HOTEL BUSINESS REVIEW

October FOCUS: Revenue Management

 
October, 2015

Revenue Management: Optimizing Income Streams Across All Avenues

The role of Revenue Managers, within their profession and the organizations they serve, continues to evolve. A significant portion of the change is driven by technological innovation which, given its magnitude in today's markets, also redefines their standing on the hotel team. Revenue Managers are moving away from being exclusively spreadsheet-centric and finding better ways to share their data. This shift also requires them to engage more directly with their sales, marketing, and operations departments. Part of this development is due to a reassessment of their metrics for success. Revenue was previously the sole factor by which success was determined but now there is a greater emphasis on price optimization, profitability and flow through. Managers are combining sales, marketing and revenue management, and then adopting a data approach to optimize their income streams across all avenues. This metric evaluates performance in all revenue streams and then calculates the gross operating profit per available room. Hotels are now measuring everything a guest does - and spends money on - from the time he books until the moment he checks out. In addition, Revenue Managers will soon be able to shift their focus from room availability to the guest and his ability to pay. A future revenue management system might take into account things like weather forecasts, the recent online activity of the guest, the guest profile and persona, time of booking, the mode of travel and the fare paid. It might also calculate all the previous stays for this guest, and how much was spent on their room and in the hotel. All of this will be compared to millions of other potential future reservations to determine a unique room and rate for a specific individual guest. The October issue of the Hotel Business Review will address all these developments and document how some hotels are executing their revenue management strategies.

This month's feature articles...

Kristie Dickinson

As hotel asset managers, we ask a lot of questions. Separating the average asset managers from the indispensable ones, is the ability to ask the right questions. What are the right questions, you ask? The right questions do a number of things…for one, they challenge the status quo, shake things up and really make people think - why are we doing it this way, how else might this be done, is it working and what should we change? Questions should also evoke discussion about where you are today, but more importantly where you want to be in the future and how to get there. READ MORE

Elizabeth  Churchill

After beginning a process of integration more than a year ago, Aqua Hospitality and Aston Hotels & Resorts rebranded this year as Aqua-Aston Hospitality. In addition to the new name, the group - which manages more than 50 properties across Hawaii and the U.S. mainland - also unveiled a new look, and further distinguished what its five hotel brands offer travel partners and consumers. The result: one of Hawaii's leading hotel management groups is in a stronger position to achieve sustainable growth through strategic revenue management. READ MORE

Amy Bair

Thanks to the Age of Technology, Revenue Management has risen to the top of the Agenda for virtually every hotel Executive Committee meeting. The question to be answered historically has been “How do we maximize our revenue stream?” But that question has been expanded to “How do we maximize our revenue stream and ensure that dollars coming in on the top line survive the journey to the bottom line?” The simple answer is focus on optimizing room rates. The numbers make the case. READ MORE

Tammy Farley

As the art and science of revenue management evolve, the focus sharpens on finding custom solutions rather than selling products to hotels, resorts and gaming establishments. As sophistication grows, the target broadens to maximization of total guest revenue. This article provides a roadmap - and cites best practices -- for optimizing revenue, regardless the type, size, or makeup of a property's business. READ MORE

Brian Tkac

The revenue management landscape has become more complex, requiring a strategic road map that navigates a property or organization through a journey meeting the horizon of optimal profit levels. How should a hotel company support these initiatives and nurture an authentic culture? Which stakeholders should be involved in the process and where should they expect all of the needed tools and resources to deploy effectively? As costs of distribution, acquisition, talent retention and costs per occupied room continue to escalate, what does a hospitality executive or asset owner need to perform in total revenue management to deliver a solid POGR (profit per occupied room) and deliver holistic performance objectives? READ MORE

Steven Pinchuk

At its inception, Revenue Management (RM) was a management science that created techniques which applied micro-economic theories. These micro-economic theories were implemented using advanced predictive analytics and robust optimization, that defined and optimized the availability and pricing of inventory. These economic theories created many slightly differentiated “products” for a company from their inventory. I believe RM is a true and noble management science that has become corrupted by predatory and baseless sales and booking rules that companies are masquerading as RM. To explain my position, we need to share some common vocabulary and understandings of the theories and implementations of RM. READ MORE

Sanjay  Nagalia

The competitive landscape in today's hospitality industry is more intense than ever. Hoteliers need new ways to differentiate themselves in the eye of the customer to provide world-class service, while still driving profitability across every segment and business unit. But despite the fact that almost every hotel manages multiple revenue streams, team members within each stream still tend to make pricing decisions based on the impact of their line of business only, which is a losing strategy. This article will discuss the benefits of holistic revenue management and the strategy of Total Revenue Performance. READ MORE

Yatish Nathraj

The hotel and service industry evolves in the front of the house all the time to meet the ever-changing expectations of our guest. Sometimes these expectations can start eating away at the bottom line, which good managers adapt to and change these environments to encourage a good rapport. But we have seen a change in the business aspect of the hospitality industry. Not only have guest's demands sometimes become unreasonable, our service supply change is being disrupted by ever increasing back of the house costs. The standard percentage of goods, labor and debt on our Profit and Loss statements are obliterating the Net profit line. This has been concerning investors and managers, making our careers as managers of revenue, a juggling act. READ MORE

Marky Moore

Hotel owners wrestle with numerous costs in the operation of their businesses, from staffing to paying sales taxes to expenses associated with maintaining the building. Fortunately, the federal tax code equips businesses in the hospitality industry with an array of incentives and strategies to help offset these costs. However, these potentially lucrative opportunities for tax savings are often overlooked by businesses that are unaware how to capture them. By reexamining their tax-planning strategies, hoteliers may uncover substantial savings that will reduce their tax burdens and improve the cash flow of their businesses. READ MORE

Nicole Adair

As a revenue management professional, it can become all too easy to get bogged down in focusing on rooms revenue in efforts to increase ADR and drive RevPAR. After all, these are the metrics by which we compare against our comp set on weekly STR reports and, quite often, the numbers used to grade our performance. However, as the practice of revenue management matures, and an increasing number of technology companies are providing the industry with newer and more optimal functionality, the focus needs to shift from primarily revenue generation to optimizing total profitability of the whole hotel. READ MORE

Bernard Ellis

Classical and even more current revenue optimization practices and technologies have focused too narrowly on maximizing room revenue, and more recently, to minimizing the distribution and marketing costs associated with that revenue. Expanding the same practice to other revenue streams has been a natural next step for some revenue managers and systems, but the higher that revenues go, the more profit margin that seems to leak out of the balance sheet. A new practice called Hospitality Enterprise Optimization, using the proven analytical abilities of revenue managers and the systems at their disposal, will go a long way to finding that lost profit. READ MORE

Rhett Hirko

The ever changing distribution landscape can be challenging to maneuver. Costly connectivity solutions often result in some degree of manual management of varied channels, which is time consuming. The good news is that a hotel usually finds a way to get content, rates, and availability out to the customer in some way. The bad news is that, often, this information is not optimized for particular customers, which can result in a lost booking. Understanding more about which customers book what sites and delivering the content and availability optimally to them is critical to a hotel's success at any distribution point. READ MORE

Stefan Wolf

The act of providing accommodation to travelers has been around for a very long time. But whilst actively selling and marketing hotels and resorts have been going on for some time already, revenue management in that context started only recently. In addition to being a relatively new function in the industry, the scope of revenue management has changed and increased at an incredible speed. In the past, revenue management focused on optimizing RevPAR using the right time, with the right price, right product, for the right customer and with the right channel approach, in isolation of other functions. This is no longer sufficient today. READ MORE

Jon Higbie

Hotels are no strangers to Revenue Management (RM). They were among the first industries to embrace Revenue Management, albeit by focusing exclusively on yield management. Retailers took notice and decided they, too, should employ Revenue Management, but weren't certain how to do it since they didn't have perishable inventory like hotel rooms. Instead, retailers zeroed in on price elasticity, giving birth to price optimization. However this time it was hotels that took notice. By the early 2000s, they were swiftly adopting price optimization of room rates and again transforming their industry. While this strategy has paid handsome rewards, it's time again for hotels to emulate retailers - and even consumer goods companies - if they want to conquer the next frontier of Revenue Management. READ MORE

Bill Linehan

Disrupters and brand loyalty are the jargon de jour among retail based industries. Even loyalty is making its metamorphosis into the more descriptive recognition. The jargon is evolving in an attempt to keep pace with its ever-changing environment as brands struggle to gain and retain the fleeting attention of consumers bombarded with messaging. Retail sales is more than the sum of its product. It is a masterful and complex interlinking of imagery and awareness that lead the consumer to purchase and advocate within their social circle. You are what you buy. The hotel industry is a retail based industry and savvy marketers are using retail based modeling to grow consumer's share of wallet and brand loyalty. READ MORE

Klaus Kohlmayr

Technology is having a huge impact on how revenue managers generate and optimize revenues at hotels. At the same time, it's clearer than ever that the “human touch” is indispensable: Without capable front desk, sales and revenue professionals at the helm, the possibility for generating meaningful ancillary revenue is limited. Equally, with an increasingly demanding and diverse generation of travelers coming to market, it's critical to be able to match the right kinds of accommodations with the right guests. This article examines the intersection of technology and human interaction in ancillary revenue generation at hotels today - with an eye not only toward enhancing revenues, but building guest experience and satisfaction as well. It pays special attention to the role of upselling, as a central piece to this puzzle. READ MORE

Loulu  Lima

As I write this article, we are on the heels of HSMAI ROC and HITEC here in Austin, TX. What an amazing learning experience it has been; industry colleagues discussing Revenue Management and how to take it to the next level while keeping it simple. It used to be that revenue management was just about room revenue and how to make each distribution channel add incremental revenue to your bottom line. Now we speak in terms of revenue strategy, optimization of the entire house. Industry leaders are discussing newer terms such as: Total RevPAR, Profit RevPar or GOPPAR, Net RevPAR, Total ADR, etc. and questioning the cost of acquisition, who is tilting the scales now, where does group fall into this new landscape, etc. READ MORE

Mario Candeias

Amidst continued and foreseeable growth in Tourism and solid numbers in hotel operational performance and investment profitability, are the underlying causes sustainable in the long run? Are the tectonic forces of the online and off-line distribution world adjusting to bring Tourism to the next level? How is the hotel sector faring in increasing its weight in the value chain of Tourism? Focused, well informed and permanent action is needed to stay ahead in an endless fight for value and relevance READ MORE

Trevor Stuart-Hill

Pricing, per se, is not a new concept within the hospitality industry, but how we think about pricing and how we deploy pricing to relevant audiences is about to change dramatically. From early stages of fixed rack rates to variable pricing and through today's dynamic pricing, conditions will be just right for an entirely new method to emerge-one that is based on guest value. We call it target pricing. READ MORE

Robert Rauch

This year has been named the best that the industry has ever seen, however, the growth in distribution costs as well as other operating costs such as health care and the minimum wage increases can stunt profit growth if not managed properly. This means that reliance on the online travel agencies (OTAs) can impact the bottom line in a significant way. By directing guests to your hotel's website and telephones, the savings are abundant. The digital distribution costs are soaring and the number of players entering the market to compete with OTAs is rapidly rising (think Google, Facebook, Apple, TripAdvisor, Amazon and more). READ MORE

Coming up in March 1970...