Why Increasing Stakeholders Helps to Increase Profits

Extending Revenue Forecast Visibility

By Bernard Ellis Vice President of Industry Strategy, Infor Hospitality | July 13, 2014

Today’s hotel managers face the challenge of growing revenue while simultaneously combatting continuously rising costs. While the hospitality industry has always been vulnerable to short-term impacts from global or regional events, new buying patterns encouraged by Internet booking channels, as well as the costs of using them, continue to be extremely unpredictable. In this increasingly uncertain environment, hoteliers have no choice but to constantly predicting future outcomes and adapt to them as they change.

According to STR, the United States lodging industry set new records for most rooms sold, highest room revenue and highest revenue per available room (RevPAR) in 2013, so why are commensurate gains in gross operating profits or net operating income not becoming the standard? Rising costs, such as labor, distribution, food, energy, and interest expenses, are major factors, but something else has to be going on.

With costs on the rise, owners and operators must ask themselves – what additional actions can be taken to improve profitability? The first stop is the top line – employing advanced revenue management techniques and strategies, often through industry-specific technology applications, is one essential method to help pinpoint areas for increased return.

There are three steps that hoteliers should take when formulating revenue management strategies in order to improve profitability:

  1. Forecast ancillary revenue streams in addition to traditional room revenue using advanced revenue management techniques and technology.
  2. Educate multiple levels of the organization on how to not only read forecasts, but interpret them in a way that derives greater meaning for their respective departments.
  3. Encourage a forward-thinking mentality that relies on forecast accuracy for right-now decisions, but employs forecast performance to create long-term benefits.

In traditional revenue management, only a select few within the organization were given the opportunity to truly understand the RMS forecast output. Since technology allows the forecasts to be recalculated at least once a day for the entire booking window, this was simply too much of a moving target to keep all the other departments in the loop. While these decision-makers, often limited to just sales and marketing directors and the revenue managers themselves, do have the expertise and knowledge to derive critical insights from the latest reports; teaching managers at all levels how to also formulate meaning from them to drive their operational and financial forecasts is critical. By extending more dynamic forecast visibility to a wider variety of employees, organizations gain unique perspectives of future outcomes that can help to grow profits.

Having a clear picture of the future allows hoteliers to determine what course of action will yield the best results. Bringing this view to more employees within the organization then enables front office, housekeeping, restaurant, and other functional managers to better align their staffing and supplies with fluctuating demand levels. By forecasting revenue streams outside of standard room revenue, such as spa and catering outlets, and then teaching these managers to read forecasts, organizations are taking the first steps toward identifying revenue and savings opportunities.

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.