Optimizing Revenues from Your Hotel Guests
By Paul van Meerendonk, Director of Advisory Services, IDeaS Revenue Solutions
Hoteliers spend a lot of time and money researching, marketing and trying to attract new guests to their hotel, all in order to boost revenue. While growing your customer base is critical to ongoing success, hoteliers should also make sure they are maximizing the money they make from existing guests.
The path to sustained profitability and growth in this current competitive climate has taken a turn for hoteliers around the world. While room revenue still makes up a healthy part of a hotel's total revenue and will always be a strong focus for revenue managers, retail, food and beverage, spas and entertainment are becoming increasingly important sources of income. Progressive hoteliers understand these factors play a big part in a hotel's ability to maximize and optimize revenue. To help ensure a hotel is making money from its current customers, it is vital hoteliers understand and qualify their guests so they can use the most targeted and effective strategies to maximize revenue through up-sells and promotions.
Optimizing revenue through ancillary services is still based on the core elements of revenue management, such as selling the right products to the right customers at the right time etc., based on accurate demand forecasting, pricing and an individual customer's preferences. Through using revenue management software, as well as effectively using staff across the hotel, from the front desk to the marketing department, it is possible to package and promote targeted offerings that expand beyond room rates and optimise revenue, as well as guest satisfaction and loyalty from existing customers. This emerging practice, which encompasses a holistic approach of maximizing total revenue from a guest, rather than just optimizing room revenue, is becoming known as total revenue management.
To effectively carry out total revenue management it is vital to have a heightened understanding of individual guest preferences. You need to understand what a guest wants - is it spa or drinks before dinner? It is also valuable to know what a guest's plans are during their stay and the reasons they are staying at your hotel in the first place. By understanding what each customer from any given market segment is likely to use, you can make better decisions about which customer should receive that last available room, who should be offered free or discount breakfast options or complimentary spa treatments for a limited time, etc. to drive demand in low periods and maximize revenue during a guest's stay.
While many hoteliers have good intentions of using market segmentation and total revenue management principals, once a guest enters the hotel these can often go out the window. Duplicate profiles and data accuracy errors can make it difficult to give guests exactly what they want or prefer, and more often than not blanket offers will be given for all guests. This is a common mistake and can lead to a number of issues, from giving away products when it's not actually necessary, or it can even put guests off your hotel, annoying them with offers and promotions that are of no interest to them.
For example, a common blanket promotion may be offering every guest a discounted breakfast at check in. Hoteliers need to understand that not all guests should be offered such discounts. If you know a guest is paying the best available rate and is less price sensitive due to different priorities (such as flexibility), why would you want to offer a discounted breakfast? It wouldn't make any sense. And for other guests, offering this discount might just be a waste of time - and show them a hotel doesn't truly understand their needs. For example if you know a guest is arriving at 11pm and leaving at 6am, wouldn't it be better to try and sell a breakfast on the go, or even a coffee that can be picked up at checkout as they leave?
These kinds of individualized offers, based specifically on a customer's exact situation and preferences, can be far more effective than trying to up-sell "one for all". To execute these types of promotions effectively, hoteliers should ensure they understand each of their customers. The earlier you identify which guests do want to take on extra offerings at your hotel, the easier it will be to drive them into your own outlets and influence their purchasing decisions, rather than wasting time and money offering discounts to the wrong customers. Without having this holistic understanding of their preferences, it is impossible to fully enhance a guest's experience, maximize revenue and ensure loyalty.
Qualifying your guests and looking at their total spend not only helps increase the relevance of promotions, but it also helps identify those customers most likely to have the greatest lifetime value. If you know enough about your customers you can send your offers only to the "best" set of customers who are most likely to respond.
Once you know who these customers are, you can then work on keeping them happy, as well as maximizing revenue, from the time they make a booking right through to after stay promotions. A hotel that we have been working with recently has even been using this approach to send text messages to guests after check in, advising them of promotions that are most suited to them. Customers appreciate this individual attention and reward hotels with increased loyalty and purchases. Once a guest has completed their stay at the hotel, instead of sending blanket marketing campaigns, your customer base should then only receive relevant offers they are likely to be interested in, based on their product preferences and previous purchases.
Extracting the Information
So how do you know what a guest's preferences are? As well as extracting data on past stays, this information can be extracted through normal conversations, both when customers are making bookings, as well as checking in and out. Often instead of employing "sales managers" at the time of booking, hotels employ "order takers" who don't take the time to extract additional valuable information to then up-sell the most relevant product. If reservation agents took the time to ask simple questions, such as whether their stay was for a special occasion, it would point them in the direction of what kind of special packages could be offered to suit them, as well as providing the chance to gather valuable data.
When it comes to check-in, the front office is the central hub and is often focused on speed and efficiency. The attitude at most hotels is the faster the check in, the better. But this can also lead to vital up-selling opportunities being missed. Hoteliers should encourage staff to focus on up-selling arriving guests at check-in, which can contribute significantly to your top line. Many staff also spend time focusing on explaining the features of a certain package, but don't explain what this means in terms of actual benefits guests will be getting. For example, when talking about a room upgrade, they may explain where it is located, but not go on to explain the "what's in it for me" benefit it has for the guest. To manage wait times, hoteliers should also be looking to use demand forecasting and data on check-in patterns to manage the number of staff at check-in, putting more on in peak times, and less in the quiet hours. This principle can then be applied to all other areas of the hotel and most hotels do this to control their costs.
Room revenue will always make up a big part of a hotel's revenue; however, by getting a strong understanding of your customers, you can make the most out of all revenue streams such as retail, food and beverage, spas and entertainment, which are all becoming increasingly important sources of income. To make this happen it is vital that staff that are taking orders, or checking in guests, also play a part in extracting valuable information and up-sell the right products therefore creating a total revenue management culture across all levels of the workforce.
As Director of Advisory Services for IDeaS Revenue Solutions, Paul van Meerendonk leads a global team of revenue management advisors focused on hotel revenue optimization projects. Mr. van Meerendonk is responsible for global development, management and operations of the Advisory Services team. He oversees the hiring, training and management of industry-leading consultants located in London, Beijing, Singapore and Atlanta. Mr. van Meerendonk also represents IDeaS on industry thought-leadership initiatives related to trends and best practices within revenue management, including authoring a number of white papers, conducting public speaking engagements, as well as leading key client webinars with an average audience of over 200 global representatives. Mr. van Meerendonk can be contacted at +44 (0) 118-82-8100 or Extended Bio...
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