Mr. van Meerendonk

Revenue Management

Revenue Management's New Frontier in 2016: Extended Length Accommodation

By Paul van Meerendonk, Director of Advisory Services, IDeaS Revenue Solutions

As the global hospitality industry grows increasingly fragmented, guests embrace new technology and alter their historic approaches to researching and booking accommodation, and new competitors enter the private rental space; it can seem that for hotel managers today, change is the only constant. For hoteliers looking to maximize their revenues and the performance of their properties in this changing landscape, it is critical that all accommodation segments (and indeed types of guests) have the same proven revenue strategies applied to them to maximize potential profits.

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. Extended length hotels and serviced apartments differ from many traditional hotel rooms in terms of physical layout of the space, with the majority of rooms being equipped with full kitchenettes and often providing amenities such as complimentary wireless Internet access.

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. However, it is vital that hotel groups enhance their approach to pricing for this sector given the revenue opportunities that it presents. Through developing accurate demand forecasts and applying best practice operational strategies, an extended length hotel or serviced apartment will not just benefit revenues, it will also see wider impacts across entire operations, optimizing wage costs and increasing guest satisfaction. Overcoming RM challenges in an extended length property

Traditionally, one of the biggest challenges in applying revenue management in the extended length sector has been forecasting for the different length of stay profiles within the same property, such as transient (typically shorter stay demand) and longer stay demand. Understanding the dynamics of existing length-of-stay demand profiles for each property, unit, or revenue centre, and how this impacts price sensitivity, is critical in the acquisition of the guests in these segments.

Another important pricing challenge specific to long-stay properties is allowing for extensions to in-house bookings. This differs from primarily transient hotels where there are few extensions and they are compensated by those that check out early. These elements are all crucial to effective forecasting in the serviced apartment, aparthotel and long-stay businesses. This forecast becomes the basis for key business decisions that account for an acceptable mix of business, public pricing structures, and levels of expected extensions, cancellations and no-shows.

How Can a Serviced Apartment, Aparthotel or Extended Length Hotel Start Their Revenue Management Process?

The logical first step in introducing revenue management into an extended length accommodation property is to build an accurate forecast. A detailed forecast should include data that is both historical and forward looking. Historically, the data should include not only the number of occupied rooms, but also the type of room and if the room stayed in was the same as originally booked, or if the guest was moved to another room as an upgrade for example, coupled with revenue by Market Segment by day. The data should also ensure that the number of rooms and revenue on the books by day (and by Market Segment) for the hotels booking window is included. If data is collected every day it will allow the extended length property to establish simple booking pace forecasts by segment and day of week, which they will be able to compare to historical data. If this is done consistently it will allow hoteliers to more accurately understand future demand and enable them to tweak their strategies accordingly.

An accurate forecast forms the core of successful revenue management strategies and allows an extended length property, or group, to proactively respond to changing market conditions, supporting effective and informed day-to-day tactical business controls. A measured and strategic approach to pricing is recommended to preserve long-term revenue optimization. It is vital that serviced apartment, aparthotel and extended stay owners are able to forecast and identify potential periods of low demand, as this will allow them to take on more long stay guests and price that demand appropriately. In periods where higher demand is anticipated, accommodation providers may not want to take on too many long stay bookings as this may displace higher paying segments which are potentially more profitable. The reverse may also be true, depending on particular market dynamics, costs and business models.

Proactively reviewing long-term demand forecasts can additionally help operators in validating future peak and need time periods. This reviewing process helps support effective decisions in Sales and Marketing teams, allowing the sharing of data, strategy and effective decision making to drive performance improvements and alignment across the business, as well as the ability to offer a weekly rate as opposed to just seven daily prices, along with a bi-weekly option and even monthly rates.

How Can Revenue Management Support the Unique Needs of This Sector?

Supporting growth in the extended length accommodation sector through effective revenue management technology and support services can be achieved through three key pillars: price, optimal business mix selection, and the allocation of available inventory. Price is a key lever to driving revenue and profitability. Price sensitivity and costs associated with both transient-type and longer-stay reservations are key considerations, equally as important to understanding a property's demand and booking, extension, and cancellation windows.

Advanced revenue management strategies and solutions can help a property select the most valuable business, spreading demand across peak and shoulder nights to maximize occupancy. Automated systems can maximize revenues from booking extension, higher valued long-stay enquiries, and help plan for cancellations and non-arrivals. There are also market tools available that fold in competitor impacts on long and short-stay demand separately, and assess the impacts of price changes or demand adjustments, which not only helps set better rates, but also helps ensure that one sold out night is not blocking a guest willing to make a 30 night booking.

How Can Revenue Managers Get Buy-In From Senior Leaders of an Extended Length Property?

To maximize the benefits for revenue management, executive teams within an extended length hotel or serviced apartment need to recognize that it is not enough to simply appoint a revenue manager, or install revenue management software and have this work in isolation to other departments. Revenue managers within an extended length property must work closely with the executive suite to build and instill a strong culture of revenue management to drive profitability. In order to obtain the maximum benefits from revenue management and optimize profits from all property assets, executive buy-in across multiple departments including sales and operational divisions is vital.

To get buy-in from property owners, revenue managers can demonstrate how the data they work with ties into areas that they are interested in, such as: asset profitability and value, competitive set performance, return and costs on employed capital, and guest acquisition and service. Many owners and senior managers are familiar with revenue metrics like RevPAR, Average Daily Rate (ADR) and occupancy and by being able to engage these figures with reports that talk to issues they commonly address, will help owners and other teams better understand how revenue management provides a rational approach to long-term business performance improvements.

The Time is Now for the Extended Length Accommodation Sector

The hospitality industry is always evolving, and 2016 will be another year of change as the landscape becomes even more competitive and guest behaviours, booking patterns and accommodation preferences alter. For hotel groups looking to maximize their revenues across their entire portfolios, the extended length accommodation market presents sizable opportunities. However, as the extended length accommodation sector grows, matures and differentiates itself from traditional hotel offerings, the management strategies and operational systems being used by extended length properties also need to advance to ensure that guest experiences and revenues are maximized. It is those property owners in the extended length accommodation sector that research and apply best practice pricing techniques, revenue management strategies and systems proven in the wider hotel sector, into their properties, that will support revenue growth now and into the future.

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...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.

Receive our daily newsletter with the latest breaking news and hotel management best practices.
Hotel Business Review on Facebook
RESOURCE CENTER - SEARCH ARCHIVES
General Search:

MAY: Eco-Friendly Practices: The Value of Sustainability

Eric Ricaurte

In 2011, we visited the 10 hotels contracted in the room block for the Greenbuild conference in Toronto. As part of their award-winning sustainable event program, the conference organizers embedded green practices into the contract language for these hotels, who either had to comply with the requirements, explain their reason why they couldn’t implement them, or pay a $1,000 fine. Part of our consulting work was to gather the data and confirm some of the practices on-site. READ MORE

Susan Tinnish

Hotels brands have actively engaged in large-scale efforts to become more environmentally friendly. Individual hotels have made great strides on property. Many significant large-scale eco-initiatives s are most easily built initially into the infrastructure and design of the building and surrounding areas. Given that the adaptation of these large-scale changes into the existing asset base is expensive and disruptive, hotels seek different ways to demonstrate their commitment to sustainability and eco-friendly practices. One way to do so is to shift the focus from large-scale change to “small wins.” Small wins can help a hotel create a culture of sustainability. READ MORE

Shannon Sentman

Utility costs are the second largest operating expense for most hotels. Successfully reducing these expenses can be a huge value-add strategy for executives. Doing this effectively requires more than just a one-time investment in efficiency upgrades. It requires ongoing visibility into a building’s performance and effectively leveraging this visibility to take action. Too often, efficiency strategies center on a one-time effort to identify opportunities with little consideration for establishing ongoing practices to better manage a building’s performance ongoing. READ MORE

Joshua Zinder, AIA

Discussions of sustainability in the hospitality industry have focused mainly on strategies at the level of energy-efficient and eco-friendly adjustments to operations and maintenance. These "tweaks" can include programs to reduce water usage, updating lighting to LEDs, campaigns to increase guest participation in recycling, and similar innovative industry initiatives. Often overlooked—not only by industry experts but even by hotel operators and designers—are possibilities for hotel design and construction that can make a property truly sustainable from the get-go. READ MORE

Coming Up In The June Online Hotel Business Review




{300x250.media}
Feature Focus
Sales & Marketing: Who Owns the Guest?
Hotels and OTAs are, by necessity, joined at the hip and locked in a symbiotic relationship that is uneasy at best. Hotels require the marketing presence that OTAs offer and of course, OTAs guest’s email when it sends guest information to a hotel, effectively allowing OTAs to maintain “ownership” of the guest. Without ready access to guest need hotel product to offer their online customers. But recently, several OTAs have decided to no longer share a data, hotels are severely constrained from marketing directly to a guest which allows them to capture repeat business – the lowest cost and highest value travelers. Hotels also require this data to effectively market to previous guests, so ownership of this data will be a significant factor as hotels and OTAs move forward. Another issue is the increasing shift to mobile travel bookings. Mobile will account for more than half of all online travel bookings next year, and 78.6% of them will use their smartphone to make those reservations. As a result, hotels must have a robust mobile marketing plan in place, which means responsive design, one-click booking, and location technology. Another important mobile marketing element is a “Click-to-Call” feature. According to a recent Google survey, 68% of hotel guests report that it is extremely/very important to be able to call a hotel during the purchase phase, and 58% are very likely to call a hotel if the capability is available in a smartphone search. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.