Conferences and Events: The New Frontier of Revenue Management?

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | August 28, 2011

With conferences and event revenues accounting for a significant portion of a hotel’s financial performance, an increasing number of hotel groups are starting to focus on these activities to support their facility's bottom lines. However, with the rise in prominence of conferences and events, there are a number of key issues that savvy revenue managers should consider to ensure that they are optimizing their conference and event spaces.

Given the maturity of room management within the revenue management sector, hotels are increasingly looking towards conferences and events as the next source of business growth. This is due to the significant contribution that conferences and events can make to the total revenues of a typical hotel – anywhere between 15 to 50 per cent and more of overall revenue in many cases. In a Cornell Hotel School survey on the Future of Revenue Management conducted with 500 revenue management professionals in 2010, a hotel’s function space also rated as the most likely area that future revenue management practices will be applied to.

Conferences and events have been underestimated in the past by hoteliers due to a lack of in-depth understanding and appreciation of the positive benefits that these activities can bring. Additionally, the overlapping nature of the revenue streams across catering, function spaces and sleeping rooms add complexity to the overall business opportunity identification, which has slowed innovation in the areas of conference and events. In reality, an opportunity in one revenue stream can hardly be separable from the other. Rather than approaching conferences and events from business viewpoint, it may actually be more appropriate to approach it from the consumer’s point of view. In this case, it is serving the needs of “groups” of people that have varying areas of needs in catering, function space and sleeping rooms.

Most experienced RM practitioners will understand that for any optimal Revenue Management process to work, the hotel must be able to effectively manage consumer demand through a thorough understanding and analysis of market segmentation, accurate demand forecasting and application of various levers for each of its products to be able to pick the optimal customer at the optimal price for the optimal time and the optimal product. The concept is the same whether revenue management is applied in rooms or function spaces.

While the process of managing each area within the conference and events cycle forms the basis of any sophisticated revenue management approach, the best results will only be achieved through optimal combination of the right processes, technology and people.

One of the primary issues needing to be addressed by any hotelier looking to enhance their returns from conferences and events focuses on developing the right forecasting methodology to predict demand for function space. This can be done via utilizing forecasting which is based on scientifically-driven calculations rather than based on experience or gut-feel. The forecasting should be performed with sufficient amount of granularity such as by segment or event type, day of week or time of day. Forecasting also needs to consider data points that provide overall picture of demand sources.

Coming up in January 2018...

Mobile Technology: Relentless Innovation

Technology has become a crucial component in attracting and retaining hotel guests, and the need to enhance a guest’s technology experience is driving a relentless pace of innovation. To meet and exceed guest expectations, 54% of hotels will spend more on technology in 2018, and mobile solutions in particular will top the list of capital investments. Many hotels are integrating mobile booking, mobile keys, mobile payments and mobile check-in into their operations. Other hotels are emphasizing the in-room experience, boosting bandwidth and upgrading flat screen TVs to more easily interface with guest mobile devices. And though not yet mainstream, there are many exciting technology developments on the near horizon. The Internet of Things (loT) is taking form in some places, and can be found in guest room control systems, voice activation systems, and in wearable sensors that can be used for access and payment options. Virtual reality headsets are available at some hotels so guests can enjoy virtual trips to exotic locations or if off-property, preview conference facilities and guest rooms. How long will it be before a hotel employs a fleet of robots for room service, or utilizes a hologram as a concierge, or installs gesture-controlled walls that feature interactive digital displays? Some hotels are already using augmented reality for translation services, or interactive wall maps, or even virtual décor. This pace of innovation is challenging property owners and brands to stay on top of the latest technology trends while still addressing current projects. The January Hotel Business Review will explore what some hotels are doing to maximize their opportunities in the mobile technology space.