HOTEL BUSINESS REVIEW

October FOCUS: Revenue Management

 
October, 2019

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.

This month's feature articles...

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

Mostafa Sayyadi

I present hotel executives with a new idea in that when change becomes increasingly valuable, hotel executives can manifest themselves as catalysts to implement effective changes in hotel's internal resources. I suggest new insights to identify corporate culture and corporate structure as primary drivers, which influence financial performance that matters to hotel executives that care. The focus of this article is based upon the critical role of corporate culture and corporate structure which allows a rich basis to understanding the mechanisms by which financial performance is influenced. READ MORE

Greg Winey

Hurricanes define you and your business. They test everything from physical to mental preparedness. During times of crisis, those in the hospitality industry act as caretakers. Guests and staff are reliant on solid and strong leadership to feel safe in the face of these growing storm systems. Communicate. Stock up on necessary foods and goods. Secure your hotel. Above all, be patient and have endurance. Do anything and everything to prepare your properties, your guests, your staff and yourself for the unknown. Don't try to predict what the storm will do – it's almost impossible. Just monitor and prepare for the worst but hope for the best. READ MORE

Stuart   Butler

Love them or hate them, OTAs likely drive a substantial number of heads-in-beds to your property. That's not a bad thing, especially when it comes to driving first-time guests. The problem is that far too many hotels aren't putting their best foot forward when it comes to converting first-time OTA bookers into repeat guests who book via a direct channel. This article looks at some simple and effective steps that you can take that will ensure each and every OTA booker wants to return to your property and that they are much more likely to do so by booking direct the next time. READ MORE

Kristi  Dickinson

A spa's treatment menu is the primary piece of communication with guests and is so much more than just a listing of offerings. It tells the story of the spa's brand and makes a promise of the experience. The spa menu and related pricing is a critical tool to ensuring your spa thrives. Savvy spa directors go beyond simply designing a menu by thoughtfully engineering it. Menu engineering is widely used in food and beverage, but other departments can utilize this valuable tool as well. In this article, we will review how to develop a menu engineering strategy and special considerations which are unique to spa. READ MORE

Ford Blakely

Artificial intelligence has become a prevalent part of our everyday lives. From the digital assistants in our homes providing us with access to virtually anything we can think of to the AI-powered apps helping us make important financial decisions, we rely on AI to boost efficiency and productivity in just about every area of our lives. And while no industry has been impervious to the impact of artificial intelligence, hospitality has seen especially significant changes due to the rise of the machines. In this article, we look at how AI has affected the end-to-end guest experience from booking to checkout. READ MORE

John Tess

Portland's Harlow Block is the second oldest commercial building north of downtown. Built as a hotel in 1882, it thrived well into the 1920s but then began a descent into disrepair and disinvestment that ended in the building becoming a flophouse before being closed. For the last forty years, people have tried to revitalize the building, only to leave it in worse condition than before. In 2007, Ganesh Sonpatki of Parum Hotels took on the challenge. Despite more than a decade of struggling through code and historic preservation issues, the building is today reborn as a historic boutique 26 room hotel/restaurant. READ MORE

Bonnie Knutson

On March 10, 1876, Alexander Graham Bell uttered his famous words, "Mr. Watson. Come here. I want to see you." Watson, who was in an adjoining room heard Bell's summons clearly. The telephone was more than an invention by an unbelievably creative mind. It was a disruptor. There is a distinct difference between an invention and a disruptor. Today, there is a disruptive "new sheriff in town" and its name is Blockchain. In this article, you'll see how this technology can be integrated into your hotel and transform your Loyalty Program. READ MORE

Priyanko Guchait, PhD

An organization's forgiveness climate is pivotal in reducing negative and promoting positive consequences of errors, mistakes, or offenses in the workplace. Organizational forgiveness refers to the abandonment of resentment and blame as well as the adoption of a positive, forward-thinking approach to errors, mistakes, and offenses. A forgiving climate in hospitality organizations can increase hospitality employees' job satisfaction, organizational commitment, performance, fairness perceptions, and learning, and decrease turnover intentions. Therefore, hospitality organizations and leaders should consider promoting a climate of forgiveness. Recommendations are provided to managers to create a forgiving work environment in hospitality organizations. READ MORE

Steven D. Weber

Interests in the hotel industry are bought and sold. Contracts in furtherance of the sale of those interests may contain restrictive covenants. In some cases, restrictive covenants might take the form of contractual provisions that, among other things, restrict competition from a new owner or prevent certain uses. Use of a restrictive covenant may lead to litigation when one party contends that another party is in violation of a restrictive covenant. Hospitality industry players should be aware of the risks associated with restrictive covenants, and aware of the hospitality-related litigation that can result from them. READ MORE

Adria Levtchenko

Hospitality has always provided a great entryway to the world of work for younger individuals, while also attracting older individuals who wish to embark on a new career in an exciting service-driven industry. This is fortunate at a time when the industry faces a labor shortage, especially in areas like housekeeping. This article discusses how available technologies, including today's best hotel task optimization software platforms, can help bring newcomers to hospitality on board and up to speed quickly, and propelling those inclined on to a rewarding career path. READ MORE

John Mavros

Regardless of the number of employment law best practices a hotel successfully embraces, one factor can be a strong indicator for future litigation – a problematic, underperforming employee. Therefore, one the best ways to protect your hotel from litigation is to hire right at the outset. In the chaos of peak season, it may be tempting to impulsively hire the first application for help received; however, hiring is a process that should not be rushed. An employee who fails to meet performance expectations or mesh with the hotel's company culture, not only can create a toxic environment at work for other employees but will likely harbor resentment which frequently motivates litigation. READ MORE

Kurt Meister

Today, some of the foremost hotel security threats are crimes on which insurers have started to tighten the reigns. These include abuse (both sexual and physical), battery and molestation. Adding to the mix is the despicable global crime of human trafficking. Each of these emerging threats brings new questions for hotels and their employees, including how employees can identify this type of deviant activity. This article walks you through each of these emerging threats and explores the risks, the potential solutions, the value of getting it right, and the ever-expanding costs of allowing this type of activity at your hotel. READ MORE

Michael Jacobson

Illinois hotels and their restaurant, banquet and spa outlets are – more than ever – dedicating resources to establish eco-friendly practices that aim to preserve our environment. There is an abundance of ways hotels are being mindful in their everyday business practices, including initiatives ranging from monitoring for energy and water efficiency to reducing plastics, crafting sustainable wine lists and even placing used furniture with those in need. As one of the Illinois Hotel & Lodging Association's core platforms, we explore how hotels nationwide can implement thoughtful, sustainable and turnkey practices as exemplified by others leading the way in this critical effort. READ MORE

David Ashen

Remember when rooftop bars and cool restaurants were novel? What was once unique enough to rile up crowds and delight hotel guests has now become the norm. Fortunately, hoteliers are now looking for fresh ways to connect with – and inspire – the communities that surround them. David Ashen, president & CEO of interior design and brand consulting firm dash design, examines what's behind this shift and some top ways today's brands are answering the call for connection, from art installations that excite to socially-conscious initiatives and more, hotels are more than a mere place for heads in beds. READ MORE

Amanda Hurley

As people continue to take more interest in their pet's well-being, pet travel has become increasingly popular. In fact, according to the 2017-2018 APPA National Pet Owners Survey, 37% of pet owners travel with their pets every year, which is a nearly 20% increase from a decade ago. Savvy hoteliers know how to capitalize on this and stay relevant among the competition. In fact, more than half of US hotels now allow pets, according to the 2018 American Hotel & Lodging Association Hotel Trends Survey. This case study explores the ways in which the Inn at East Beach, managed by broughtonHOTELS, used operational and promotional strategies to ensure the hotel was set up for success in becoming a dog-friendly hotel. READ MORE

Bob Neal

Rooted in history, our nation's capital is full of character and charm, and a focus on preservation is the norm rather than the exception. That's why the design for Columbia Place, a recently completed, mixed-use development combining a dual-branded hotel, residences and retail with historic buildings in Washington, D.C.'s Shaw District, didn't need to invent a new sense of place. Design and architectural firm COOPER CARRY in collaboration with tvsdesign instead built upon its origins. Striking an artful balance between "then" and "now", Columbia Place blends centuries-old structures with modern living to honor history while also welcoming the next generation. READ MORE

Dianna Vaughan

This has been a monumental year for the All Suites brands by Hilton, and the category has big plans in store to push the envelope even further next year. Embassy Suites by Hilton, Homewood Suites by Hilton and Home2 Suites by Hilton have each broken into new markets domestically and abroad with innovative construction methods, enhanced their technology offerings to make personalizing a guest stay easier than ever, and have doubled down on their social and environmental initiatives. Looking ahead to 2020, the All Suites brands vision has never been clearer. READ MORE

S. Lakshmi Narasimhan

So, what does the future hold in store for guest loyalty? And more importantly loyalty for independent hotels? Well, independent hotels have their work cut out for them but do not need to despair. The customer is looking for value offerings and in recent times does not care whether they are from independent or chain hotels. A slickly executed marketing strategy on the foundation of strong differentiation and tying into guest personalization demands can bring the bacon home. Owners of these independent hotels who have already stuck their necks out with the investment can then laugh all the way to the bank. READ MORE

Mostafa Sayyadi

Hotel executives find that knowledge management is the in the forefront of success. And knowledge management could be the most important component of success in this ever-changing business environment of today. This, by far, is why some hotels are successful and some are not. The key take-away for hotel executives is that knowledge management is a resource that enables hotels to solve problems and create value through improved performance and it is this point that will narrow the gaps of success and failure leading to more successful decision-making. READ MORE

William Toth

William Toth, Spa Director at the brand new St. Somewhere Spa at Margaritaville Resort Orlando discusses trends in the spa industry in 2019. As consumers become more educated on the capabilities of resort spas, products and treatments, industry leaders are looking to find differentiators. What are consumers looking for? Current trends can be broken down into four factors. They are facilities, experience, services, and results. Especially for those wishing to make their spas a part of their revenues or profit, since spas surely add to the profit of a hotel, all of these factors should be considered. For that reason, this article will focus on those factors as a guide towards a successful spa. READ MORE

Coming up in February 2022...

Social Media: Essential Interaction


As important as social media has been to hotels as a way to engage guests and drive direct bookings, it is becoming even more essential for hotels to implement a comprehensive social media strategy. All the major platforms have users numbering in the hundreds of millions - and in some cases, billions of users - so it is imperative for hotels to have an established presence on those massive channels. The goals of social media outreach are relatively clear-cut - identify and interact with current and prospective guests; create a brand voice that resonates with your target demographic; promote products, services, special offers, and contests; and acquire market data to support your business analytics. This is accomplished by creating imaginative and shareable content in order to give your brand maximum visibility, generate bookings, and keep guests interacting with your business throughout the entire customer journey. The February Hotel Business Review will document how some hotels are successfully executing social media strategies for the benefit of their operations.