Profit Optimization Is Not Just a Buzz Phrase for Room Revenue

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | February 04, 2018

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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Sales & Marketing: Opinions Matter

Hotel Sales and Marketing Directors manage a complex mix of strategies to attract and convert customers into guests. Part of their expertise includes an awareness of customer behavior during the reservation process, so they can make sure their hotel is favorably positioned. One such trend is the growing popularity of travel review sites. According to one recent survey, 61% of prospective customers consult online reviews in order to validate information about the hotel before making a purchasing decision. Another survey found that the average hotel customer reads between 6-12 reviews across 4-10 properties before making a final decision on where to stay. Similarly, other studies have shown that consumer reviews are a more trusted source of information for prospective customers than other kinds of marketing messaging. In fact, reviews are often considered to be as influential as price regarding whether a customer decides to complete a purchase or not. Plus, travel sites with the most reviews - including recent reviews from satisfied customers and thoughtful responses from staff - were also found to be the most appealing. So having positive reviews on a travel website is essential and can help to increase a hotel's conversion rates dramatically. Of course, there are all kinds of additional marketing strategies for sales and marketing directors to consider - the importance of video and the emergence of live streaming; the implementation of voice search; the proliferation of travel bots; and the development of Instagram as an e-commerce platform. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.