Total Revenue Management - What is the Asset at Large?
By Kristie Goshow Vice President Marketing, Sabre Hospitality | October 06, 2013
'Once upon a time' a hotel's entire sales and distribution strategies were built around a bedroom. Modern day hotel tales must now speak to the entire hotel estate. Let's face it, anything and everything is potential inventory that may be distributed and sold. Anywhere and everywhere has potentially become a point of sale. Think laterally please. Beyond the obvious inventory of bedrooms, restaurant covers, spa treatments, golf tee times, marina slips, gym memberships, 'front door' parking spaces to mention but a few, hotels have walls, floors and doors that in any other industry would present real estate marketing opportunities. The hotel has undeniably become a retail destination – whether it is a 1 star road inn or a 5 star palace. Put simply, these two primary core tenets should underpin all technology and marketing investments undertaken by hotels today.
If we are to successfully apply a retail mentality to the hospitality industry, we (the industry) must embrace and accept a fundamental paradigm shift around the concept of a guest; how we reach them, engage them, and manage them.
Having spent a number of years in the Middle East where many hospitality developments were classified as 'mixed use' – a hotel operator was often challenged to successfully distribute, sell and manage the inventory assets of a hotel, a residence, an office tower and a retail mall. More significantly, food and beverage spend could often be equivalent to (and possibly greater than) room revenue. I would often ask myself why many of these 'operators' did not apportion the same level of effort to their distribution and sales activities across their entire real estate and inventory sets. Perhaps the answer can be found in the narrow focus currently applied to our revenue management practices across the industry at large?
Revenue Per Available Room (REVPAR) is a respectable and widely used measure of a hotel's commercial vitality and yet it is also fundamentally flawed. It does not acknowledge the revenue opportunities available across multiple inventory sets available to an individual consumer that may never stay in a hotel's bedroom.
In the early to mid 2000s, we saw the emergence of REVPASH (revenue per available seated hour for F&B outlets) and REVPAG (revenue per available guest). Great strides forward albeit two issues are apparent; 1. disconnected measures of success across an estate and 2. the perpetuation of a revenue measure over a profitability focus.
Introducing PROFPAC - "Profitability per Acquired Consumer"