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 What NYC's Revenue Managers Want You to Know
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Insights from the HSMAI NYC Revenue Managers Summit
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By Laura Osborne and Donna Quadri-Felitti

To a standing room only crowd, the Big Apple Chapter of Hospitality Sales & Marketing Association International (HSMAI) convened the first New York City Revenue Managers Summit, entitled “On the Record,” on March 29, 2006.  The roundtable comprised primarily of directors of revenue of dozens of NYC hotel assets as well as reservations, sales, marketing professionals and even a few general managers packed the room at the USA TODAY offices, sponsor of a seminar series for HSMAI in New York.

What was the group willing to go “on the record” about regarding the current state of revenue management in the hospitality industry?  Quite a lot! The evening was a case of pent up demand when over the next 90 minutes, a torrent of ideas, issues and concerns emerged, including a series of best practices, challenges and surprises, as well as a wish list that Revenue Managers wanted their DOS, GM, Owner, Asset Managers to know! 

Facilitating the discussion was Donna Quadri-Felitti, assistant professor at New York University’s Tisch Center for Hospitality, Tourism and Sports Management, one of the first academic programs to offer a concentration in revenue management located in Manhattan.  Laura Osborne, VP Sales and Marketing at OZone Strategic Marketing, a revenue management consulting firm that has been developing and implementing cutting-edge revenue growth strategies for the hospitality industry since 1999, and Kerry Mack, regional director of revenue for Highgate Holdings assisted in advance to craft the evening’s extensive agenda, exploring every aspect of today’s revenue management function.  Fortunately, the energized group was so willing to share ideas that the outline evolved into a mere prelude for a year long series of events and discussions, which the chapter is currently programming.

Room remains for greater recognition of the complexity and value of revenue management 

Consensus that revenue management has fully evolved from a person to a practice was evident early in the discussion. Yet, recognition of the full value and complexity of the practice is not fully realized throughout all levels of operations management. When the discipline of revenue management is fully acknowledged and integrated within the entire management team of a hotel, the property can capitalize on the full intrinsic worth of the practice.

When asked who in the room was tasked with revenue management at their hotel, but did not have Revenue Manager in their title, a sea of hands were raised. Participants responsible for daily revenue activities included titles ranging from inventory specialists to reservations supervisors to solitary sales managers.

A research study conducted by HSMAI and PKF Hospitality Research released in September 2005 found that 31.7 percent of hotel respondents did not have a dedicated revenue manager on property. When Director of Revenue for the Morgans Hotel Group, Tom Buoy, asked the audience how many properties use a proprietary or third party supplied revenue management system, a small fraction of hands were raised, indicating that while there have been many advances in revenue management technology, a considerable amount of hotels have not to date invested in these systems nor the personnel to the practice.

Insights and highlights from the HSMAI NYC Revenue Managers Summit

  • Forecasting, re-forecasting, and then re-re-forecasting is key!  30/60/90 review was the standard operating practice in the room.  Some practitioners change their forecast every seven days to reflect new information.
  • Tired of hearing about booking compression?  It is the new normal. In fact, according to the audience since the 2002-03, the booking window is much shorter that it ever was then or since.  Seventy to 80 percent of the business is booked inside of 21 days according to these NYC market experts.
  • You can always understand sources of demand better.  Demand by room type is equally important to analyze, particularly for properties with significant variations on room products, as is following market segment and channel demand.
  • Hotels represented with significant room inventory acknowledge the practice of projecting group business 8 to 10 years out, core hotel business 4 years out, and re-forecasting those as frequently as possible as is more near demand.
  • Production by distribution channel is essential and has become increasingly difficult. However, there can be no substitute for tracking bookings by channel. The industry discussion of cost by distribution cannot be adequately advanced without more consistent and improved analysis of production by channel over all seasons.
  • Rather than debate whether the definition of demand should include denials and refused business, savvy revenue managers in the group caution that these need to be calculated into the analysis of business for a more robust and whole picture of each property’s demand issues.
  • System providers, distribution partners and other third party vendors are urged to work with revenue managers to create useful, streamlined information and feedback tools to help them make better decisions, even if those data don’t favor decisions that benefit the supplier. As Hotel Market Manager for Orbitz and chapter board member, Markus Boeker, commented during the networking reception, “Listening to my clients in forums such as HSMAI events, I gain a “big picture” perspective of my client needs that complements supporting individual property clients.”
  • Utilize all of the tools at your disposal but use them well.  Another report does not solve the problem alone. While data is crucial to sound decisions, creating report after report for ownership or management without accurately analyzing the data in order to lead to a recommended action is fruitless. 
  • Quadri-Felitti quoted a recent Cornell Hotel School research study “Discounting Still Doesn’t Work” and asked how many revenue managers felt as the article states that they were under pressure from upper management to lower prices when competitors did. Many concurred and others felt little pressure. Those hotels represented in the room with a robust revenue management program, with a depth of yield tools and staff, seemed less likely to respond to this pressure. 
  • With ADRs rising in New York, one guest raised the thought that New York might be starting to be seen as less of a value to alternative destinations for travelers, leisure or group? While it provoked a strong response, there was little consensus and we expect the debate shall continue. Recently, Sean Hennessey of Lodging Investment Advisors, LLC addressed the HSMAI Big Apple members, as his firm does at each NYC monthly meeting, with data demonstrating that ADRs in New York City have indeed risen but have not yet reached the 1999 or 2000 rates when accounting for inflation since those years.
  • Demand is unlikely to improve by price discounts when issues of security or safety are involved. So outside of these issues, fundamentals such as understanding your market positioning, macro and micro demand influences, practice forecasting, and consistent demand analysis and your revenue management department will meet its goals. 
What Revenue Manager’s wish their GM/Owner/DOS would understand:
  • Black out dates! (This first, spontaneous and unfiltered response received a thunder of laughter and applause!)
  • Stop asking us to create more and more reports!  Better to have one good one and spend the rest of the time analyzing and implementing. 
  • Communicate! Communication is so important to all: parties, sales, reservations, revenue! Revenue managers need to be involved in all segments sought so we have the whole picture.
  • The revenue manager’s task list is longer than a six-year-old’s Christmas list. We need help doing the sheer volume of “stuff” so we can manage, analyze, and recommend. 
  • This is expected to be a 365-day a year job!  Please let us cross train others to let us have a vacation without a laptop! 
Next Steps

The need for each hotel to be developing talent in the revenue management discipline now is an essential take away from the evening’s discussion, as well as the need to continue to lobby upward for greater understanding of the practice by owners, investors, and colleagues. As such the HSMAI Big Apple has created a new committee to mirror its international organization’s successful Special Interest Group in Revenue Management. Noted trainer Douglas Kennedy, advisor to the national HSMAI Revenue Management group, spoke at the NYC Summit and outlined some of the group’s initiatives, including a certification program and practice publications. The SIG will host a meeting in advance of HITEC in Minneapolis, MN this June. 

Another notable point of the evening is the magnitude and intricacy of the countless factors and pressures affecting the New York City lodging market. It reminds us of the line from the Sinatra song,”…if you can make it there, you can make it anywhere….” Each lodging market has its peculiarities and challenges, yet none as unique and enormous has properties in Manhattan and the surrounding metro area.
This roundtable representing over 12,000+ hotel rooms in NYC illustrated how far revenue management has come since the early1990s and illuminated that there is much more to accomplish for the discipline to achieve its maximum potential, and make even greater contributions to the financial health for our owners, our companies, and our industry.

To join the HSMAI Big Apple Chapter and continue the discussion with the leaders from this roundtable, please visit www.hsmainyc.org

About HSMAI:  The HSMAI Big Apple chapter is the greater New York area division of the Hospitality Sales & Marketing Association International,  a professional association whose members are committed to the sales, marketing, management, educational or planning disciplines within the hospitality industry. A socially conscious organization dedicated to educating our members in the most efficient sales and marketing techniques and industry trends, HSMAI Big Apple provides a positive forum to meet with clients and other hospitality executives. We are committed to helping our members perform their jobs according to the highest standards demanded by our customers, employers and peers.

About NYU:  Entering its second decade, the Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management at New York University is a dynamic educational and research center grounded in the living laboratory of New York City. In concert with a location and connections in the lodging, finance, sports business, and tourism capital of the world, the NYU Tisch Center offers an extensive complement of bachelors, masters, and certificate programs in the disciplines of hospitality, tourism, and sports management. Entrepreneurial course work focuses on asset management, financial analysis, destination management, product development, strategic marketing, and information technology. Donna Quadri-Felitti is Assistant Clinical Professor of hospitality and tourism, quadri@nyu.edu, and for information on the NYU Tisch Center, visit www.scps.nyu.edu/tischcenter

About OZone Strategic Marketing: OZone Strategic Marketing, LLC is a results-driven, independent consulting firm with expertise in the fields of Hospitality Sales and Marketing, Distribution Planning, Revenue and Pricing Management, Operational Hospitality Management and cost effective business re-engineering.  Through extensive market research and planning, sales process re-engineering, advance revenue management and pricing tactics, OZone has been able to introduce new business processes that have added immediate value.  Each are designed to continue providing value and survive long after each engagement has been completed.  Laura Osborne is Vice President of Sales and Marketing, OZone Strategic Marketing LLC, laura@ozonemarketing.com, and for further information visit http://www.ozonemarketing.com

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Contact:

Laura Osborne
OZone Strategic Marketing, LLC
203-348-3022
www.ozonemarketing.com

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Also See: Revenue Management: Too Tactical and Not Strategic Enough; Highlights from HSMAI's Revenue Management Strategy Conference / June 2005
Revenue Management...It Really, Really Works!! / July 2005
Connectivity! Connectivity! Connectivity! Achieving Really Real Time, Last Room Available Room Inventory Management / Craig W Cooley / November 2005

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