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October - Revenue Management: Measuring All Hotel Revenue Streams
Revenue Management is a dynamic and ever-evolving profession and its role is becoming increasingly influential within hotel operations. In some ways, the revenue manager's office is now the functional hub in a hotel. Primarily this is due to the fact that everything a revenue manager does affect every other department. Originally revenue managers based their forecasting and pricing strategies on a Revenue per Available Room (RevPAR) model and some traditional hotels still do. But other more innovative companies have recently adopted a Gross Operating Profit per Available Room (GOPPAR) model which measures performance across all hotel revenue streams. This metric considers revenue from all the profit centers in a hotel - restaurants, bars, spas, conference/groups, golf courses, gaming, etc. - in order to determine the real gross operating profit per room. By fully understanding and appreciating the profit margins in all these areas, as well as knowing the demand for each one during peak or slow periods, the revenue manager can forecast and price rooms more accurately, effectively and profitably. In addition, this information can be shared with general managers, sales managers, controllers, and owners so that they are all aware of and involved in forecasting and pricing strategies. One consequence of a revenue manager's increasing value in hotel operations is a current shortage of talent in this field. Some hotels are being forced to co-source or out-source this specialized function and in the meantime, some university administrators are looking more closely at developing a revenue management curriculum as a strategy for helping the hospitality industry close this gap. 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. Need to subscribe? Click here!
Robert Mandelbaum

Historically, hotel revenue managers, aided by sophisticated computer programs, helped their properties determine the proper balance between the volume of guest rooms rented, with the price charged to rent those rooms. As revenue management has evolved, other factors have been added to the equation. Now, it is not just rooms revenue that is evaluated. Hotels realize that an occupied room has the ability to generate other revenues within the property. Using data from our Trends® in the Hotel Industry survey we are able to analyze historical changes in all revenues earned by U.S. hotels. READ MORE

Robert Rauch

The market is poised for boutique hotels to make an impact on the hotel industry like they never have before. With an expected soft landing of the economy in 2017 (2-3 percent RevPAR growth max) it is more important than ever for independent hotels to ensure that they have proper revenue strategies in place. Competing with the big brands for market share can sound like a herculean struggle but with execution of the proper procedures, a boutique hotel can stand apart from the crowd. Understanding where your business comes from is the first step of proper revenue management. READ MORE

Liz Uber

Finding “good” business is not enough, by itself, to ensure the long-term success of a hotel. Instead, you must find good business to bring to your property that is also the “right” business for that particular location. Although this might sound like a fairly simple task, identifying the right business for the right hotel can, in fact, be a complicated endeavor. It involves a thorough evaluation of each opportunity, along with many fluid components at the property, and the market in which it is located. These factors can include the operations of individual departments within a property. READ MORE

Ahmed Mahmoud

The ultimate goal of each hotel is to generate more revenue, achieve higher guest satisfaction, and a higher rank vs. its competitors, but when hoteliers implement the revenue management concept it needs a set of tools to help achieve the goals critical to maximizing a hotel’s profitability. It might be “A dark science --combining high technology and black arts”. While revenue management professionals devote significant effort towards advancing strategies and tactics to optimize revenue, many revenue managers still lag when it comes to establishing and measuring agreed upon success criteria. READ MORE

Nitin Shah

The good news is that globalization, cable news, the internet, and social media come together to give us instant and constant worldwide connectivity. However, the bad news is that these same technologies make all of us interdependent like never before on economic, political, and social events around the world. For hotel owners, the result is an industry that is more competitive, challenging, complex, and volatile -- and less predictable -- than ever. To demonstrate this, let’s look at how current global economic developments are having an impact on four aspects of the lodging business in America. READ MORE

Sheenal Patel

The hotel business can be mired in the way things have always been done. Hotel managers input data into spreadsheets without analysis, information from different business areas isn’t centralized, and hotel owners only address problems once they become chronic. Decisions are made without rigorous data to back them up, and a stagnant mentality can prevail. It doesn’t have to be that way—and in our company it isn’t. When we founded NVN Hotels 10 years ago, our intent was to challenge the status quo. By coupling a data-driven approach with guiding principles that empower employees to have ownership and enact change, we’ve created a culture that expects and rewards excellence, which ultimately increases revenues and propels growth. READ MORE

Breffni Noone

It is no secret that revenue management is facing a talent shortage. Current revenue management practice requires a focus on managing the profitability of all of a hotel’s revenue streams, and hotel companies are looking for emerging revenue managers who have the skill set required to meet that challenge. Amidst growing concern that hotel schools do not make the cut in terms of graduating students who are prepared for the demands of this new era in revenue management, I suggest that a strategic industry-academia approach is needed to develop a viable, and strong, revenue management talent pipeline. READ MORE

Steven Pinchuk

There appears to be an inevitable collision between two titans. Traditional segment based RM, which is not currently structured to consider each individual customer’s background and both their tactical value and lifetime value, currently does not work with the new breed of customer centric customer triggered one to one personalized marketing. Today an unknown customer usually gets the same price and availability as a known customer. This article will propose a solution that should be acceptable to both of these titans – where they will actually work together. Both pricing and availability can be more personalized without changing existing RM systems. READ MORE

Mario Candeias

Revenue Management (RM) has taken a lead role in the generation of an optimized top line. As it is technologically based and technology has taken over the world, RM benefited from those tailwinds in its rise to supremacy. Such, that most literature, research and general writings have been almost exclusively focusing on it. That is not a problem per se. But RM is merely a fraction of the top line. Sales is the “big picture” and RM is a function of it, not the other way around. Sales must recover its leading role, as without it, RM is nothing but a one-legged body. READ MORE

Mark Davis

The true art of Revenue Maximization (RevMax) at the elementary foundation is segment mixology including all points of revenue generation. I label this the perfect RevMax Cocktail with the ingredients engineered for total consumption of market share by segment from top rate to the lowest, while also considering each element of contribution to NOI margin. In terms of maximum RevPAR, it is simply maximum achievable occupancy at the highest deliverable ADR. However, before the hotel can celebrate success the team must also have a discipline to avoid the typical erosion of RevMax thru Rev-Leak! Every hotel must have an effective team balance to deliver the sweet spot: the most profitable revenue possible per available room. READ MORE

Bonnie Buckhiester

The saying goes that there are always two sides to every story. In the hotel business this couldn’t be truer when examining the relationship between operator and owner, or in many cases between operator and asset manager. Both want to optimize performance, but often this requires a careful balancing act between guest satisfaction and profitability. If a hotel is exceeding expectations – i.e. beating budget, surpassing last year, stealing market share – one might ask “does that mean the revenue management effort is optimal”? If a hotel is falling short of expectations, does that mean that somehow the revenue management effort is lacking? READ MORE

Stefan Wolf

Considering ancillary revenue streams can make up to 60% of hotel revenues of why would not any operator embark on the journey of total hotel revenue management? Apart from challenges related to the creation of a functioning revenue management culture the inclusion of F&B, spa and event revenue streams into that culture brings its own set of challenges. This article will explore these challenges and offer a guideline to successfully integrate additional revenue streams into a comprehensive revenue optimization strategy. Revenue per available room or RevPAR is a measurement of the success of a balanced occupancy versus average daily rate strategy. READ MORE

Natasa Christodoulidou

Revenue Management, also known as yield management, may be defined as the process of analyzing, anticipating, and impacting consumer behavior to maximize the profits from a fixed perishable resource, primarily hotel guest rooms and airline passenger seats (Christodoulidou, Berezina, Cobanoglu, 2012). Revenue management, including overbooking and dynamic pricing, has been an enormously important innovation in the service industry (Netessine & Shumsky, 2002). For example, a number of airlines overbook their reservations for a particular flight by 14% since on average they expect a 10% to 20% no shows on flights. The Marriott hotel chain credits its revenue management system for generating additional revenue of about $100 million per fiscal year. READ MORE

Kristie Dickinson

Revenue management continues to be one of the most important aspects of profitably operating a hotel, though it also remains one of the most difficult to grasp fully. Last year, I wrote an article on the Top 5 Questions Hotel Owners Should Be Asking About Revenue Management, which focused on conversations that owners should be having with their operators about setting goals, analyzing data and how best to measure results, all good primer leading up to budget season. To further the discussion, I will highlight some specific issues below that bear relevance in today’s market READ MORE

Steve  Van

We have all heard the old cliché that “less is more”, and, while there is a grain of truth in the notion that simplicity and clarity are sometimes preferable to complexity, the reality is that, regardless of the circumstances, more information is almost always a better bet. Today we are seeing the tension between these two ideas play out in the hotel industry, where revenue management has exploded with new approaches in recent years–almost all of it facilitated by an avalanche of previously ignored or unavailable data. Consider just how sophisticated revenue management has become in the hotel industry. READ MORE

EJ Schanfarber

The revenue manager of an individual hotel or hospitality entity has become the “quarterback” of modern hospitality strategy and, in many ways, operations. He or she reviews past game data, surveys the competitive environment, consults with coaching staff (ownership and brand standards) and listens to teammates (especially the general manager and director of sales) before hitting the field on any given day and making a complex play call. As we know, with revenue management, a lot of things are in motion at once before we can determine and allocate “which rooms, when, at what rates.” READ MORE

Jesse MacDougall

In the last two decades, the boutique hotel revolution has stolen the show and has birthed an abundance of small batch hospitality concepts that have scaled out and fundamentally changed the way hotels look and behave. The Kimptons and W’s have blazed the trail for FB&E hotels like the Ace and the Standard. European darlings like Citizen M have dared to dream small by making micro-rooms sexy with unapologetic modernism and vibrant, public spaces. Outliers, like the 21c Museum Hotels, exemplify the sort of programmatic innovation that begs the question – are hotels just hotels anymore? READ MORE

Bob Verrier

Back in 2001, Saunders Hotel Group, LLC (SHG) and Irish hotel group Jurys Doyle commissioned The Architectural Team, Inc. (TAT) to design a luxury hotel project in Boston – but it wasn’t to be a tall, glassy tower. Rather, our task was to renovate, restore, and update a classic structure that had been a part of the city’s fabric for nearly a century: the former Boston Police Department headquarters. Located in the historic and trendy Back Bay neighborhood, this beautiful seven-story Italian Renaissance Revival building rendered in limestone dates back to 1925. READ MORE

Pat McBride

The mission of hotels has evolved over the years, from simply providing guests with a comfortable, safe place to sleep to offering a destination that provides much more than shelter. At today’s hotels and resorts, visitors have a place to conduct business, enjoy good food and drink, socialize and escape from life’s everyday pressures. But travelers often seek something more now, and a new trend has distinctly emerged. Many visitors no longer want to escape. They want to explore and dive into the local atmosphere. Today’s travelers desire to experience the culture, attractions, food and neighborhoods of a destination more than ever before. READ MORE

Erin Hoover

Until mid-20th century, a hotel’s aesthetic was unique and customized to each location – either by design, as in the case of luxury properties built at the beginning of the 20th century, like the Waldorf Astoria or St. Regis, or by default, in the case of humbler regional hotels, motels and inns. The trend toward design standardization started in the 1950s in North America. Middle class prosperity mixed with modern interstate highways and cars designed for longer trips fueled an increase in leisure and business travel. But to offset the boundaries being pushed in personal exploration, travelers desired predictability in lodging. READ MORE

Coming Up In The December Online Hotel Business Review




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Feature Focus
Hotel Law: Issues & Events
There is not a single area of a hotel’s operation that isn’t touched by some aspect of the law. Hotels and management companies employ an army of lawyers to advise and, if necessary, litigate issues which arise in the course of conducting their business. These lawyers typically specialize in specific areas of the law – real estate, construction, development, leasing, liability, franchising, food & beverage, human resources, environmental, insurance, taxes and more. In addition, issues and events can occur within the industry that have a major impact on the whole, and can spur further legal activity. One event which is certain to cause repercussions is Marriott International’s acquisition of Starwood Hotels and Resorts Worldwide. This newly combined company is now the largest hotel company in the world, encompassing 30 hotel brands, 5,500 hotels under management, and 1.1 million hotel rooms worldwide. In the hospitality industry, scale is particularly important – the most profitable companies are those with the most rooms in the most locations. As a result, this mega- transaction is likely to provoke an increase in Mergers & Acquisitions industry-wide. Many experts believe other larger hotel companies will now join forces with smaller operators to avoid being outpaced in the market. Companies that had not previously considered consolidation are now more likely to do so. Another legal issue facing the industry is the regulation of alternative lodging companies such as Airbnb and other firms that offer private, short-term rentals. Cities like San Francisco, Los Angeles and Santa Monica are at the forefront of efforts to legalize and control short-term rentals. However, those cities are finding it’s much easier to adopt regulations on short-term rentals than it is to actually enforce them. The December issue of Hotel Business Review will examine these and other critical issues pertaining to hotel law and how some companies are adapting to them.