Owners demand yield-maximizing RM in Europe
 
Owners demand yield-maximizing RM in Europe
17 NOVEMBER 2015 8:53 AM
Revenue management has been a mainstay of the hotel operations discussion for some time, but that is yet still to increase, especially in Europe, as owners demand more discipline and yield.
LONDON—Owners in Europe are becoming far more active in the revenue-management area of the business as the discipline moves to the forefront of hotel business in the continent. 
 
Owners are demanding hotels yield-manage better, and chains adopt a more holistic approach across all silos. Recent legal decisions concerning rate parity, even the outright banning of the practice by France and Italy, has put even more emphasis on clarifying the practices.
 
At the inaugural Revenue Strategy Forum hosted by revenue-management firm Duetto on 2 November at the Ace Hotel Shoreditch, panelists at a session titled “From revenue management to revenue strategy: Why this has to be a board-level initiative” said the revenue-management team even more so today needs to be front and center of the entire operation.
 
How? Panelists said heads of revenue-management departments should sit on company boards; marketing and other relevant silos need to be brought under its fold; data needs to be improved; and educational facilities should be prompted to understand and teach this evolving discipline.
 
“Have it be the chief revenue manager who hires the team and have weekly calls to assets on price strategy. From an investment viewpoint, this provides a land of opportunities,” said Cody Bradshaw, senior VP of acquisitions and asset management of European hotels at United States private equity firm Starwood Capital Group.
 
“The discipline has always been more comfortable talking about revenue optimization than revenue management. That needs to change more, to take more ownership of the strategy and have guts exposed to the commercial side of things,” said Simone Truscello, director of revenue management at the Ace.
 
Jonathon Liu, VP of pricing and revenue management for the United Kingdom and Ireland at AccorHotels, said there has to be different strokes for different folks. Not one approach fits all operations.
 
“The larger chains have to look at revenue management with both sides of the brain. … You’re looking after the assets but also looking after the guest and their whole travel journey, and that approach allows you to be with the customer a lot more,” Liu said.
 
Continental divide
While Europe might be at the hard end of revenue-management disciplinary changes, panelists said North America appears streets ahead when it comes to data and educational provision.
 
There is plenty of data out there, panelists agreed, but the logistics need to be streamlined.
 
“There might be a separate data science team, and then another team that sorts this data and sends it to operations, and then there is revenue management,” Liu said, who added that at the end of the day the important point is who is charged with transforming data into something meaningful.
 
“The U.S. has far more forward-looking data reports, and I wish they were here in Europe, as without them we’ll see more transfer of value to (online travel agencies) from owners, who are being attacked from all sides,” Bradshaw said.
 
“I have no problem with brands owning more of their customers’ data, but what I do have a problem with is that much of their data gathering and analysis is so archaic,” Bradshaw added.
 
The ownership of data and having nimble minds linked to decision-making power in the hotel operation must be the spearhead, panelists said.
 
“Who is our best customer; how do they spend; how can we increase their spend; and where can we find more of them? It’s not going to happen from your own website,” said the other owner on the panel, Todd Shallan, portfolio manager at KSL Capital Partners.
 
Truscello put it more bluntly.
 
“If you get a rubbish answer, usually it is because you asked a rubbish question. Have focus and direction in your team,” Truscello added.
 
As for worries concerning education, the panel was divided. Liu said work continues to be done in European schools, but the Americans on the panel said they see no concerns back on their side of the Atlantic.
 
“Hotel schools (in the U.S.) are far more concentrated on the silo you wish to push. Europe needs to get with the program,” Shallan said.
 
Example right here
According to Starwood’s Bradshaw, the forum’s host hotel, Ace Hotel London, is a blueprint for why revenue management is so important.
 
Starwood sold the Ace, which is in London’s trendy Shoreditch neighborhood, in April to Limulus Limited for £150 million ($222 million), or £580,000 ($858,610) per guestroom.
 
“The Ace is a fascinating case study, a formerly de-flagged vanilla box that has essentially become the community center for Shoreditch. It was not the easiest transition, like putting a round peg in a square hole. It was reliant on base business, which came with fairly low rates, but with investing and repositioning we were able to target independent travelers,” Bradshaw said.
 
Bradshaw said his revenue-management team was selling 14,000 corporate roomnights at £115 ($174) when Starwood bought the Ace, but they changed that quickly, moving to selling only 1,000 roomnights to that corporate market—and at higher rates, in the low £200s ($303). The remaining rooms were then targeted at free independent travelers, and at average daily rates higher than that £200.
 
“I consider that a testament to why revenue management is so necessary,” Bradshaw said.
 
“From almost no weekend trade and high volume, low-rate weekday business, we changed the mix and became something different, able to drive our own demand generators without following anyone,” Truscello said.
 
Shallan said his sights also were on low-yielding corporate business but warned that revenue-management strategy be part of overall underwriting.
 
“Commissions were going up, which led to us kicking out 25% of corporate accounts as they did not hit the ADR numbers, but be careful, for these accounts stay for three days and spend more in other revenue centers,” Shallan said.
 

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