News for the Hospitality Executive
Managing Hotel Revenue and Everything That Drives It;
Five Considerations Worth Repeating
|By: Neil Salerno, February 2010
I first started writing about revenue management in 2001 and, frankly, I haven't seen overall business conditions change too much since then; markets are highly competitive and many hotels are still openly discounting rates to drive business.
I wish hoteliers would stop thinking that lowering your rates will sell more rooms and increase room revenue. That tactic may sell a few more rooms, but it rarely sells enough rooms to offset lowered rates. Itís simple economics; simply selling more rooms increases expenses, while even slightly higher or flat rates increase profit. As occupancy demand increases, ADR should increase as well.
The tell-tale sign of a hotel-in-trouble is to see increases in occupancy and decreases in average rate and RevPar. A hotelier who understands and employs the tactics of revenue management monitors and adjusts rates in reaction to fluctuations in current and future occupancy demand.
For many hotel owners and managers, reducing rates is the lazy-man form of marketing. Itís generally their first thought when sales are low; after-all, it takes very little thought and certainly very little research and/or effort. And, it also ignores the fact that people donít buy rate, they buy value. Sometimes, lower rates are interpreted as having lower value or ďtoo good to be trueĒ.
In a vacuum, rates mean little, but no hotel operates in a vacuum. Low rates, when compared to your competition set, can devalue your hotel. ďYou get what you pay forĒ is still alive and well; a new Mercedes car for $20,000 is not credible, even though you might sell one to a fool.
When sales demand is low, look to value-added marketing and position your hotel properly within your marketplace. If your hotel deserves to be in the number one position because of its location, facilities and amenities, make sure it is positioned that way.
Gather Data in Your Market Before You Set Rates
For a modest amount of money, you can start receiving market share reports from Smith Travel Research. They are not available everywhere, but, if theyĎre available in your area, they will provide a tremendous amount of insight into your local market status. It is far better than guessing or ďcounting carsĒ in your competitionís parking lot; that brings me back to the seventies, it didnít work then either.
STR reports will provide you with accurate information comparing your occupancy, ADR, and RevPar with your stated competition. The fairness and accuracy of STR reports will assist you to place your hotel in its proper position among your competitors.
Improve Your Knowledge Base
Iím constantly surprised to hear from hoteliers who have so many excuses why they donít stay current by reading any of the many online eNewsletters. Lack of time is often the most used excuse; I guess these are the same people who donít have time to return phone calls too.
Today, go online and subscribe to at least three free online newsletters. Keep your knowledge base current with the happenings in our industry. You can learn a great deal from the successes and failures of others; the only thing you truly own is what you know.
The Internet Is Indispensable
Take a serious look at your hotelís website; this year, more than 70% of your business will be directly or indirectly influenced by the Internet. Before you look to have another website designed, get an analysis of your current site. A good analysis will give you a clue to what is working or isnít working very well on your site. Beware of those offering to analyze your whole site for free; that's usually what it's worth.
You can then use this analysis to guide the new designer to create a functional website. Remember, search engine optimization must be incorporated into the design of your site; itís not something used only after your site is completed.
Itís an absolute fallacy to think that SEO can be applied to a poorly designed website to increase traffic. If someone suggests that to you, run, donít walk away quickly. SEO must be incorporated into the design of the site itself.
The number of hotels getting ripped-off by techie-talking web
designers is astounding. I read an article the other day, written by a
web site design company that thinks that, having an average of only 2%
of site visitors who actually make a reservation, is a good average. Less
than 4% indicates that something is wrong. Converting "lookers into bookers"
is an integral function of your website.
Make a Commitment to Revenue Management
Today is the day to finally make a commitment to learn and use revenue management to increase occupancy and average rate. Sure, it takes a little effort to do the necessary research, but the rewards are great.
Revenue management relies upon your ability to look into the near and distant future to view occupancy demand and making rate decisions well in advance. Measuring reservation booking pace and being aware of occupancy generators in your area promotes smart decisions.
|Also See:||Are You Still Discounting? You Might Gain Some Occupancy, But Lose RevPar to Your Competition / Neil Salerno / December 2004|
|Hotel Web Sites; Want it Creative or Effective? / Neil L. Salerno / May 2003|