RevenueManagement     Town Pump  Manager’s Meeting   October 13, 2011
Agenda•   Introductions•   Revenue Management Defined•   Costs•   Incremental Revenue•   Displacement•   Competitor Benchm...
IntroductionsDaniel WiseCascade Revenue Management•   Best Western•   Choice•   Hilton•   IHG•   Independents
Revenue ManagementFrom the literature…"Revenue management is the art and science ofpredicting real-time customer demand at...
Revenue ManagementIn practice…   Selling the right product   To the right person   At the right time   For the right p...
RM Goals↑ $ Revenue $ ↑  Conditions Necessary…     • Fixed inventory   • Various price points       • Perishable   What ot...
Understanding CostsFixed Costs• Mortgage• Salaries• Utilities (somewhat)Variable Costs• Labor• Cleaning supplies• Amenities
Individual ProjectTake a break and calculate Fixed and Variable costsfor your hotels.• Use a spreadsheet or paper• First c...
Example                     Fixed                                VariableMortgage                     45,000   Housekeeper...
How can you use this?Cost of an empty room…Average Occupancy 62% = 38% Vacancy Rate70 room hotel• 70 * .38 = 27 room spoil...
Costs & PricingIn economics and business decision-making, sunk costs areretrospective (past) costs that have already been ...
Minimum PriceFC = $32VC = $12TC = $44To achieve profitability? Why?Lowest amount you would take? Why?
Incremental Revenue          Sun Mon       Tue   Wed Thu       Fri    Sat   WK SOLD    25     45     57     44     53    1...
10 @ $30 S-Th          Sun Mon        Tue   Wed Thu      Fri    Sat   WK SOLD    25     45     57     44     53    105    ...
3 @ $60 Fr/Sa          Sun Mon        Tue   Wed Thu      Fri    Sat   WK SOLD    25     45     57     44     53    105    ...
To consider…Not just about room revenue: Total Revenue• Food & beverage• Gaming• Activities• Others?Need to analyze averag...
BreakTake 10-15 minutes
Not enough rooms?Enough talk of empty rooms!What if you don’t have enough rooms to meetdemand?Unconstrained demand > avail...
Displacement Analysis1. Determine your forecast without the group2. Determine amount displaced by the group,   if any3. Co...
Displacement ScenarioUse the data in the RMS Workbook:
Group Request…• Arriving Thursday 12/8/2011• Departing Monday 12/12/2011• 30 rooms each night   o 12 Kings @ $75.00   o 18...
What did you come up       with? Why did you make the choices you did?
Let’s do the DA together
Know your comp set• Benchmark  o Tour their site  o Compare online information• Collect Intelligence  o Shop their rates  ...
Know your customersCater a strategy to their unique needs• Categories               • Types   o Leisure                  o...
What’s important to             them?Single business traveler        Family on vacation• Distance to their work site   • D...
Forecast by segment          Sun   Mon   Tue   Wed   Thu   Fri   Sat King           BT    BT    BT    BT2 Queen           ...
Pricing by room typePeak/Busy dates by customer and room type          Sun    Mon      Tue    Wed     Thu      Fri   Sat K...
BreakTake 10-15 minutes
Top Down Selling           Strategy• Choice Hotels recommended strategy
Choice Selling Tool
Day in the life…How to revenue manage, even if you are not arevenue manager…• Daily check  o So much impact can be made si...
RM Team• Who should be on that team?• What roles should they have?
RM Meeting• Agenda items  o Time for each• Sales• Front Desk• Revenue Manager
Get some tools• Bare minimum (if I was stuck on an  island)  o Competitor Rate Shopping  o Occupancy Tracker
The RM Cycle                 Monitor                 DemandForecast                       MonitorDemand                   ...
Tools• Simple forecast tool• Opaque workbook• Choice Target Selling Application
Resources• Major brands if applicable  o Choice University  o Wyndham• Other managers on your team/company• Hotel organiza...
Questions?
Thank you!
Town Pump Managers Meeting
Town Pump Managers Meeting
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Town Pump Managers Meeting

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Worked with the Town Pump hotel managers during a half day workshop on key revenue management principals and tactics.

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  • Switch to RMS file and work through as a group, perhaps using the scenarios
  • Introduce idea of Just Noticeable Differences
  • Run the live program through a scenario with the group
  • Sample forecast tool in files too
  • Town Pump Managers Meeting

    1. 1. RevenueManagement Town Pump Manager’s Meeting October 13, 2011
    2. 2. Agenda• Introductions• Revenue Management Defined• Costs• Incremental Revenue• Displacement• Competitor Benchmarking• Selling Strategies• Day in the life….• Questions
    3. 3. IntroductionsDaniel WiseCascade Revenue Management• Best Western• Choice• Hilton• IHG• Independents
    4. 4. Revenue ManagementFrom the literature…"Revenue management is the art and science ofpredicting real-time customer demand at the micromarket level and optimizing the price and availabilityof products.“-Robert G. Cross
    5. 5. Revenue ManagementIn practice… Selling the right product To the right person At the right time For the right price
    6. 6. RM Goals↑ $ Revenue $ ↑ Conditions Necessary… • Fixed inventory • Various price points • Perishable What other industries?
    7. 7. Understanding CostsFixed Costs• Mortgage• Salaries• Utilities (somewhat)Variable Costs• Labor• Cleaning supplies• Amenities
    8. 8. Individual ProjectTake a break and calculate Fixed and Variable costsfor your hotels.• Use a spreadsheet or paper• First column put all fixed monthly costs o Fixed Costs = Total Fixed ÷ (Total Rooms X Days in Month)• Second column put total monthly variable costs o Variable Costs = Total Variable ÷ (Rooms sold in month) Let’s take 10-15 minutes….
    9. 9. Example Fixed VariableMortgage 45,000 Housekeepers 7,000Electric 15,000 Laundry 3,000Salary 12,000 Amenities 1,500 72,000 11,50072,000 ÷ (75 * 30) 32.00 11,500 ÷ (75 * 87% * 30) 5.87 POR• Month of September FC: $32.00 per room• 75 room hotel VC: $5.87 POR• 87% monthly occupancy $37.87 CPOR
    10. 10. How can you use this?Cost of an empty room…Average Occupancy 62% = 38% Vacancy Rate70 room hotel• 70 * .38 = 27 room spoilage daily• 27 * $32.00 Fixed Costs = $864 spoiled revenue• $864 * 365 = $315,360 average annual spoilage
    11. 11. Costs & PricingIn economics and business decision-making, sunk costs areretrospective (past) costs that have already been incurredand cannot be recovered.Pricing decisions (Marginal Costs vs Marginal Revenue)Cost based pricing or market based pricingTo achieve profit  exceed FC and VCTo reduce sunk costs  cover VC at minimum
    12. 12. Minimum PriceFC = $32VC = $12TC = $44To achieve profitability? Why?Lowest amount you would take? Why?
    13. 13. Incremental Revenue Sun Mon Tue Wed Thu Fri Sat WK SOLD 25 45 57 44 53 105 106 62 ADR $49.36 $72.69 $70.35 $67.34 $69.96 $75.29 $76.88 $68.84REVPAR $11.32 $30.01 $36.79 $27.18 $34.02 $72.52 $74.76 $39.25 Break up into pairs… 109 rooms. What happens to RevPAR if they: • Take 10 rooms Sun-Thu at $30? • Take 3 rooms Fri & Sat at $60?
    14. 14. 10 @ $30 S-Th Sun Mon Tue Wed Thu Fri Sat WK SOLD 25 45 57 44 53 105 106 62 ADR $49.36 $72.69 $70.35 $67.34 $69.96 $75.29 $76.88 $68.84REVPAR $11.32 $30.01 $36.79 $27.18 $34.02 $72.52 $74.76 $39.25 Sun Mon Tue Wed Thu Fri Sat WK SOLD 35 55 67 54 63 105 106 69 ADR $43.83 $64.93 $64.33 $60.43 $63.62 $75.29 $76.88 $64.18REVPAR $14.07 $32.76 $39.54 $29.94 $36.77 $72.52 $74.76 $40.80 $1.55 / 3.9% RevPAR Increase
    15. 15. 3 @ $60 Fr/Sa Sun Mon Tue Wed Thu Fri Sat WK SOLD 25 45 57 44 53 105 106 62 ADR $49.36 $72.69 $70.35 $67.34 $69.96 $75.29 $76.88 $68.84REVPAR $11.32 $30.01 $36.79 $27.18 $34.02 $72.52 $74.76 $39.25 Sun Mon Tue Wed Thu Fri Sat WK SOLD 25 45 57 44 53 108 109 63 ADR $49.36 $72.69 $70.35 $67.34 $69.96 $74.86 $76.41 $68.71REVPAR $11.32 $30.01 $36.79 $27.18 $34.02 $74.17 $76.41 $39.71 $0.46 / 1.2% RevPAR Increase
    16. 16. To consider…Not just about room revenue: Total Revenue• Food & beverage• Gaming• Activities• Others?Need to analyze average spend per guests.
    17. 17. BreakTake 10-15 minutes
    18. 18. Not enough rooms?Enough talk of empty rooms!What if you don’t have enough rooms to meetdemand?Unconstrained demand > available inventory
    19. 19. Displacement Analysis1. Determine your forecast without the group2. Determine amount displaced by the group, if any3. Compare revenue with group to revenue without group to decide
    20. 20. Displacement ScenarioUse the data in the RMS Workbook:
    21. 21. Group Request…• Arriving Thursday 12/8/2011• Departing Monday 12/12/2011• 30 rooms each night o 12 Kings @ $75.00 o 18 Doubles @ $85.00• Group into pairs and determine if you should take the group and at what rate? o What is your forecast without the group on each day? o Will the group displace any business? o How much revenue will be displaced? o Should you book the group? If yes, what rate?
    22. 22. What did you come up with? Why did you make the choices you did?
    23. 23. Let’s do the DA together
    24. 24. Know your comp set• Benchmark o Tour their site o Compare online information• Collect Intelligence o Shop their rates o Subscribe to Smith Travel Research o Consider other report tools• Maintain a friendly yet competitive relationship• Avoid complacency
    25. 25. Know your customersCater a strategy to their unique needs• Categories • Types o Leisure o Family • AAA o Single o Business o Couples o Group • Price sensitivity o High “Bargain shoppers”• Stay Patterns o Low “Willing to pay more to o Weekday get exactly what they want” o Weekend • Typical booking path o Call direct o Internet o Travel agent
    26. 26. What’s important to them?Single business traveler Family on vacation• Distance to their work site • Distance from attractions• Weekday business • Weekend business• Book direct or with an • Books online (OTA’s or agent brand.com)• Low price sensitivity • High price sensitivity• Prefers larger king beds • Needs two beds• Quality high speed internet • Free breakfast• Restaurant/bar on-site or • Swimming pool nearby
    27. 27. Forecast by segment Sun Mon Tue Wed Thu Fri Sat King BT BT BT BT2 Queen FAM FAM
    28. 28. Pricing by room typePeak/Busy dates by customer and room type Sun Mon Tue Wed Thu Fri Sat King BT BT BT BT2 Queen FAM FAMPossible pricing based on forecasted demand Sun Mon Tue Wed Thu Fri Sat King $84 $99 $99 $99 $99 $89 $892 Queen $84 $89 $89 $89 $89 $99 $99 J.N.D.’s
    29. 29. BreakTake 10-15 minutes
    30. 30. Top Down Selling Strategy• Choice Hotels recommended strategy
    31. 31. Choice Selling Tool
    32. 32. Day in the life…How to revenue manage, even if you are not arevenue manager…• Daily check o So much impact can be made simply by monitoring and adjusting to demand• Weekly revenue meeting o Develop a team and conduct regular meetings • Review past performance • Strategize for the next 90 days
    33. 33. RM Team• Who should be on that team?• What roles should they have?
    34. 34. RM Meeting• Agenda items o Time for each• Sales• Front Desk• Revenue Manager
    35. 35. Get some tools• Bare minimum (if I was stuck on an island) o Competitor Rate Shopping o Occupancy Tracker
    36. 36. The RM Cycle Monitor DemandForecast MonitorDemand Comp Set Understand Adjust Customer
    37. 37. Tools• Simple forecast tool• Opaque workbook• Choice Target Selling Application
    38. 38. Resources• Major brands if applicable o Choice University o Wyndham• Other managers on your team/company• Hotel organizations o HSMAI o AH&LA• The Cascade team
    39. 39. Questions?
    40. 40. Thank you!

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