Ms. Mockerman

Revenue Management

How Today's Revenue Management Systems Can Help Hotels Manage Tasks

By Lily Mockerman, Founder, TCRM

Today's revenue management systems can help any hotel quickly and efficiently manage revenue tasks that would otherwise present a challenge. It can be difficult to stay on top of distribution across multiple channels when there are plenty of other issues facing a property at any given time. In the Revenue Management world, the differences within independent or branded environments can often be significant regarding how each respective entity deals with revenue management. Often, we're asked about differences in working with each type of property as it relates to strategies or RMS systems, and how TCRM approaches these unique challenges.

In response to these types of inquiries regarding revenue management systems, it's likely more accurate to say that a system is more important to specific markets as opposed to an independent or branded environment. In quickly changing and dynamic markets like New York City, Los Angeles or San Diego, minute to minute fluctuations make the benefits of an RMS more substantial than to suburban markets that see little fluctuation in demand or rates as each day progresses. That being said, independent hotels are significantly more customizable from property to property in rate setup and yielding tactics, which allows Revenue Managers to use tools like Excel and simpler formulas vs. complex algorithms to help guide revenue decisions. For this very reason, it may be easier for an independent property to function without a full-scale system, whereas a brand would need that all-encompassing system to make proper decisions.

The differences in handling independent properties and chain properties are widespread, but the most significant difference is in the scope of possibilities within the system. For example, independents provide the opportunity to leverage a minimum stay-through strategy against or in combination with a minimum length of stay by arrival, combinations of which are usually not supported by brand systems. In addition, rate category setup and restrictions can be customized to suit the precise situation of a property which caters to market dynamics and property goals vs. a pre-defined structure provided by a chain.

To address revenue optimization, each chain has a slightly different approach to the RMS question. Some chains are contracting with independent RMS providers to "white-label" each system, like GRO for Hilton. Others, like Hyatt and Starwood, have developed entirely proprietary systems to suit their internal brand goals. Brand systems, particularly those that are uniquely developed for one brand family, often have a significant edge over independent systems in dynamic functions due to the size of the budget backing the development of each program.

The ability to leverage more expensive features such as hourly real-time optimization updates can quickly give a property a strong competitive edge in a major market, as opposed to many independent systems that offer updates only once or twice a day. Alternatively, brand systems leave less room for customization, which at times can hinder properties that might not fit the exact mold of the brand, resulting in additional overrides and manipulation of the system by revenue managers to help create adaptation.

This may lead those in the industry to believe that independent hotels do not possess the same resources as chain hotels. To an extent, that is true. There are certain challenges that an independent hotel faces that don't affect chains. In today's revenue management environment, there are a few critical resources that revenue managers must use when working with independent properties. Most importantly, revenue managers cannot excel without adaptability and learning agility. Every independent property in each market presents unique challenges and opportunities, and requires a truly adaptable approach to each situation, with the necessary level of customization, to properly leverage the opportunities that present themselves. Depending on the property, demand may dictate completely opposing strategies.

For one hotel, packaging and upgraded room types may be in demand, while at another property, upgrades may rarely be booked directly and will only be filled by overbooking base room types. In another case, packages may be used strictly for SEO purposes and rarely generate revenue directly. For independent properties, it's essential for revenue managers to be creative, constantly researching and uncovering new opportunities within the industry. This will help each property develop future revenue growth rather than remaining stagnant.

Independent hotels do have the unique opportunity to be more agile than chains, as things often move more quickly when dealing with a single property compared to a large group. If independent hotel revenue managers want to stay ahead of the curve, they should be proficient in Excel. Yes, it might be "old-school," but this program has been around for several years and for good reason. Excel has the customization and capability that allows it to be used in several different ways to provide essential supplementation to an existing RMS or other hotel system.

At TCRM, we have experience with both independents and chain properties and pride ourselves on customizing our approach to each individual situation, whether market, economy, brand or independent. When working with an independent property, we are more likely to supplement any system in place with specialized Excel tools. Additionally, we are able to approach a revenue problem from different angles for these hotels without restraint from brand guidance on how various strategies should be deployed.

This is not to downplay the benefits of being part of a brand, however, by any means. These chains have set procedures that are time-tested and work across large portfolios and a variety of markets. When TCRM is working with a property that is part of a chain, we adjust our approach to leverage the unique capabilities and opportunities that each brand presents based on their internal structure and approach to revenue management. These setups yield multiple layers of support that allow a revenue manager to draw from the experience of a group, which differs from a solo experience within an independent environment. In either case, the role of the Revenue Manager can often become more like that of a systems analyst, with the best results coming from managers that understand their given systems and capabilities in depth to leverage those systems against revenue opportunities.

There are many challenges that have developed in the revenue management industry over the years. Booking windows grow shorter and shorter and year over year pace no longer yields as much intelligence as it previously did, mainly because patterns and booking behavior of guests have changed dramatically. As TCRM leads strategy for our clients, it remains important that we present the data for changing elements in each unique market and the opportunities or potential pitfalls that could present themselves.

It can be easy to get mired in the minutia and fixated on same-day results, especially when trying to impact a longer-term, more sustainable change in revenue strategy. Long-term gains can sometimes necessitate absorbing short-term pain. For example, when strategy shifts from an occupancy focus to an ADR focus, there may be short-term negative results. This is when hotels often panic and think a mistake has been made and derail the carefully crafted strategy.

This is precisely the reason that it is so important to work with a Revenue Manager experienced in analyzing these situations rather than giving in to an emotional, knee-jerk reaction. A seasoned Revenue Manager will evaluate the data correctly, pulling from various sources and looking at multiple angles, and adjusting and tweaking the approach as the property travels toward sustainable strategies and overall revenue growth.

As mentioned previously, independent hotels benefit from a higher level of agility, as they can react to changing times with the potential to quickly shift strategy. Chains remain forced to roll out a complete change to their entire portfolio, which can sometimes take months to move forward. Independent hotels can change quickly, given that the appropriately experienced person is leading the way.

However, a major challenge for independent hotels remains the ability to boost ADR, which is typically easier for chains. Chains often receive better placement on the available distribution sites because of the size of their agreements with each OTA. This can leave independent hotels with fewer tools to boost visibility without having to offer discounts or higher commissions to secure better placement, particularly relevant in larger markets. As a result, and by default, independent properties may push RevPAR from an occupancy standpoint. This is notably different for iconic independent properties or well-known luxury properties, which create their own "brand," while being managed independently and experiencing strong direct booking demand.

While this disparate ADR strategy may be the trend of today's market, however, traveler preference and demographics are beginning to lean more towards independent properties that provide unique and local experiences for their guests, mainly a result of the emergence of affluent millennial travelers that prize an experience over the standard amenities of a cookie-cutter brand. Brands are already seeking to capitalize on this with the emergence of "soft brands" such as Curio, Autograph or Tribute, but independent hotels have the potential to create thoughtful authentic experiences for their guests and will continue to hold the advantage. Over the next two to three years, independent properties that provide excellent guest service and receive overall positive reviews will be able to charge premiums that compete with and may overtake similar branded properties, which would propel them to higher RevPAR than their branded competition.

On the other hand, an independent hotel may decide to align itself with a "soft brand" or perhaps an affiliation group, such as Preferred Hotels or Design Hotels, to benefit from the brand's broader marketing reach and list of resources. It is important to closely evaluate the costs and benefits of this type of affiliation prior to engaging in the partnership. The expected increase in demand, the impact of having to accept lower-rated reservations, such as reward stays, and the additional marketing fees and higher cost of distribution are all areas that need to be carefully evaluated.

Inevitably, human error may cause revenue managers to make mistakes. The degree and impact of a mistake can vary and could include anything from a strategy negatively affected by sudden market changes to a data entry error resulting in an incorrect room rate being published. So, are independents or chain hotels impacted more when a mistake is made? The answer is that each property needs to deal with this situation very differently. For example, when a strategy is not well thought out or deployed, both independents and chains must absorb the results of the decision. However, with an event like a rate published in error, the guidelines of a brand will likely determine which type of property will have a better recovery. The brand may be able to work with guests that booked an inaccurate rate and return rates on most reservations to a normal and market-appropriate spend.

Alternatively, the rules of the brand could protect the guest if the brand seeks to present a strong customer service image and mandates that hotels absorb the impact of these errors. Additionally, the marketing reach of the brand can work against a hotel in this case, as low rates are quickly circulated and available to guests, oftentimes before a revenue manager can find the error. As for independents, it generally remains the responsibility of the property to determine the action that is best suited for each individual situation. In some cases, each individual guest may be handled differently with demeanor and value playing a major role.

In the end, there are several unique differences in the management of independents and chain hotels, with several variables that come into play, requiring revenue management professionals who can skillfully navigate each situation. The properties that will "win" are those that employ these savvy revenue managers, leverage the systems and benefits that their affiliation offers, and adapt quickly to today's changing environments.

Lily Mockerman, President and CEO, founded Total Customized Revenue Management in 2012. It has become the premier provider of revenue management services for the hospitality community. Ms. Mockerman is a devoted leader and practitioner in the revenue management field. She has developed strong analytical skills and experienced foresight, is technology-savvy in many hotel systems and can clearly communicate vision and strategy for her clients and team. Since earning her Bachelor of Science in Hotel Management from Johnson & Wales University, Ms. Mockerman’s career has encompassed a variety of roles and responsibilities, including experience with Starwood Hotels & Resorts, Hilton Worldwide and the independent hotel space. Ms. Mockerman can be contacted at 623-536-7066 or info@tcrmservices.com Please visit https://www.tcrmservices.com/ for more information. Extended Bio...

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