Why Increasing Stakeholders Helps to Increase Profits

Extending Revenue Forecast Visibility

By Bernard Ellis President & Founder, Lodgital Insights LLC | 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.

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Coming up in January 2019...

Mobile Technology: The Future is Now

Mobile Technology continues to advance at a relentless pace and the hotel industry continues to adapt. Hotel guests have shown a strong preference for mobile self-service - from checking-in/out at a hotel kiosk, to ordering room service, making dinner reservations, booking spa treatments, and managing laundry/dry cleaning services. And they also enjoy the convenience of paying for these services with smart phone mobile payments. In addition, some hotels have adopted a “concierge in your pocket” concept. Through a proprietary hotel app, guests can access useful information such as local entertainment venues, tourist attractions, event calendars, and medical facilities and services. In-room entertainment continues to be a key factor, as guests insist on the capacity to plug in their own mobile devices to customize their entertainment choices. Mobile technology also allows for greater marketing opportunities. For example, many hotels have adopted the use of “push notifications” - sending promotions, discounts and special event messages to guests based on their property location, purchase history, profiles, etc. Near field communication (NFC) technology is also being utilized to support applications such as opening room doors, earning loyalty points, renting a bike, accessing a rental car, and more. Finally, some hotels have adopted more futuristic technology. Robots are in use that have the ability to move between floors to deliver room service requests for all kinds of items - food, beverages, towels, toothbrushes, chargers and snacks. And infrared scanners are being used by housekeeping staff that can detect body heat within a room, alerting staff that the room is occupied and they should come back at a later time. The January Hotel Business Review will report on what some hotels are doing to maximize their opportunities in this exciting mobile technology space.