Revenue Management's New Frontier in 2016: Extended Length Accommodation
By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | October 25, 2015
As the global hospitality industry grows increasingly fragmented, guests embrace new technology and alter their historic approaches to researching and booking accommodation, and new competitors enter the private rental space; it can seem that for hotel managers today, change is the only constant. For hoteliers looking to maximize their revenues and the performance of their properties in this changing landscape, it is critical that all accommodation segments (and indeed types of guests) have the same proven revenue strategies applied to them to maximize potential profits.
For hotel groups looking for new ways to generate additional revenue in 2016 and beyond, the extended length accommodation sector continues to grow and provides solid value for owners and guests alike. While the sector grew out of a niche set of hotels in the 1970's that sought to provide long stay guests with home-like amenities and atmosphere, nearly every major global hotel franchise today has at least one extended length accommodation product under their portfolio of brands. Extended length hotels and serviced apartments differ from many traditional hotel rooms in terms of physical layout of the space, with the majority of rooms being equipped with full kitchenettes and often providing amenities such as complimentary wireless Internet access.
Pricing of extended length hotels and serviced apartments has traditionally been a challenging concept for revenue managers given rates vary greatly depending on the length of stay a guest is seeking. However, it is vital that hotel groups enhance their approach to pricing for this sector given the revenue opportunities that it presents. Through developing accurate demand forecasts and applying best practice operational strategies, an extended length hotel or serviced apartment will not just benefit revenues, it will also see wider impacts across entire operations, optimizing wage costs and increasing guest satisfaction.
Overcoming RM challenges in an extended length property
Traditionally, one of the biggest challenges in applying revenue management in the extended length sector has been forecasting for the different length of stay profiles within the same property, such as transient (typically shorter stay demand) and longer stay demand. Understanding the dynamics of existing length-of-stay demand profiles for each property, unit, or revenue centre, and how this impacts price sensitivity, is critical in the acquisition of the guests in these segments.
Another important pricing challenge specific to long-stay properties is allowing for extensions to in-house bookings. This differs from primarily transient hotels where there are few extensions and they are compensated by those that check out early. These elements are all crucial to effective forecasting in the serviced apartment, aparthotel and long-stay businesses. This forecast becomes the basis for key business decisions that account for an acceptable mix of business, public pricing structures, and levels of expected extensions, cancellations and no-shows.
How Can a Serviced Apartment, Aparthotel or Extended Length Hotel Start Their Revenue Management Process?