The 10 Steps to Successful Revenue Management in a Hotel Revenue - PowerPoint PPT Presentation

The 10 Steps to Successful Revenue Management in a Hotel Revenue Management Fundamentals

What is Revenue Management ? • “ Revenue Management is the art and science of predicting real-time customer demand at the micro level and optimizing the price and availability of products.” – Robert G Cross – The Founder of Revenue Management in Travel for American Airlines • Suggested better way of pricing and inventory management • Created a more discipline approach at est, $3M cost to generate an est. $30M in incremental revenue • Program actually generated $100M incremental revenue in first year. Revenue Management Fundamentals 2

The 10 Steps to a Successful Revenue Management Strategy 1. Calendar Analysis 2. Competitor Analysis 3. Pricing Matrix 4. Segment Analysis 5. Demand Creation 6. Forecasting 7. Price Planning 8. Distribution Planning 9. Communication 10. Measuring Success Revenue Management Fundamentals 3

Calendar Analysis STEP 1 Revenue Management Fundamentals 4

Calendar Analysis • Review past 2 years Occupancy and ADR by DAY – What dates did the market and hotel run high occupancies – WHY? – What dates did the market and hotel run low occupancies – WHY – What dates did the market and hotel run at a high ADR – WHY? – What dates did the market and hotel run at a low ADR – WHY – Look for trends across two-three years – This may indicate a demand impacting scenario • Identify HIGH and LOW demand patterns Revenue Management Fundamentals 5

Competitor Analysis STEP 2 Revenue Management Fundamentals 6

Competitor Analysis • Twice a year a hotel should do a full Competitor analysis. – Site inspection – Rate Analysis – Channel Analysis – Brand.com Analysis – Service, Product & reputation Review Revenue Management Fundamentals 7

Pricing Matrix STEP 3 Revenue Management Fundamentals 8

The Great Distribution Merge OTA Channels Public Rates Wholesale Rates Travel Agent Channels Revenue Management Fundamentals 9

Segment Analysis STEP 4 Revenue Management Fundamentals 10

Segment Analysis • All Hotels & Hotel Groups work with different segments but the Main Market Segments used are. You need to know how you perform compared to your Comp Set. – Transient – Discount & Retail – Corporate – Dynamic & Contracted – Wholesale – Dynamic & Contracted – Corporate Group – Leisure Group – Aircrew Revenue Management Fundamentals 11

Demand Generation STEP 5 Revenue Management Fundamentals 12

Demand Creation Demand Creation (Marketing) Demand Demand Management Capture (Revenue (Sales) Mgmt.) Revenue Management Fundamentals 13

Forecasting STEP 6 Revenue Management Fundamentals 14

Forecasting • A hotels forecast ties all the previous elements together. • Forecasts SHOULD be done 12 months ahead – Daily – For next 30 days plus any LOW or HIGH demand days over the next 90 days – Weekly – Review the next 3 months – Monthly – Review the next 12 months and Add a forecast for the month just past for next year Revenue Management Fundamentals 15

Why do we need to know demand? • Positive – HIGH DEMAND – We focus on the rate side of the REVPar. Occupancy will look after itself. • Negative – LOW DEMAND – We focus on the occupancy side of the REVPar. We need to take business out of our competitor hotels. Hotels need to FORECAST DEMAND 12 months in advance - Many hotels in Asia do this just 3 weeks ahead. Revenue Management Fundamentals 16

What are some causes demand changes • Public holidays in a city or in the hotels main emitting countries • School holidays in a city and in the main emitting countries • Events – The days before and after large events • Weather • Transport issues – lack of flights, flight cancellations, • Price Revenue Management Fundamentals 17

Forecasting • Steps to Forecasting – Input Calendar dates from your calendar analys is – Review Last year Hotel and comp set results. Highlight any LOW or HIGH demand generators – Review Booking Pace – Current pace vs last years pace, comp set pace vs last year – Forecast using DEMAND inidcators plus changes on Year on Year on Booking Pace. The closer you get to the date, the more important OTB information is. Further out use your DEMAND inidcators Revenue Management Fundamentals 18

Forecasting • Steps to Forecasting – Review Pricing of your hotel and your comp set. – Using all possible data points at hand, the hotel then should forecast • Occupancy by day • ADR by Day • Segments by day ( rarely done ) • Channels by day ( rarely done ) TIP: Forecast the same month next year at the end of the month. Ie: Beginning of August 2016 forecast July 2017 Revenue Management Fundamentals 19

Price Planning STEP 7 Revenue Management Fundamentals 20

Price Planning • Price planning is now the MAIN KEY ELEMENT in optimising revenues. – Lower prices “can” help to generate demand for a hotel, even in periods of low demand for the area. You “steal” business out of competition , BUT YOU MUST NOT DO THIS WHERE IT IS EASY FOR YOUR COMPETITORS TO SEE or you can push a markets rates down. Use qualified rates / CRM – Higher Prices are used to maximise price in a period of High Demand – Packages help to sell your Unique selling points. Can be used for both High and low demand times Revenue Management Fundamentals 21

Distribution Planning STEP 8 Revenue Management Fundamentals 22

Distribution Planning • Main elements of Distribution Planning – Close segments (X) – MLOS – Minimum length of stay ( 2 / 3 / 4 ) – CTA – Closed to arrival ( CTA ) – Close Room Types ( X ) – Close out low rate levels – Close out Distributors / Channels Revenue Management Fundamentals 23

Distribution Planning Please remember that Distribution planning is a RESTRICTIVE approach and is designed to TURN AWAY / DENY bookings. These practices should only be used usually when forecasting high / full occupancy Revenue Management Fundamentals 24

Communication STEP 9 Revenue Management Fundamentals 25

Communication • Meetings – Daily – Review Pick up for next 30-60 days and + & - event periods for next 90 days. Review Competitor pricing changes. Adjust pricing accordingly – Duration 15 minutes • Revenue Manager, • DOS, • Reservations Mgr, • GM Revenue Management Fundamentals 26

Communication • Meetings – Weekly Revenue Meeting : Review next 90 days. Duration 60-90 minutes • General Manager • Revenue Manager • Reservations Manager • Front Office Manager • Financial Controller • DOSM • Marketing • E-Commerce Revenue Management Fundamentals 27

Communication • Meetings – Monthly Revenue Meeting : Review next 12 months . Duration 90 minutes • Forecast previous month for next year • Review top account productivity • Review OTA & Direct web performance compared to comp set. • Review segments for previous month compared to comp set. • Review Country of Residence for previous month • Review Source Reports for previous month • Review Return Guest Numbers Revenue Management Fundamentals 28

Measuring Success STEP 10 Revenue Management Fundamentals 29

What are the best measurements • RGI – This measures your performance against competitors. It balances ADR & OCC %. The ideal is to have this by segment and by channel. • Just having total RGI of the hotel creates more questions than answers and does not help a hotel to improve. • FORECAST VARIANCE – This measure how accurate your forecasting is. Should be measured by day 12 months out, 3 months out, one month out. • Inaccurate forecast creates negative revenue outcomes. Revenue Management Fundamentals 30

Measuring Success How to Calculate – ARI - Average rate Index - (Average rate is Rooms Revenue/Rooms Sold) • Your ADR/Comp set ADR – MPI – Market Penetration Index ( Occupancy is Rooms Sold/# of Rooms ) • Actual Share/Fair Share – RGI – Revenue Generation Index ( REVpar is Rooms revenue / Ttl # of Rooms ) • Your REVpar/Comp set REVpar Revenue Management Fundamentals 31

The 10 Steps to a Successful Revenue Management Strategy 1. Calendar Analysis 2. Competitor Analysis 3. Pricing Matrix 4. Segment Analysis 5. Demand Creation 6. Forecasting 7. Price Planning 8. Distribution Planning 9. Communication 10. Measuring Success Revenue Management Fundamentals 32

Maria Taylor Regional Vice President SEA Thank TravelClick You mtaylor@travelclick.com +65 9647 0391 33