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Revenue-management resolutions for 2012
January 6 2012

The most important resolution for revenue managers might be familiar, while others in this list require complete shifts in thinking.

Highlights
  • The primary focus for revenue managers during 2012 should be to raise rates.
  • Revenue managers must start thinking strategically about distribution strategies across multiple channels.
  • The hotel industry should adopt total revenue management to better understand profitability by customer segment, consultant Bonnie Buckhiester said.

 

Editor’s note: This is the final installment in a four-part series titled “Hotel resolutions for 2012.”

REPORT FROM THE U.S.—For many revenue managers, the primary goal in the year ahead is the same as it was during 2011: raise rates.

It’s something with which the global hotel industry has had only moderate success. Through November 2011, the Americas region posted a 3.9% increase in average daily rate in dollars, according to STR Global, sister company of HotelNewsNow.com.

 

Ron Pohl
Best Western International

In euro terms, the European hotel industry posted a 2.7% ADR increase, while Asia/Pacific posted a 3.4% gain and the Middle East/Africa posted a 0.9% decrease.

 

“The most important thing of the new year is don’t be rate shy,” said Ron Pohl, senior VP of brand management and member services for Phoenix-based Best Western International, which has more than 300,000 guestrooms worldwide in its portfolio.

“We’ve had three years of concerns of stagnant rates and discounting rates to drive business. What we’re finding today is we’re more concerned about it than the customers are,” he continued. “We’re having some very good success in rate opportunities throughout our hotels. The areas where we’re not benefiting from it are areas where the hotel staff isn’t confident that they can raise rates or push rates because of the economy. Be confident in what you have and go out there and ask for the price,” Pohl said.

STR forecasts a 3.7% ADR increase for the U.S. hotel industry for 2012.

Other resolutions for revenue managers in the year ahead include:

2. Trust the data
Having the confidence to raise rates is tied inextricably with trusting the data, according to sources interviewed for this special report.

Revenue management is a science, not an art; far too often, managers rely on gut feelings instead of concrete numbers, said Sharon Paine, senior director of rate and sell management for Silver Spring, Maryland-based Choice Hotels International, with 1,100 franchised hotels in over 35 countries and territories.

“I’m very strong on using data for informed decision-making,” she said.

That’s especially important in low-demand markets, where a discount won’t generate incremental demand, Paine said.

To break owners and revenue managers away from those oft-misguided gut instincts, she and the team at Choice relay best practices during training and education sessions or conferences.

“We look for examples to illustrate how those best practices can help drive revenue. … It’s not an overnight process. It takes time. The more that we can show data and examples to support the best practices, the better adoption we would get.”

Trusting the data also means knowing the data—something that only can be achieved by using the right tools for the job, Pohl said. While STR’s STAR reports are essential, there exist other rate-shopping platforms and brand-provided tools that can assist revenue managers with pricing and forecasting.

And if revenue managers pay for a particular tool but don’t use it, they should ask why not, said Bonnie Buckhiester, principal with Buckhiester Management USA, which has offices in Seattle and Washington, D.C. Either use it or lose it.

“We’re way past the time that we can be doing this manually or on spreadsheets,” she said.  

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3. Get strategic
“Revenue managers really need to be much more strategic in offering promotions and discounts either by region or market. There is a rate imbalance in key markets in high-demand periods that we need to try to overcome a little bit,” said Flo Lugli, executive VP of marketing for Parsippany, New Jersey-based Wyndham Hotel Group, which has more than 610,000 rooms in more than 65 countries worldwide.

Strategic thinking begins with channel mix—determining the right distribution channel across the right channels at the right time for a particular property, she said.

Flash sites, for example, largely are proving a failed strategy because they don’t generate repeat guests, Lugli said.

“The job of the revenue manager is to get the most revenue that they can out of every booking. These days it’s as much about optimizing across distribution channels as it is the traditional revenue-management levers,” Paine said.

Revenue managers have to know their guests. Different things are important to different customer segments, and hoteliers have to tailor their pricing and distribution strategies accordingly.

“Know for each type of guest that you have which amenities are important to them and then be able to stack yourself up against your competition for each of those amenities types,” Paine said.

For families, an indoor pool might be a key component, but for a business traveler, high-speed Internet access likely is more important.

“You can highlight your strengths when you’re selling to that particular customer and you can also work to overcome your weaknesses,” Paine said.

4. Think beyond room rates
The most important part of strategic thinking, Buckhiester said, is thinking beyond room rate toward a “total revenue management,” which includes other sources of revenue.

 

Bonnie Buckhiester
Buckhiester Management USA

When guests stay at a hotel, they often pay for more than just a room rate, she said. They might also pay for parking, spa services, food and beverage, meeting space, dry cleaning and more. Total revenue management takes all of those factors into account for a more accurate picture of total revenue contribution to a hotel.

 

“This is an industry change that has to happen,” Buckhiester said. “We have to re-examine our (profit and loss statements) and uniform system of accounts to drill into profitably by market segment.”

A good place to start is by talking to financial controllers who view the P&L from top to bottom. Revenue managers should work with them to analyze which business segments are the most profitable for a hotel.

“We, as an industry, have to adopt total revenue management in a really serious way in 2012,” Buckhiester said.

5. Revisit and review past strategies
“Learn from the past or be doomed to repeat it.” The saying isn’t any less prescient for revenue managers, according to sources interviewed for this report.

Revenue managers have to go back and examine the success of past strategies, Pohl said.

“To be good at revenue management looking ahead, you have to look back. We develop rate strategies; they may work, they may not work, but oftentimes we forget to look back at the actual decisions we made and when we made them to determine whether or not they were the right decisions at the time,” he said.

The same is true for forecasting, on which revenue managers rely to set strategies and pricing decisions, Buckhiester said. Managers should go back and review the accuracy of past forecasts to see what changes need to be made, if any.  

COMMENTS   Show All
Mike
4/17/2012 2:21:00 PM
Sharon's comment that RM is not an art is completely wrong. You can tell that she has never worked in the revenue management field a day in her life. RM is not all data, and when you treat like that you get stuck in the numbers.
anonymous
2/1/2012 2:14:00 AM
Its good to know the detailed information for revenue management. It updates to the professional with the market trend as well.
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