REPORT FROM THE U.S.—Most revenue managers might argue they already practice optimal revenue management strategies in the way they find the most profitable mix of business.
However, the industry is not practicing total revenue management in enough detail and with enough analysis, according to revenue management experts who spoke Wednesday during an HSMAI University webinar titled “The Road to Total Revenue Management.”
“Hotels and resorts must sophisticate the approach to profit optimization,” said Bonnie Buckhiester, president of Buckhiester Management.
The hotel industry is in its second generation of revenue managers, and the second generation tends to be very analytical, can crunch numbers quickly and loves spreadsheets, Buckhiester said. The third generation of revenue management is where the industry should aim to be, she added. This third-generation revenue manager’s title would lean more toward “director of demand management,” and the role would be held by someone who possesses a strategic point of view.
Some of the barriers to getting to that third generation of revenue management are the lack of manpower, disjointed work environments and an unwillingness to adapt to technology, Buckhiester said.
Third-generation revenue managers are going to need more training, Buckhiester said. Those doing the best at strategic thinking are the ones who have gotten guidance from senior staff members. These revenue managers also need help from junior staff members to help with some of the leg work.
The key to overcoming barriers comes down to asking more questions and listening more often, said Alex Gregory, director of sales and marketing at Sea Island in Sea Island, Georgia. “In particular, listen to people that don’t agree with you, but listen with interest. That will give you some opposing viewpoints and some ideas to consider.”
Optimizing rate profitability
“Unfortunately, as an industry we haven’t used the word ‘profitability’ to measure our success as we’re analyzing groups and analyzing offers we put on the back-end,” Gregory said. It’s not just a matter of driving roomnights but a matter of driving roomnights that are profitable, he said.
At time, revenue managers tend to think of high rates as the most profitable and low rates as second-class, Buckhiester said. What’s important is to become familiar with the revenue per available room for each room type. If a revenue manager realizes his or her hotel’s RevPARs are much lower than its competitors, looking at RevPAR by room type can help solve the mystery.
Tracking upgrades also is important to optimizing profitability. The industry often loses sight of the ability to upsell, Buckhiester said. “You should be doing a lot more upselling than upgrading,” she said.
As for food-and-beverage sales, revenue managers need to look at unconstrained demand forecasting for catering, Buckhiester said.
Chain restaurants re-engineer menus on a frequent basis to optimize profitability, but this practice is not seen as often in the hotel industry. Advanced menu engineering—in which menu items are analyzed one by one—will help drive revenue, Buckhiester said.
Capturing and trying to drive ancillary revenue also will be key in the long run, Buckhiester and Gregory said.
“The goal that many of us have in our industries is to monetize that location-based price,” Gregory said. If hoteliers could capture a guest sitting on the beach on their iPad and be able to push an offer to them about a deal at a hotel restaurant, it will help leverage optimized-based demand in one’s own backyard.
Group bookings should be an additional point of focus for revenue managers, panelists said.
Although the forecast for the U.S. hotel industry is looking good from a macro perspective, group bookings are not moving up as previously predicted, according to Bobby Bowers, senior VP at STR, parent company of HotelNewsNow.com.
Analyzing every group lead that comes through should be done on a daily basis, Gregory said. This will help find out where group demand should be. Another opportunity would be using that same style to understand where group demand might not be historically.
Although group bookings are not as strong right now, hoteliers should be confident looking ahead, Bowers said. “There is really more contribution to occupancy growth that’s going to come out of group as we continue to move forward into 2012,” he said
Investing in the area of revenue management is a necessity, Gregory said. “Make it a budget-line item either for a (revenue management system), staffing or business intelligence programming. Give yourself some tools,” he said.
As the booking window continues to shrink, revenue managers need to give themselves the ability to stay in step with the competition, he said.
“This is a journey … It doesn’t happen overnight,” Buckhiester said. She advises revenue managers to take one key thing they would like to do and tackle that first.
“As you start to tackle the things, I think you’ll start to see the road become a little more clear,” she said