Profit Optimization is Not Just a Buzz Phrase for Room Revenue

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | October 29, 2017

The evolution of revenue management has taken hotels from dynamic pricing of transient rates to a holistic strategy of maximizing profitability across multiple revenue streams. Revenue management has moved far beyond the Microsoft Excel expert in a small back office and now involves multiple stakeholders from several departments, all influencing overall revenue strategy with each of their key areas of function.

True hotel profit optimization leverages multiple hotel functions to ensure goals are aligned to achieve optimal results. It encourages hotels to intelligently decide which business to accept across multiple revenue streams at all times, based on greatest overall value to the asset. This holistic approach to revenue management goes beyond guest room rates and maximizes profits from the strategic management of other key hotel revenue streams; like sales with group bookings and meetings & events teams with catering sales.

Maximize Meetings & Events

Meetings and events are traditionally underestimated by hoteliers as they are often a secondary revenue source to bring in more rooms revenue. However, given meetings and events revenue can account for a significant portion of a hotel's top line revenue, an increasing number of hotel groups are starting to focus on the strategic management of these activities to bolster their bottom line.

Contrary to any narrow understanding of the benefits that meetings and events spaces can deliver to a hotel, these areas actually do more than just sell guestrooms. In fact, for many hotels, the profit potential of this revenue stream is so significant that it can contribute 40-60% of their total revenue.

Surprisingly, many hoteliers still aren’t leveraging their event spaces strategically today, which means they risk overlooking opportunities for substantial revenue generation. Many hoteliers fail to fully realize revenues through meetings and events due to the complex nature of the revenue streams across catering, function spaces and sleeping rooms overlapping. In addition, there are other streams of revenue like audio visual, event rentals and more that may involve a revenue share with third parties. These conditions add complexity to the overall business opportunity, which has stifled adoption of demand-based meetings & events strategy.

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Hotel Spa: Oasis Unplugged

The driving force in current hotel spa trends is the effort to manage unprecedented levels of stress experienced by their clients. Feeling increasingly overwhelmed by demanding careers and technology overload, people are craving places where they can go to momentarily escape the rigors of their daily lives. As a result, spas are positioning themselves as oases of unplugged human connection, where mindfulness and contemplation activities are becoming increasingly important. One leading hotel spa offers their clients the option to experience their treatments in total silence - no music, no talking, and no advice from the therapist - just pure unadulterated silence. Another leading hotel spa is working with a reputable medical clinic to develop a “digital detox” initiative, in which clients will be encouraged to unplug from their devices and engage in mindfulness activities to alleviate the stresses of excessive technology use. Similarly, other spas are counseling clients to resist allowing technology to monopolize their lives, and to engage in meditation and gratitude exercises in its place. The goal is to provide clients with a warm, inviting and tranquil sanctuary from the outside world, in addition to also providing genuine solutions for better sleep, proper nutrition, stress management and natural self-care. To accomplish this, some spas are incorporating a variety of new approaches - cryotherapy, Himalayan salt therapy and ayurveda treatments are becoming increasingly popular. Other spas are growing their own herbs and performing their treatments in lush outdoor gardens. Some spa therapists are being trained to assess a client's individual movement patterns to determine the most beneficial treatment specifically for them. The July issue of the Hotel Business Review will report on these trends and developments and examine how some hotel spas are integrating them into their operations.