Revenue Management: Focus On Profit

Revenue Management is still a relatively new profession within hotel operations and as such, it continues to evolve. One significant trend in this area is a shift away from using revenue as the foundation to generate key performance indicators (KPIs) and to instead place the emphasis on profit. Traditionally, revenue managers have relied on total revenue per available room (TrevPAR) and revenue per available room (RevPAR) as the basis of their KPIs. Now, some revenue managers are using gross operating profit per available room (GOPPAR) as their primary KPI. This puts profit at the center of revenue management strategy, and managers are increasingly searching for new ways to increase the profitability of their hotels. Return on Investment is the objective of any hotel investment, so it is only logical that profitability and ROI will be emphasized going forward. Another trend is an expanded focus on direct hotel bookings. Revenue managers know that one way to increase profitability is to steer guests away from online travel agencies (OTAs) and book directly with the hotel. This tactic also reinforces brand identity and loyalty, and encourages repeat business. In addition, it provides a valuable platform to market the hotel directly to the customer, and to upsell room upgrades or other services to them. Another trend for revenue managers involves automation in their software programs. Revenue management systems with automation are far more desirable than those without it. Automating data entry and logistics increases efficiency, allowing managers to spend more time on formulating strategy. As a bonus, an automated system helps with aggregating and interpreting data. The October issue of the Hotel Business Review will address these developments and document how some leading hotels are executing their revenue management strategies.

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Zoe Connolly

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Library Archives

 
Nicole Adair

Artificial intelligence and its role in the practice of hotel revenue management is front and center in the minds of most industry professionals today. Is my hotel using it? Should my hotel be using it? How would my hotel use it and what would this mean for my role? In this article, we will discuss how hotel technology is evolving, how any revenue manager looking for continued growth in the field should approach these changes, and why the best revenue management strategy will combine artificial intelligence with human intelligence. READ MORE

Cassie Bond

What do these new and still-evolving revenue management strategies look like? How is this profit-focused mindset influencing both the day-to-day details and the big-picture thinking of revenue management professionals? Cassie Bond, Regional Vice President of Revenue Management for Chesapeake Hospitality discusses the emerging practice of revenue management and the emphasis on profit over revenue that is leading to sophisticated revenue management strategies, intriguing perspectives, and exciting possibilities in the hospitality industry. She outlines how successful hotels are utilizing the information and enhanced techniques of margin prophets, not just today, but in the months and years ahead. READ MORE

Nicholas Tsabourakis

While it is undeniable that there is a tremendous amount of data generated throughout the guest journey, for the vast majority of Hoteliers data analytics still remains an unexplored and overlooked domain. Most of the time they will find themselves trying to find the right balance between improving guest satisfaction and increasing profits. With both competition and customer requirements growing, they would generally rather focus on guest satisfaction than crunching numbers and data. The aim of this article is not to provide a review of current data analytics and technologies associated with them, but it rather focuses on what data & data analytics is all about, what makes incorporating them so important. READ MORE

Doll Rice

In the hotel business, there are few topics hotter than revenue management. Here is a helpful guide to position your people and your properties for success in an increasingly bottom-line-driven industry that actually demands looking beyond the bottom line. With powerful and sophisticated new tools comes new techniques, new possibilities, and new ways of looking at old challenges. Doll Rice, Vice President of Revenue Optimization at Prism Hotels & Resorts references shifting ownership perspective, technology and dependence, culture clashing and today's trends to go beyond the bottom line. READ MORE

Tom Engel

Since their emergence in the early 2000's revenue management roles have become a critical component of the hospitality industry. Training and development resources for revenue managers have grown considerably in response to this change. Given the likelihood of turbulent times in 2020 – the result of an abundance of new supply, trade wars, the continued proliferation of brands, and other social and economic factors – as a general manager or asset manager the need for a skilled revenue manager is becoming more and more essential. This article provides an overview of the ideal revenue manager, including their most needed attributes as well as how best to measure performance. READ MORE

Paul Murray

Hotel chains are using mergers and acquisitions to expand their portfolios and increase revenue, but many don't consider the impact on Revenue Management. For many, the acquisition results in disparate Revenue Management systems that don't integrate with the different brands or create efficiencies of scale. Additionally, some go with an off-the-shelf solution that doesn't take into account the needs of the different mix of economy vs. luxury brands. This article provides an insight into the most common problems hotel revenue managers encounter with mergers and acquisitions, plus some solutions on how to address them. READ MORE

Marcela Trujillo

Reaching maximum profitability is an obvious goal. Reaching that goal can be a challenge. Marcela Trujillo, an experienced revenue consultant, explores going beyond RevPAR into market segmentation and how to develop better strategies for attracting the right customer through the right pipeline. Are direct bookings really the least costly? Sometimes, but the source of the direct booking affects net profitability. Will GDS bookings yield a higher ADR than other channels? Sorting out the details of the world of OTAs will help find the true costs and their affect on the bottom line, providing an understanding of optimal business mix. READ MORE

Jaavid Bharucha

Revenue management as a discipline has evolved over the last 10 to 12 years. The revenue cycle at hotels is no longer just rate changes online, on direct booking channels or the OTA extranets anymore. With the incorporation of ecommerce into the selling strategy revenue managers are encouraged to be more dynamic and forced to think outside the box. Having dynamic pricing strategies driven by the brand and a stronger global presence in the overall accommodation space through partners like Air B & B, Vacation rental hotels have numerous options when it comes to partnerships. READ MORE

Bram Gallagher

Profit maximizing is the goal of the hotel owner; however, incentives or lack of information may lead the revenue manager to revenue-maximize instead. This paper examines a theoretical model of the differences in the approaches and suggests a simple statistical model to estimate the outer bounds of premia or discounts that should be applied to the revenue-maximizing ADR to achieve profit-maximizing. The model is applied to hotel statements, and I find that the amount charged in extended stay and limited-service hotels should be higher, full-service somewhat higher, and resort hotels the same or lower to maximize profit. READ MORE

Ahmed Mahmoud

Your property's bottom line is defined and measured for success if you as the property revenue manager implement a good revenue management strategy with the help of other departments in your property. The strategy of implementing good revenue management has been tried and approved of success is true through the regular revenue management measurement, but there is another and more efficient way to influence your property's yields. We call the strategy profit management which determines a property's net revenue after taking into consideration the costs of acquisition by channel, opportunity costs, and target audiences. READ MORE

Theresa Hajko

A surefire way to drive additional revenue and profit is to include Value Add Packages as part of Hotel Revenue Strategy. Value Add Packages are a unique way to pique guest attention, provide them with an experience that is more than just your typical overnight stay and create a perception of value. Additionally, it drives guests to our own more profitable website that has fewer associated costs than an OTA or other more costly channels. In this article we explore the concept of Value-Add Packages and review some really effective packages that will work for your hotel. READ MORE

Bonnie Buckhiester

More often now the term 'revenue strategy' is being used to describe the process of creating, capturing and managing demand. It's a broader, all-encompassing expression than 'revenue management' and implies a more comprehensive approach to optimizing revenues and profit. But in changing the nomenclature, are hotels really changing the way they do business? Some are, most are not. And why is that? Well, the hard truth is that the industry faces many barriers to fully adopting a total revenue management approach; however, articulating and acknowledging those barriers is a good first step to overcoming them. READ MORE

Mark Ricketts

Modern-day revenue management already relies on substantial number crunching, including sophisticated predictive analyses that help determine the optimal room mix and pricing-with the goal of achieving maximal RevPAR. Now, advanced metrics are pushing the revenue management envelope even farther, focusing on determining the complete costs of acquiring any given reservation. At the same time, advanced operational benchmarks are giving revenue managers, property general managers and the entire executive team a better handle on whether a given quoted rate is supportable in the overall quest for profitability and return on investment. READ MORE

Mario Candeias

Balanced Scorecards have been a widely used strategic management system, namely in large-scale corporations and institutions in the last 30 years. They were designed to align short-term practices with long-term vision and strategies. That alignment is a kind of cement between the corporate and operations level in any organization, holding the two levels together and increasing the organization's efficiency and effectiveness. Transparent and results-driven reward systems come as a consequence. This methodology is now ripe to go into new depths, by applying it to data-intensive and reward-prone operations, at a tactical and day-to-day level. Revenue Management qualifies perfectly! READ MORE

Yatish Nathraj

The amount of internal and external channels a hotel revenue manager has to juggle to make a profit is no joke these days. As Marriot, Hilton and Intercontinental Hotels Groups advance management tools to battle this constant operational nightmare. The franchisors need to start connecting systems that will save on expenses. Managers must manually check these systems daily and it's a daunting task to complete this all in a day. Why isn't there a computer program that will connect all revenue management tasks automatically without switching screens to increase productivity & profit? Let's take a look... READ MORE

Kell Sloan

It's hard to imagine a time when revenue management wasn't the key to running a successful hotel. As a profession, revenue management is continuing to develop and evolve at a frantic pace with Occupancy Rate, ADR and RevPAR as the most widely used key performance indicators and measures of success. However, none of these metrics actually measure business success. Profit is the reason why investors build hotels. This article explores how revenue management is evolving to include a focus on developing revenue strategies such as Gross Operating Profit Per Available Room (GOPPAR) to measure business success. READ MORE

Brandon White

The landscape of revenue management is everchanging, and revenue managers must stay at the forefront of these changes as Key Performance Indicators (KPIs) continue to evolve. It seems like only yesterday that Revenue Per Available Room (RevPAR) was the end all be all KPI. Then came Total Revenue Per Available Room (TRevPAR) and now we review Gross Operation Profit Per Available Room (GOPPAR) as an additional metric for growth. Let's review the many ways to maximize GOPPAR so that through proper management of your property resources, your team will find success. READ MORE

Trevor Stuart-Hill

As it has over the past three decades, revenue management will continue to evolve in the one that follows. Changes in this field are likely to be far reaching and those that prepare now will be well positioned to thrive in the future. Organizational structure, education, hiring practices, guest engagement, pricing practices and performance metrics are just a few of the areas that will be significantly impacted. This article delves into possible scenarios and issues that practitioners and others will face in the years to come. READ MORE

Sheryl E. Kimes

Revenue management professionals have been talking about 'Total Hotel Revenue Management' for well over a decade. There have been multiple presentations and academic articles on Total Hotel Revenue Management, yet based on the research we have conducted, our observations and conversations we have had, not too much progress has occurred. The question is why have hotels been so slow in achieving the goal of Total Hotel Revenue Management? In this article, we discuss some of the obstacles and impediments to success and offer some suggestions and proven tips for success. READ MORE

Renie Cavallari

The old thinking of hotel revenue management within the silo of revenue per available room may have been acceptable in the past, but times have changed. No longer is it adequate to measure success through key performance indicators such as RevPAR or TrevPAR. Today, hotel revenue managers must look through a different lens finding innovative ways to produce profit in all areas of hotel operations, demonstrating ROI to ownership. In my article you will see how creative opportunities to grow profit exist all over your property; they are just often overlooked. READ MORE

Coming up in December 2019...

Hotel Law: A Labor Crisis and Cyber Security

According to a recent study, the hospitality industry accounted for 2.9 trillion dollars in sales and in the U.S. alone, was responsible for 1 in 9 jobs. In an industry of that scope and dimension, legal issues touch every aspect of a hotel's operation, and legal services are required in order to conform to all prevailing laws and regulations. Though not all hotels face the same issues, there are some industry-wide subjects that are of concern more broadly. One of those matters is the issue of immigration and how it affects the ability of hotels to recruit qualified employees. The hotel industry is currently facing a labor crisis; the U.S. Labor Department estimates that there are 600,000 unfilled jobs in the industry. Part of the problem contributing to this labor shortage is the lack of H2B visas for low-skilled workers, combined with the difficulty in obtaining J-1 visas for temporary workers. Because comprehensive immigration reform is not being addressed politically, hotel managers expect things are going to get worse before they get better. Corporate cyber security is another major legal issue the industry must address. Hotels are under enormous pressure in this area given the large volume of customer financial transactions they handle daily. Recently, a federal court ruled that the Federal Trade Commission had the power to regulate corporate cyber security, so it is incumbent on hotels to establish data security programs in order to prevent data breaches. The lack of such programs could cause hotels to face legal threats from government agencies, class action lawsuits, and damage to their brand image if a data breach should occur. These are just two of the critical issues that the December issue of Hotel Business Review will examine in the area of hotel law.