Over the last 10 years, revenue management has gone from being an undertaking with uncertain financial upside potential to a strategic imperative with highly predictable revenue outcomes. At the same time, the demand for next-generation solutions has increased with the proliferation of online travel agencies (OTAs) with differing pricing and commission structures, shrinking booking windows, ever-more intense hotel competition in high-demand destinations and ever-increasing pressure to drive profitable growth. One way to harness the power of next-generation solutions is to adopt a mentality of “total revenue management,” and to bear this in mind while asking the right questions of your RM solutions.
Think In Terms of “Total Revenue Management”
According to the research, more than one-quarter (28%) of hoteliers who have not upgraded their revenue management within the past 3 years plan to do so in the next 12 months. While guest room revenue is the bread and butter of most hotels, ancillary revenue streams can contribute significantly to overall revenue and profitability. When considering adopting a next-generation RMS, look to see if there may be a golden opportunity to apply revenue management tactics in these and other non-room categories to achieve optimal financial results.
Hotels that fail to embrace next-generation solutions that enable “total revenue management” will fall behind their competitors. The best of revenue management solutions allows hotels to consider the contribution margins and capacity constraints of not just guest rooms, but also restaurants, bars and cafes, spas, golf courses, ski lifts, and any other assets of the property. Some advanced revenue management solutions include capabilities specifically focused on optimizing meetings and events revenue and driving profitability. These capabilities allow hoteliers to optimize profits across multiple revenue streams, from guest rooms and meeting spaces to food and beverage, catering, A/V equipment rental, ancillaries and more.
Thinking in terms of total revenue management, taking into account the ancillary spending that takes place in hotel restaurants, bars, conference centers, banquet space, golf courses, etc. and not just revenue management as it pertains to guest rooms, can mean leaving a lot less money on the table and significantly boosting revenue and profitability.
The First Question to Ask: Are We Asking the Right Questions?
By keeping key considerations in mind and asking the right questions, decision makers can determine which revenue management solution on the market best fits their needs and is most likely to deliver the benefits they seek, with minimal risk and expense. Most RMs want solutions that provide visibility. They want to be able to look under the hood and dive into price sensitivity data and observe at a detailed level what inputs are behind the system outputs that are being made and how adjustments to the decision model would change revenue outcomes. They do not want to wait for actual booking numbers to come in to understand the impact of their strategies and determine whether they made the right decisions.
In short, RMs need to be comfortable that the new solution will enable them to do their jobs with maximum effectiveness. The 2018 Smart Decision Guide to Hospitality Revenue Management contains just a few of the must-ask questions that decision makers and influencers may wish to explore with solution providers to ensure that, once implemented, the revenue management solution will enable them to achieve their desired business outcomes. The first question you need to answer is will the solution provide the answers we need to our pricing questions? RMs require tools that will enable them to answer all of their day-to-day pricing questions. These questions may be voluminous, and some may be difficult to always know in advance.
Such questions might include:
- By how much should we increase or decrease our rates for a given type of room?
- How many groups, and what size groups, should we accept on a given day?
- How much should we charge walk-in guests?
- Are the changes in demand and bookings likely to represent a short-term or long-term pattern –and, if the latter, what actions should we take in response?
- What discounts and promotions, and to what target customer segments, are likely to perform well right now and in the near-future?
- What discounts would likely dilute profits and should we therefore avoid?
- What price moves by our comp set would likely affect these demand patterns and how should we respond if those moves become reality?
- How can we counteract cancellations and no-shows, group wash, extensions and early departures to capture optimal profitability?
For more must-ask questions around topics related to the ideal revenue management solution for your property, as well as a roadmap and specific recommendations for hoteliers considering enhancing their revenue management practices, download the 2018 Smart Decision Guide to Hospitality Revenue Management.