rapidly rising (think Google, Facebook, Apple, TripAdvisor, Amazon and more). READ MORE

Paul van Meerendonk

Extended Length Accommodation - For hotel groups looking for new ways to generate additional revenue in 2016 and beyond, the extended length accommodation sector continues to grow and provides solid value for owners and guests alike. While the sector grew out of a niche set of hotels in the 1970's that sought to provide long stay guests with home-like amenities and atmosphere, nearly every major global hotel franchise today has at least one extended length accommodation product under their portfolio of brands. Pricing of extended length hotels and serviced apartments has traditionally been a challenging concept for revenue managers given rates vary greatly depending on the length of stay a guest is seeking. READ MORE

Zoe Connolly

While the general public focuses on football, Thanksgiving, Black Friday, Cyber Monday, Christmas, Hanukkah and a host of other traditions that occur between Thanksgiving and New Years, those in the hospitality industry know the season for something different: a dramatic uptick in travel. In fact, “uptick” may be the wrong word. “Tidal wave” may be more appropriate. While the media will inevitably report that “the day before Thanksgiving is the busiest day of the year for air travel,” this ignores the aftermath of people getting off their plane at their destination. This year, according to Orbitz, more than seven in ten Americans will travel for the holidays, meaning that across the US, folks in our industry will get to fire up the “no vacancy” lights. READ MORE

Carolyn Murphy

For hotels, driving direct bookings is more critical than ever before. With Expedia's acquisition of Orbitz earlier this year, Expedia and Priceline now own 94 percent of the online travel agency (OTA) market in the United States, according to Phocuswright data. Additionally, Google and TripAdvisor, two of the top online sources of travel inspiration, have released OTA-like features that will surely disrupt the market further. What does this mean for hotels? Hotels rely on OTAs to acquire new customers. The latest OTA consolidation means there is less competition. This, on top of the release of Book on Google and TripAdvisor Instant Booking, may result in fewer direct bookings and higher commission fees for hotels. READ MORE

Karim Meghji

There's a lot more to building a new product than just the technical aspect. Sure, you've got to have excellent design and execution, whether we're talking about blue jeans or cloud-based software solutions. Before you get to that stage, though, there's some important soul-searching that needs to happen. Approaching the planning stages with a healthy dose of critical thinking and honesty leads to the best product possible. And that's what everybody wants, from the business to the consumer. READ MORE

Doug Walner

Service orientation, aka personality traits and a predisposition to be helpful, thoughtful, considerate and cooperative, can impact your company's reputation for customer service - an important factor for success in the hospitality industry. Some people have it... and some people don't. Some people appear to have it (especially during job interviews), but, in reality, they're not suited for a service oriented position. Recent research has shown that being able to predict employee customer service behavior before an employee is hired would be extremely valuable to hospitality managers who must select and assess applicants for service orientated positions READ MORE

Janet Gerhard

Would you meet up with a fellow passenger from your flight to New Orleans at Cafe du Monde? Or leave a couple of women from a cleaning service in your house alone if you only just met then a half an hour before? How do you feel about leaving your cellphone at an airport charging station unattended? Yes, I've done all these things plus many more that some may call naïve or downright boneheaded, but I have always had a high level of trust in the strangers I meet every day. It's served me well for four decades, but how is trust changing in the modern world? READ MORE

Bernard Perrine

Through customer reviews and social media chatter, hotels have online reputations. While many owners and managers view this as a hassle, guest input is actually a gold mine, both for fixing service issues and learning about potential product additions that can provide new revenue streams. Hotels that address problems customers raise in cyberspace also outperform those that don't. We offer a guide to turning clientele comments into better service.This article will examine how managers should deal with online feedback, both positive and negative, and will look at how they can turn constructive criticism into better guest service. READ MORE

David Muller

Stagecraft is an indispensable part of the statecraft hotel executives perform in a variety of venues, before a variety of attendees, on behalf of a variety of issues. For that presentation to be a success, there must a distinctive look and feel that captures the essence of what a specific hotel represents; there must be an exclusive design, and a physical expression of the same, that is breathtaking in its use of color, lighting, set pieces and other materials. Achieving that goal is a collaborative effort between a hotel executive and the experts responsible for this project. Honoring that mission is an absolute priority. READ MORE

David Hogan

Revenue and risk management systems operate as part of a network much like the human body's nervous system. They're both part of a larger ecosystem delivering vital signals to an information center. Revenue management systems operate best when working in concert in an environment comprised of integrated, complementary processes answering to a central hub. An effective revenue manager (and management system) is essential for any hotel. READ MORE

Laurence Bernstein

Soft Branding is the new “it thing” in hotel marketing. Much has been written about how it works for developers, owners and operators, but the more important question is whether and how they work for travelers. In this article we look at the fundamental structure two of the brands that are successful in the soft brands space, and view this in terms of consumer's functional and emotional needs. The answer, from a consumer point of view, might surprise you. Is soft branding the answer to everything? READ MORE

Tema Frank

The best way for a hotel to thrive is by really understanding its customers and what they really want. We make too many assumptions about what our customers want and how they interpret our marketing and services. Kodak, for example, buried its own invention of a digital camera because it thought customers wanted printed pictures. Far too late they realized that what customers really wanted was a convenient way to capture and revisit special moments. It didn't have to be print. This article shows ways you can use market research and tools like personas to identify, understand and successfully cater to your ideal customers. READ MORE

Simon Hudson

Increasingly, hospitality marketers are turning their attention away from Baby Boomers towards gratifying the instantaneous needs of the Millennials. There are currently around 79 million Millennials in North America - that is three million more than Baby Boomers who are predicted to dwindle to just 58 million by 2030. Otherwise known as Generation Y, they were born between 1980 and 1999, children of the Digital Age. This article focuses on the behavior of this generation, and offers some tips on how hotels can be creative in attracting, satisfying and retaining this demanding demographic. READ MORE

John Padwick

Analytics and personalization are more relevant to the Customer Travel Planning Journey than ever before. As these factors evolve in parallel with innovations in technology, unique value propositions become crucial for every conversation and conversion. For the world-class brands we serve, every ad, offer and delivery should consist of more than just a currency exchange - more than a discounted room rate or property value points. Instead, travel brands need to understand where each customer stands within the travel journey - from search to shopping to booking. We need to develop conversations with our prospects by unifying the customer experience across devices and guiding each customer toward the next stage of the journey. READ MORE

Marc Stephen Shuster

Is it a mirage or are hotel condominiums making a strong comeback from the depths of the recession? Like everything else in real estate, it depends on location, location, location. In a select few cities, where the residential real estate market is only surpassed by the hotel industry (Miami, Los Angeles, and New York City), development is strong. Looking beyond these core cities to the nation as a whole, the resurgence has been slow and steady. READ MORE

Brandon Dennis

SEO (search engine optimization) is a long-term strategy. There are no quick wins. There are no shortcuts. You won't see success for months, or even years. You need to be ok with that. Think about SEO like investing in the stock market. Sure, a few people get quick wins, but for most investors, they only find success after years of investment in mutual or index funds. You will only find success with SEO if you understand that you are in it for the long-haul. READ MORE

Michael Koethner

We are living in profoundly extraordinary times and in order to get the most out of it, everyone must fully and completely step aside and leave the constraining and very limiting realms of mundane and irresponsible thinking, behavior and systems, which society has created for itself. People are coming to terms with the painful truth that they have given away all sacred and inherent knowledge and wisdom for the sake of a fake and restrictive safety net that in fact does not exist. READ MORE

S. Lakshmi Narasimhan

Whether it be geographic, demographic or the current rage, psychographics (or a combination of the three) that a hospitality business adopts to generate and sustain continued customer patronage, owners are particular only about whether these result in incremental revenues and profits. In short, is the business showing year on year growth? Having poured in substantial sums of money as investment, it is only fair and just that they expect and get returns commensurate with the risk taken and initiative shown. Thus, as far as the owners are concerned, the ascent of psychographics in marketing mix is a good thing since it may well be the tool used to produce sustained results that will make them laugh all the way to the bank. READ MORE

Bonnie Knutson

A current “hot term” in digital marketing is engagement. Everyone wants to engage their customers through their online content. The trouble is that most businesses, hotels included, are still trying to find their way in making this happen because, engaging customers via electronic media is still more art than science. This article will explore five “best blogging” tips for engaging customers/guests. READ MORE

Kelly McGuire

Hotel companies are beginning efforts towards personalizing the guest experience, leveraging what they know about their guest to create meaningful, personalized experiences and offers. These initiatives are designed to encourage guests to book directly with the hotel, reducing third-party commissions. While this may sound like a purely marketing-oriented program, if pricing and operations are not aligned, the hotel's profitability will suffer. The best way to ensure that all functions within the hotel profitably execute on personalization initiatives is for revenue management to implement a total hotel revenue management program, and help the organization move towards a revenue-oriented mindset. READ MORE

Jeff Catlin

You are already reading your reviews. I mean, you are, right? If not, then, you probably should at least start doing that. Do that, and then come back to this article. What we're going to talk about here is how you can broaden your view from just your reviews, out to competition reviews, then out to listening to all the social conversations that are relevant to your guest experience.Your brand reputation translates directly into higher revenue, and nowhere is brand reputation influenced more than online. The Internet is an enormously influential tool for consumers today: 80% of TripAdvisor's 340 million unique monthly users read at least 6-12 reviews before they book a hotel; another survey reported almost 30 percent of consumers saying that positive online reviews are the single most important factor in their booking decision. READ MORE

Mark Heymann

Tech-savvy, feedback-hungry millennials will soon represent the majority of the U.S. workforce. For the hotel industry, this will bring a fundamental shift in the way managers manage. Gone will be the days of top-down management, replaced by a flatter organization in which information flows freely and managers function as coaches, driving team results by focusing on optimizing individual performance. For the manager accustomed to holding information close to the vest, it will require a change in mindset - and that change will have to start at the top. READ MORE

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