By Ahmed Mahmoud
As vaccination programs continue to find success against Covid-19, lockdown policies are easing, and hotels are reopening. Tentative steps are being made toward the resumption of international travel – there is now significant domestic leisure travel taking place in a number of countries. With consumers starting to make travel plans, hoteliers should begin preparing their strategy for reopening and a wider recovery.
Like most hotel departments, revenue management changed dramatically in light of the last two years’ unprecedented challenges. Established processes were flipped upside down as demand dried up and historical data lost its power to predict future business. Now that most countries can finally ease restrictions, it’s time to look ahead, make the most of recovery and set ourselves up for future success.
Trying to re-establish old habits and ways of doing things won’t be enough. The only way to guarantee sustained growth and success is by moving with the times and adapting your revenue management practices. That includes broadening revenue management’s scope, fostering collaboration with other commercial departments and taking tech adoption to new levels.
Let’s look at how you can do this at your hotel and get Revenue Management Right for 2022.
Demand Recovery Strategy Plan
As the situation surrounding COVID-19 continues to evolve, it is important to observe industry forecasts and trends that will ultimately shape your recovery strategy. Although many countries have implemented travel restrictions further impacting global travel demand, most of the research in 2020 says there have been significant decreases in year-over-year flight searches correlating to the outbreak within each country.
Similarly, global hotel bookings have been heavily impacted as a result of COVID-19. As of March 22, 2020, year over year hotel bookings were down by at least 75% across all regions. In general, the drop in hotel bookings has correlated with the drop in flight searches across all regions.
STR’s latest full-year 2021 forecast for the hotel industry shows that despite leisure demand going beyond pre-pandemic levels and hoteliers managing to hold rates through the industry downturn, there is still a long way to go to get back to prior 2019 numbers, Revenue Your Hotel.com estimated that the demand situation will change as of January 2022.
For revenue management, it’s important for hotels to have an action plan in place that addresses both the current state and the future when demand picks up again. Overall, your hotel should consider a four-phase approach:
- While Travel Is on Pause: While there is no or low demand and many hotels are closed, hotels should stay connected with past and future guests through social media, email, and editorial content that entertains and adds value, and this is what we call Strengthen Brand Relationship.
- Initial Rise in Demand: Ramp up marketing efforts and reach people beginning to daydream about rebooking and planning vacations and business activity. hotels to ensure a flexible cancellation policy, and this is what we call Ramp Up Marketing and Reach.
- Demand Strengthens: As revenue management strategy hotels need to continue focusing on intent as well as targeting the right demographics and feeder markets with the right messaging and packages, and this is what we call Increase Revenue and Marketing Efforts.
- Revenue Management Sales Strategy: This type of sales strategy aims to maximize the number of rooms booked at any point in the year, regardless of the typical demand at that particular point in time. Typically, a revenue management plan requires hotel operators to drop room rates during the low season in order to encourage bookings, while raising rates during high traffic times. During these moments, guests are going to be willing to pay higher rates to get a room, so it’s worthwhile raising rates to generate more revenue per available room.
While gathering data on your current demand, you should go into details. For example, you can’t view pick-ups in general. You have to analyze them within microsegments to obtain valid information on demand among your guests.
10 Top Tips for Demand Recovery
- Optimize your hotel website
- Anticipate Through Forecasting
- Keep a Close Eye on Your Pricing Strategy vs your competitors
- Optimize Your Distribution Channels (Hotel branded website and OTA)
- Optimize Your Advertising Strategy
- Optimize Your Marketing strategy
- Use your Database to Address and reconnect with your Loyal Guests
- Optimize ancillary revenue with Up-Selling & Cross-Selling opportunities
- Organize Events to Boost Low Demand and Attract More Business Guests & Meetings
- Offer Packages That Fit the Needs of Your Target Group
What drove demand into your market in the past may have changed significantly. While this could be positive or negative for the future, in either event, pay close attention to the demand drivers in your market. Reach out to your local corporate accounts to see how their travel demand has and will change in the future.
As these demand drivers recover, booking windows and stay patterns will likely change and you want to be on top of it. Particularly as many hotel brands must now price transient 500 plus days in advance – every day. You do not want to be the hotel that is priced with all your discounts open on the day a major event becomes bookable in your market. Think Super Bowl. While that is an extreme example, there are countless others in markets across the globe.
Technology Above All
If you disagree with the above statement, look at the present working conditions. What is helping us most in the COVID-19 era? Internet, various instant messaging apps, virtual calendars, headphones and webcams. In short, technology! However, hoteliers might be skeptical about hospitality solutions such as Revenue Management Systems due to insufficient knowledge, fear of disrupting company operations or focusing on short-term goals instead of long-term ones. However, previous crises, including the one after the September 11 attacks, led to a technological boom in the hospitality industry. Revenue Management of 2022 will be based on continuous analysis of current and detailed data, short-term forecasts, adjusting to the situation, a more holistic view of the hotel – and all this will be virtually impossible without using technology. When should you start using it? In a perfect scenario – now. Learning the technological approach may take time, so you should prepare in advance for better days.
Hotels recognize that now is the time to implement new technology to transform the guest experience and streamline their services, a hotel’s goal today is to make the guest stay feel like they’re in their own home, customizing it as if they had selected every setting themself. And while design plays an important role in this goal, technology is just as important – possibly more so. Simple to connect, fast, free Wi-Fi is not an amenity any longer in hotels. It’s an expectation. Having multiple devices automatically connect to the hotel’s guest network is commonplace with hotels…not only specific hotels…but across brands as well.
The process should be seamless. The network recognizes the guest’s phone, laptop, watch, or any other device that has connected to any of that brand’s networks across the globe and immediately says “Welcome Back!” These days, this network is the start of so much more than just connecting to the internet to check emails. It’s the backbone to a converged network that enables so many more customized amenities and settings to treat you as if you were in the comfort of your own home…and pamper you even more.
Hoteliers need to understand that while modern technology has reduced the number of staff needed to make intelligent business decisions, there is still a call for a large number of talented and experienced revenue managers to optimize the bottom line.
Total Revenue Management is on the Rise
Before the COVID-19 crisis, and under the traditional model, hotel revenue management was largely focused on maximum room revenue. However, revenue management principles can be applied to operational areas beyond just rooms. At its core, total hotel revenue management brings together and optimizes all revenue streams, as opposed to thinking of each department separately. Thus, a more holistic approach to revenue management is needed to identify revenue-generating opportunities and optimize revenue and profit generation. Today, hoteliers are looking for ways to generate extra revenue even during low-occupancy times, In line with this, we’ll see an important shift towards total revenue management.
The Future of Revenue Management = Total Revenue Management, Total hotel revenue management has emerged in the hotel industry as the next stage in the evolution of revenue management. By integrating several revenue streams including food and beverage, function space, catering, spa, retail, golf, and others with room revenue management, total revenue management enables hotels to achieve their goal in maximizing revenue in highly competitive markets.
The move to total revenue management involves a shift from a tactical, short-term focus to a more strategic, long-term view. Total revenue management relates to capturing mostly untapped revenue and profit potential, associated with hotels’ non-room revenue-generating centers. Some hotel chains are already expanding revenue management practices to F&B outlets and/or the function rooms.
The applications of Total Revenue Management can be exhibited in many ways, but some of the primary focus areas for rolling out a new program involve applying the concepts of revenue management to your ancillary revenue streams beyond rooms, such as F&B, Spa, Function Space, Golf, and more depending on the offerings of your particular property. The end goal of any serious Total Revenue Management program is to enhance bottom line profits by maximizing both top-line revenues and the costs associated with each area. This is referred to often in the industry as Profit Optimization.
Let us Hope for a Better Year of 2022
Although the COVID-19 pandemic can still surprise us (hopefully not), the above on how to get the revenue management right for 2022 is the most realistic for the upcoming months. Lifting the increased restrictions and opening hotels for leisure segments and foreign guests will happen sooner or later. Volatility will continue to dominate the market, and guests will pay attention mostly to safety. Hotels must adapt to the “new reality” trends. This is difficult to achieve when some properties are understaffed or need to be restructured. However, you can’t neglect to prepare for changes. This is the only way to win the largest market share after the restrictions are lifted.