The Way I See It
|By: Neil Salerno – April 2006
The way I see it, there are almost as many versions of revenue management as there are people actually using it. Whether it’s referred to as yield management or revenue management, it’s obvious that it means different things to different people, but no matter what definition or tasks are applied to revenue management; it can work magic if it’s applied correctly and consistently.
The way I see it, the process of managing the flow of one’s business revenues can and, possibly, should be tailored to the individual hotel operation and what one is looking to accomplish. The primary goal is to maximize hotel revenue by taking advantage of available pockets of occupancy demand.
Many hotels and major franchises or hotel membership type affiliations take revenue management very seriously and have people dedicated to the process; while others leave the responsibility to local management, the front office, or reservations department. The sad part is that many people, with the revenue management title, have never been trained nor provided with the tools and goals of their job.
Preferred Hotels & Resorts have true revenue management professionals who follow strict guidelines to walk their member hotels through the process of maximizing their revenues. Their commitment to revenue management has contributed to their great success as a company, one of the many benefits of being a member of this fabulous group of hotels.
The way I see it, no matter who is charged with this important responsibility, revenue management can make a serious impact on your bottom-line. There are several important elements of revenue management, but none more important than knowing your competition.
Many years ago, I worked for an owner who constantly reminded me that increased occupancy had its own associated increases in expenses; linen, disposables, housekeeping payroll, etc. The key to increased profit, he used to add, is to find ways to increase average rate; where a dollar improvement meant that at least $.95, from every room sold, goes to the bottom line.
Revenue management is a combination of art and science.
It doesn’t happen by accident or simply good fortune. It takes work
and dedication. The first step is to know your competitive business environment.
For those fans of the Sopranos, there is an Old Italian proverb which says “Stay close to your friends, but even closer to your enemies”. I hope no one considers business competition this harshly, but this can easily be translated to “Know your hotel well, but know your competition even better”.
The way I see it, there is no better way to begin the process of revenue management than to understand your competition. I can think of no better way to begin that process than to subscribe to Smith Travel Research weekly and monthly reports. Smith Travel Research compiles data on occupancy, average rate, and revenue-per-available room for your hotel as compared to your competition. This will help you to develop your hotel’s true position in the marketplace and to set goals for where you want to be in the market.
The way I see it, too many hotels, especially independent ones, place themselves in a box by ignoring competing hotels. Hotels can’t operate well in a vacuum. I can’t understand how a hotel can set competitive rates without knowing what the competition offers.
Traditional Revenue Management
Traditional revenue management involves the adjusting of rates and hotel inventory based upon room demand. These adjustments are usually dependent upon current reservations, historical data, forecasting, and a good measure of gut-instinct; the art in revenue management.
In traditional revenue management, discounted rate tiers are closed as occupancy increases. Historical data may also indicate that a certain period has high demand even though reservations may be weak at the current time. Basically, as occupancy increases, rates available for sale should also increase. In this way, the hotel is building a “base” of business, which enables the hotel to sell rooms at higher rates.
Many hotels build this base with discounted group business; dedicating a portion of their rooms to groups, actually enables the hotel to end up with stronger average rates overall. This would be a very simple process except that revenue management should be applied to group bookings as well. One of the factors affecting good revenue management is the fact that many hotels accept too many group rooms at deeply discounted rates.
Telltale Signs of Poor Rate Management
It’s very easy to spot hotels which are not using revenue management; hotels which start-off with strong rates and begin dropping rates when they realize that reservations are not what they expected. Don’t you just love those feelings of panic, one or two weeks into the month, when management finally figures-out that you aren’t going to make budget and declares that rates need to be reduced? It’s usually much too late, but something has to be done; right?
It’s amazing how often this takes place. On the other hand, this is the same hotel which will do nothing when reservations appear stronger than anticipated. Frankly, I don’t know which scenario is the bigger sin. This rate, “set it and forget it”, situation is more common among smaller independent hotels and can be avoided if someone is assigned to revenue management.
The way I see it, revenue management need not be a complicated process in order to be effective. Sometimes our industry tends to magnify the complexity of various tasks. Revenue management is a learned process, but you need to assign it to someone who has a legitimate interest and curiosity for numbers. If there is no one on staff with this knowledge, there are many outside authorities who can handle training. The return on this modest investment can be huge.
|Also See:||Hotel Web Site Lookers & Bookers; Want to Convert Lookers on Your Web Site? / Neil Salerno / March 2006|
|Hotelier Rebuts Article Concerning Third-party Online Aggregators / Neil Salerno / February 2006|
|Great Opportunity for Independent Hotels - Cash-in on Electronic Sales / Neil Salerno / January 2006|
|Some Hoteliers Still Don’t Recognize the Benefits Derived from Third-party Listings; Shame, Shame, Shame on You! / Neil Salerno / January 2006|
|Online Hotel Rating Sites Driving Anxiety into the Hearts of Many Hotel Managers / Neil Salerno / December 2005|
|Hotel Web Site Priorities –Some Do’s, Don’ts; Why the Heck Did You Do That? / Neil Salerno / November 2005|
|The Best Hotel Sales Director I Ever Met; What Do The Good Ones Have in Common? / Neil Salerno / November 2005|
|The Best Hotel General Manager I Ever Met / Neil Salerno / October 2005|
|What’s your eMarketing Proficiency? Using Electronic Marketing Tools / Neil Salerno / October 2005|
|When Times Get Tough…Get Tougher! Sell Harder Before You Cave-in on Rates / Neil Salerno / September 2005|
|The Web Site Conundrum…Are You Winning the Electronic Marketing Game? / Neil Salerno / August 2005|
|Lions and Tigers and Bears…Oh My; The Hotel Yellow Brick Road is Less Scary than It Used to Be / Neil Salerno / August 2005|
|Running Dry on Good Hotel Ideas? It’s not What You Know - It’s Who You Know / Neil Salerno / July 2005|
|Revenue Grabbing Tips for Independent Hotels; Start Thinking Like the Chains / Neil Salerno / July 2005|
|Hotel Web Basics That Really Work…Content is King / Neil Salerno / July 2005|
|Hotel Supplier Sites versus Online Travel Agents; The War Chronicles / Neil Salerno / June 2005|
|New Hotel Technology Surround Us; Yet Face-to-face Selling is Still Most Productive / Neil Salerno / June 2005|
|The Internet…The Great Equalizer For Independent Hotels / Neil Salerno / June 2005|
|Third-Party Booking Sites Still Dominate Internet Sales; Why Do So Many Consider this Bad? / Neil Salerno / April 2005|
|Now That Online Hotel Booking Is Here to Stay, New Challenges Emerge / Neil Salerno / April 2005|
|Independent Boutique Hotels Can Compete With their Big Box Neighbors / Neil Salerno / April 2005|
|Who Are Your Most Important Guests? We’ve Come a Long Way, Baby! / Neil Salerno / March 2005|
|New Consumer Hotel Booking Preferences - They Love the Internet…Now What? / Neil Salerno / March 2005|
|Who Would Have Thought - Today's Hotel Marketing Necessity Is Also its Best Value / March 2005|
|Time For a Hotel Web Site “Make-Over”? Methods for Building a Successful Web Site Change / Neil Salerno / March 2005|
|Create Impact by Developing a Link Strategy For Your Hotel Web Site / Neil Salerno / February 2005|
|Steps to Develop Your Hotel's Presence on the Web / Neil Salerno / February 2005|
|Five Hotel Internet Marketing Myths - Busted!/ Neil Salerno / January 2005|
|How Does Your Hotel Web Site Measure-Up? 2005 Will Be the Internet’s Most Productive Year so Far / Neil Salerno / January 2005|
|Are You Being Out-Hustled By Your Competition? How to Dominate Your Hotel's Market Set / Neil Salerno / December 2004|
|Why Are Some Hotel Companies Plagued By Management Turnover? Is This Systematic of Poor Performance? / Neil Salerno / December 2004|
|Basic Components of a Hotel Website: Current Weather, Flash Animation, and Virtual Tours?? Plain Talk About Internet Sales / Neil Salerno / February 2004|
|Don’t Compromise Your Goals In 2004; Five New Year’s Resolutions You Will Want To Keep / Neil Salerno / January 2004|
|No More Whining About Third-Party Suppliers; You Control Your Own Fate On The Net / Neil Salerno / December 2003|
|Six 'Maxi’s' Guaranteed To Boost Hotel Sales / Neil Salerno / November 2003|
|It’s Time To Take Back Control Of Rates & Rooms - But Is The Enemy...Us? / Neil Salerno / November 2003|
|Booking Engines Are Like A Box of Chocolates...You Never Know What You’re Gonna Get! / Neil Salerno / October 2003|
|Hotel Web Site & Search Engine Optimization; Always A Work In Progress / Neil L. Salerno / October 2003|
|Hotel Budgets and Marketing Plans; Oh No, Is It That Time Again? / Neil L. Salerno / September 2003|
|Increasing Hotel Internet Sales Is Not Rocket Science...And It Doesn’t Have To Be Costly Either / Neil L. Salerno / September 2003|
|Are You Treating Third Party eWholesalers As Competititon Or a Valuable Marketing Partner? / Neil L. Salerno / August 2003|
|How Often Have You Heard, 'I could have gotten a better rate but the client saw our rates on the Internet' ? It’s Time To Get Back To Selling Location, Facilities, and Services / Neil L. Salerno / August 2003|
|Before You Begin that Marketing Plan Challenge Your Sales Team; Expect More and Get More / Neil L. Salerno / July 2003|
|Jump Up and Shout Yes - Delivering Best Online Customer Experience, Nice Job Vividence! / Neil L. Salerno / July 2003|
|Is The Internet Delivering On Its Promise? Well, It Depends on How you Look at It / Neil L. Salerno / June 2003|
|Coaching and Mentoring, Sometimes A New Paradigm Can Go A Long Way / Neil L. Salerno / June 2003|
|Sales Training Works Well, But Sales Mentoring Makes It More Effective; Mentoring Lasts a Lifetime / Neil L. Salerno / May 2003|
|Is It Time For A Sales Tune-up? How Healthy Was Your Last Forecast? / Neil L. Salerno / May 2003|
|Hotel Web Sites; Want it Creative or Effective? / Neil L. Salerno / May 2003|
|If You Always Do What You Have Always Done.... You’ll Always Get What You Always Got! Hotelier’s Mantra... Thinking Outside The Box / Neil L. Salerno / April 2003|
|Good Sales Planning - The Basics Still Work / Neil L. Salerno / April 2003|