The Most Overlooked Hotel Revenue Stream Measures

By Ahmed Mahmoud Founder, | October 02, 2016

Revenue Management represents the technique that helps hoteliers to achieve the highest profits by correctly identifying the customer groups that the hotel has to serve ( market segments ) , establishing the right ( quantity of ) products and services as well as setting up the optimal prices to be offered to these customers. But when it comes to measurement, it is confirmed that there is a major link between RevPAR and profitability. This means if the hotel takes any action to increase the RevPAR it will translate into improving the hotel’s profit. Even though the key EBITDA hotels realized that RevPAR is a key driver of GOP, other hotels are using the correct data to make decisions affecting their RevPAR, and you would be shocked to realize that only a few hotels have regular Rev Max meetings to discuss revenue strategy.

In the old days the role of the Revenue Manager was to get the right product, at the right price, to the right customer, through the right distribution channel. The diversity of online distribution, along with the implicit direct sales model of mobile, means that hotels are receiving richer data, allowing them to make one to one offers to individuals at the right place and time.

This technology is enabling the revenue management team to become deeply involved in decision making to cater to an ever-more complex sales matrix, impacting the demands for new skills to manage revenue which is no longer limited to rooms revenue.

The Revenue Managers’ roles are no longer optimizers of profit alone but are becoming chiefs of strategy offering analytical insights since they live and breathe performance measures. Many revenue managers still lag when it comes to establishing and measuring agreed upon success criteria, often leaving revenue management professionals to defend their actions to a skeptical audience with insufficient data. From RevPAR to ADR to Comp Set Rankings, the job of RM is to manage, optimize and explain changes in these metrics. As a result, RM is now the most numbers-focused hotel function, second only to or maybe tied with Finance. In fact, few would argue that a DORM needs to have as much or more of a quantitative background than a DOF. There are many challenges in defining revenue management metrics, but the payoff is an effective optimization program.

Revenue Stream Measures Challenges

An important issue facing hotel RM is the concept of Total Hotel Revenue Management ( THRM ) and total strategic revenue management. This issue has prompted calls for a re-evaluation of some of the practice’s fundamentals, including the question of what should be measured: revenues or profits? It relates to capturing the mostly untapped revenue and profit potential associated with the non-room revenue-generating centers of the hotel, or, in other words, THRM is “managing every revenue source at every guest touch point to its maximum profitability for the entire hotel or resort asset”. For a revenue manager to be truly effective in the job, devising, implementing and agreeing on “what success looks like” is, in many cases, as important as the activities themselves and will go a long way to support a revenue manager’s success story, Crucially, many revenue management professionals along with industry professionals still struggle when it comes to measuring and articulating the impact of their initiatives and methods they use to measure the impact of revenue management implementation. The Hospitality business model is characterized by high fixed-costs and variable income. Fluctuations in occupancy and room-rate demand tight cost control.

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