Building a revenue and channel culture together

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Building a revenue and channel culture together

  1. 1. Building a Revenue andChannel Culture together
  2. 2. Key Objectives Broaden awareness of Revenue Mgt and Business strategies Focus on the development of critical analysis and strategic thinking skills with a focus on enhancing competitive positioning and driving total revenue growth Develop influencing behaviours and strategies for planning and preparing for trade reviews and board reports. Optimise channel contributions through clear understanding of the hotels market segmentation Increase the awareness of all channel distribution points by linking into the sales and marketing function. Develop competencies and skills of revenue champions at hotel level Communicate, share and enhance best practice between revenue/channel and hotel Drive revenue generation through strategic promotions across all 4 channels
  3. 3. Key drivers to achieve our goals Research  Understanding the business Analyse  Problem solving & decision making  Innovation Convince  Leading & developing people  Impact & Influence  Adaptability Execute  Planning & organising  Drive for results Measure  Take responsibility  Asses strategy
  4. 4. Course agenda Market segmentation Data Collection & Analysis Forecasting Yield management Channel management Pricing
  5. 5. Market segmentationWhat is a market segment – Dividing a market into distinct groups of buyers who might require separate products, have different needs or show different behaviour Each property may have different market segments depending on their focus or location.  City hotel Corporate BTA Leisure Individuals  Resort Hotel Leisure Individuals Travel Agents Corporate  Conference hotel Corporate Conference organisers  Long stay hotels Corporate BTA  Transient hotels Corporate leisure Individuals
  6. 6. African Sun’s Mkt Segementation African Sun/Staff Business Travel Agents Conference organisers Corporate Government Leisure Individual Non-Government Organizations Sporting group Tour Operators Associations
  7. 7. Benefits of accurate market segmentation Accurate forecasting Optimising market mix Developing targeted strategies to attract specific customers Effective and targeted pricing strategies
  8. 8. Data collection Where does one look to extract the information needed to make an informed decision on generating increased revenues  PMS  Market share reports  Market trends  Events calendar  Sales reports  Local news papers Why do we need to analyse data out side of what the PMS can give us ?
  9. 9. Key metrics associated to room revenue Occupancy Average daily rate RevPar
  10. 10. Quick calculation Revpar / ADR = Occ% Revpar / Occ = ADR ADR X Occ = RevparWhich of the above is the most significant measurement for RM to consider ?
  11. 11. RevPar Revenue per available room Gives a measure of performance against all available rooms as opposed to just sold rooms A key measure in ensuring that pricing and occupancy decisions give the best possible return Rate reduction decisions to drive occupancy must be considered very carefully – increased occupancy carries increased costs Increased price can result in a drop in occupancy but also give a better RevPar result
  12. 12. Key performance indicators MPI – Market penetration index How our occupancy compares to our competitive set ARI – Average rate index How our ADR compares to our competitive set RGI – Revenue generated Index How our RevPar compares to our competitive set
  13. 13. Market Penetration Index Our occFormula = Market occ Hotel MarketExample Occ 84.1% 77.1% MPI 1.09
  14. 14. Average Rate Index - ARI Our ADRFormula = ------------- Market ADR Hotel MarketExample ADR $71.96 $81.90 ARI 0.879
  15. 15. Revenue Generated Index - RGI Our RevParFormula = ----------------- Market RevPar Hotel MarketExample RevPar $60.55 $63.17 RGI 0.959
  16. 16. Monthly Performance Data My Property: The Grace In Rosebank #133104Comp Set: Hyatt Regency Johannesburg #111222, InterContinental Johannesburg Sandton Towers #111489, The Michelangelo Sandton Square #127993, African Pride Melrose Arch Hotel #137159, Excludes Subject PropertyJob Number: 957984 Staff: Dave Bunyard Created: July 30, 2009 Currency: ZAR - South African Rands Occupancy Date This Year Last Year Index Rank My Prop Comp Set My Prop Comp Set Jan 2009 27.1 48.7 47.1 60.8 55.7 5 of 5 Feb 2009 44.8 65.8 64.7 85.6 68.0 5 of 5 Mar 2009 36.8 64.3 60.6 76.4 57.3 5 of 5 Apr 2009 35.5 56.4 61.8 71.0 63.0 5 of 5 May 2009 40.0 66.2 53.7 70.6 60.4 5 of 5 Jun 2009 62.7 73.4 72.3 70.5 85.4 4 of 5 ADR Date This Year Last Year Index Rank My Prop Comp Set My Prop Comp Set Jan 2009 1,477.43 1,597.50 1,353.60 1,413.37 92.5 5 of 5 Feb 2009 1,654.56 1,714.76 1,621.49 1,623.36 96.5 4 of 5 Mar 2009 1,531.95 1,685.61 1,547.68 1,533.24 90.9 5 of 5 Apr 2009 1,417.14 1,644.37 1,562.50 1,554.71 86.2 5 of 5 May 2009 1,411.16 1,762.26 1,549.00 1,578.67 80.1 5 of 5 Jun 2009 1,431.85 1,910.03 1,561.15 1,602.23 75.0 5 of 5 RevPAR Date This Year Last Year Index Rank My Prop Comp Set My Prop Comp Set Jan 2009 400.21 777.43 637.02 858.83 51.5 5 of 5 Feb 2009 740.67 1,128.09 1,048.57 1,389.80 65.7 5 of 5 Mar 2009 564.36 1,083.65 937.64 1,171.51 52.1 5 of 5 Apr 2009 503.48 927.09 966.04 1,104.13 54.3 5 of 5 May 2009 564.46 1,167.38 831.66 1,115.04 48.4 5 of 5 Jun 2009 897.20 1,401.98 1,129.16 1,128.85 64.0 5 of 5
  17. 17. Other revenues SpendPAR RevPOS RevPas RevPASH SpendPAR Total in-house guest / Total Rooms = SpendPAR Revenue Available $12,375 / 100 = $123.75 This excludes events, banqueting & conferencing revenues
  18. 18. RevPos & RevPasRevPos – Revenue per occupied space (sq m)RevPas – Revenue per available space (sq m) Total revenueRevPos = ------------------- Occupied square meter Total RevenueRevPas = ------------------- Available square meter
  19. 19. Example of Hotel C&B RevPos & RevPas Teak 0 42.84 0 85.68 27-Jul Acacia 30 8550 8550 2 28.56 57.12 57.12 100% R 149.68 R 149.68 Baobab 35 9975 9975 2 198 396 396 100% R 25.19 R 25.19 Boardroom 0 36.69 0 73.38 Mahogany 9 315 315 2 28.22 56.44 56.44 100% R 5.58 R 5.58 Seringa 0 138.84 0 277.68 Teak 0 42.84 0 85.68Jul Acacia 113 39170 1500 1230 41900 26 28.56 742.56 1771 42% R 56.43 R 23.66 Baobab 346 73280 4500 14300 92080 20 198 3960 12276 32% R 23.25 R 7.50 Boardroom 4 0 0 180 180 2 36.69 73.38 2275 3% R 2.45 R 0.08 Mahogany 115 35350 1500 1605 38455 32 28.22 903.04 1750 52% R 42.58 R 21.98 Seringa 259 60140 15000 16425 91565 22 138.84 3054.48 8608 35% R 29.98 R 10.64 Teak 161 62225 0 8000 70225 26 42.84 1113.84 2656 42% R 63.05 R 26.44Date Room No of Pax Total DCP Venue hire Extras Total Rev No of Periods Square meters Occupied Available % Occ RevPOS RevPAS Total 998 270165 22500 41740 334405 128 473.15 9847.3 29335.3 34% R 33.96 R 11.40Cost per square meterDate Room Total Cost Square meters Occupied Available % Occ RevPOS RevPASJuly Total 257000 0 9847.3 29335 34% R 26.10 R 8.76Profit per square meterDate Room quare meter Occupied Available RevPOS RevPASJuly Total 0 9847 29335 R 7.86 R 2.64
  20. 20. RevPash RevPash – Revenue per available seat hour  Benchmark to establish revenue generation for food and beverage outlets  Takes into account perishable products of a seat and outlet opening timesTotal outlet / Nr of available / hrs open = RevPASHRevenue seats$13,000 / 100 / 10 = 13
  21. 21. Variable V’s Fixed costs Variable costs – a cost that is proportional to the volume of the input produced  Examples:-  Guest supplies  Utilities  Food & Beverages Fixed costs – A periodic charge that does not vary with business volumes  Examples  Admin & General  Sales and Marketing  Salary burden
  22. 22. Gross operating profit GOP – Calculation Increase increase ADR OccTotal Hotel Rev $15,000 $18,000 $18,000 _Variable costs $4,500 $4,500 $5,800 _Fixed Costs $5,000 $5,000 $5,000 =GOP $5,500 or $8,500 or $7,200 37% margin 47% margin 40% margin
  23. 23. Forecasting Forecasting should drive at least 50% of your actions Forecasting Revenue Math Market segmentation Channel Man Pricing Yield Man
  24. 24. What is forecastingEstimate the company’s share of market demand based on defined market segments and an assumed marketing environment  Predicting market demand  In each market segment  Based on predicted market conditions
  25. 25. Forecasting Building blocks to achieve accurate rooms forecastOpportunity/gaps/peaks Short Term In system No showsYield Restrictions Long term Booking Pace CancellationsFinancial performance Historical Data Day of week BudgetsDemand to come Room nights Market seg Patterns/trendPricing Average Rate Length of stay Tentative/definiteOverbooking Revenue Uncertainty Groups Wash downMarket conditions Unconstrained Special Events Capacity
  26. 26. ForecastingOrganizing the dataQuestions & Short term – Long term – Uncertainty – Budget – Market conditionHypothesisData Collection In system – cancellations – No shows – Historical data – Market seg Room nights – Average Rate – Length of stay – Revenue – CapacityData Day of week – Patterns/Trends – Booking Pace – lead timeOrganizationData Analysis Special Events – unconstrained – Group Wash – Tentative/Definite – DemandRecommendations & Opportunity/Gaps/Peaks – Financial performanceDecisionsTake Action Yield Restrictions – Pricing - Overbooked
  27. 27. Forecasting Organizing Data – continuedHow best can we display the data so that it shows, patterns, trends, seasons and events.Graphs and simple tables tend to work better than detailed figures. Summaries are essential and gives the reader a brief overview if they do not have the time to go further.Always take into consideration that the reader is extremely busy and has very little time.
  28. 28. Forecasting Organising Data – continuedPace report100 90 80 70 60 50 40 30 20 10 0
  29. 29. Pick-up report
  30. 30. Forecasting Data Analysis Short Range Forecasting  Pick up  Pace  DemandPick Up – What bookings are in the system now for a future date/periodPace – What is the current trend or lead-in timeDemand – What is the future demand for accommodation
  31. 31. Forecasting Forecasting Group forecasting Transient forecasting  Groups  Historical utilisation  Booking pace  Sales estimates  Type of group  Wash down  Transient  Historical  Booking pace  Sales events  Public holidays
  32. 32. Action Plan Low Demand High Demand Pursue market share  Manage demand to optimise rev.  Raise prices to be consistent with Keep discount categories open competitors Sell value and benefits  Control room rates and availability through rate restrictions Increase allotment allocations  Focus on other revenues Target email blasts  Up-sell Remove stay restrictions  Tighten guarantees and cancellation policies Involve all staff  Apply full price to suites and executive rooms  Involve all staff
  33. 33. Yield Management Definition of yield management Yield management techniques Impact of yield management Displacement of costs and effective negotiations.
  34. 34. Yield ManagementDefinition of yield management The process of managing customer demand through the control of differential pricing and inventory allocation in each price category in order to maximise gross revenue  Managing customer demand  Differential pricing  Inventory allocation  Maximise gross revenue
  35. 35. Yield Management Revenue cycle Create demand Strategic Planning & Action Reservations requestForecast demand Yield Management Manage demand Repeat customers Guest Retain demand
  36. 36. Yield ManagementHow can we measure yield management Occupancy % X ADR = RevPar Volume X Unit price = Profits
  37. 37. Yield ManagementHow to drive yield Automated Revenue Management systems Length of stay (LOS) Displacement costs analysis Overbooking
  38. 38. Yield ManagementAutomated revenue systems The most popular system is probably IDeas – but there are many others Length of stay  Minimum number of nights  Maximum number of nights  Close days to arrival Examples:-  If each of your guests stayed one extra night how would this effect your occupancies.  If you had to restrict length of stay for peak periods or high yield days  What happens if your demand days in a week are to high how will you sell shoulder days The aim is to establish the maximum revenue from a high demand period not the maximum average rate or occupancy.
  39. 39. Yield Management How do you control Length Of Stay You need a good unconstrained forecast Understand your length of stay profile Do not wait until you have 90% occupancy on the books Use minimum length of stay rather than closing out lower rates Do not over use minimum length of stay – we still need to fill the peak nights
  40. 40. Yield Management100rooms 120 100 100 40 30 Mon Tue Wed Thu Fri
  41. 41. Yield Management100rooms 100 40 70 60 30 Mon Tue Wed Thu Fri
  42. 42. Yield Management LRA ? What is Last Room AvailableIf the Best Available Rate (BAR) is available for a standard room type, for a given length of stay, the client’s negotiated rate for that room type will also be available for the same length of stay. If the BAR for a standard room is not available for the given length of stay, but is available for the next negotiated room type, then the client’s available rate for that room type will also be offeredThe clients negotiated rate is subject to black out dates as defined by the RFP
  43. 43. Yield ManagementDisplacement Cost Analysis This refers to contracted business Groups Corporate Airlines Tour Series One must be aware of how much business is contracted at a lower than average rate and then manage how much of that business is booked over peak times/days
  44. 44. Yield Management Overbooking Internal factors  No Shows  Cancellations  Unexpected departures  Stay overs  Human error External factors  Season or day of week  Supply and demand  City wide conferencing or events
  45. 45. Yield Management Remember the Revenue cycle Create demand Strategic Planning & Action Reservations request Revenue Management Influence Strategic Actions -Create optimal Make recommendations on business Manage demand mix to create optimal demand at thedemand right time based on forecasts. Repeat customers Guest Retain demand
  46. 46. Channel Distribution
  47. 47. Channel ManagementChannel Distribution brings together our reservation channels, distribution strategy and channel operations so we can simplify the way customers get to our brands and our brands get to market.
  48. 48. ChannelHow do customers book Direct with the Hotel Central Reservations Office Global Distribution Systems Third Party Intermediaries Online Distribution
  49. 49. Channel Direct Bookings PhoneHotelReservations Fax Customerdepartment – E-mailBrilliant Walk-in Who uses direct channel Transient corporate Leisure Groups Contracted clients Conference organisers All market segments All Local bookings
  50. 50. Channel Central Reservations Offices - Voice Phone PACROBrilliant REZVIEW or Fax Customer HACRO E-mail Who uses Voice Transient corporate Leisure Groups Contracted clients Conference organisers All market segments All Local and regional bookings
  51. 51. Channel Global Distribution Systems - GDS Amadeus Rezview Pegasus GalileoBrilliant or Customer switch Worldspan Utell Saber Who uses GDS Contracted & non contracted companies Leisure Consortia Travel Management companies Business Travel Agencies
  52. 52. ChannelThird Party Intermediaries - TPI Pegasus WWWBrilliant Customer switch OR PACRO or HACRO Expedia Who uses TPI Orbitz Priceline Non contracted companies – once off Leisure Venere Transient Lastminute
  53. 53. ChannelOnline Distribution Brilliant Customer WWW Who uses direct channel All non contracted customers
  54. 54. ChannelCost per channelCHANNEL RVNG RCVL RCVL UTELLMonthly retainer 120.00 150.00GDS – Rack 13.84 6% 6.66GDS – Neg 11.84 3% 6.66Online 5.50TPI 3.50 +10% 3.55PACRO 4.00UTELL – CRO 10%
  55. 55. ChannelKey learning from Channel Manage rates Maintain parity where possible Different channels attract different market segments Instant results Content management Keep inventory open Global internet access
  56. 56. ChannelAdding New Properties Register with Utell and Pegasus or both Load property information On-boarding information Wait for Utell or Pegasus to open inventory and rates in Rezview or Netrez Start booking
  57. 57. PricingPricing A Mckinsey & Ass Survey conducted amongst 2,400 companies across a range of industries showed the impact on the bottom line of various business initiatives  A 1% reduction in fixed costs improves profitability by 2.3 %  A 1 % increase in volumes increase profit by 3.3 %  A 1 % reduction in variable costs increases profit by 7.8%  A 1 % increase in pricing can boost profitability by 11% Price right and you will achieve the ultimate goal Increase ADR and bank your RevPar
  58. 58. Pricing How easy is it to raise your prices Realising price increases is not as easy as we’d like it to be  A 2 litre of Coke often has the same price tag as it did in 2005  Laptop prices are at low low prices  Airline tickets can cost up to 25% less than they did 5 years ago
  59. 59. PricingPricing is an industry wide problem Consumers are confused with irrational and overwhelming amounts of choice 72% of hotel guests agree that they like to shop around Hotels need to sell on benefits and confidence that the guest is getting the best deal – there should be no elements of risk Consumers know and will accept fences, Fences should become part of the overall value proposition
  60. 60. Pricing 5 pricing principles Pricing is approached holistically with supportive segment structures Offer constrained set of differentials & clearly target products using the BAR as the benchmark Customers will have to do something or give away something to get a discount Product messages must be clear, descriptive, consistent and inline with brand positioning Price points are based on marketplace demands and compressed to encourage buy up
  61. 61. PricingQuestions to ask when considering a price change Product  Is this product different in the customers eyes  If discounting, what specific behaviours does this customer exhibit that will allow me to target this specific customer and prevent cannibalization Place  How does this impact each distribution channel and the customers that use them Price  How will the price relate to the benchmark and other price points  Is it compressed and rational in relation to other price points  How price sensitive is your target market Promotion  How do you intend on promoting the value of this product to customers  How will your message clearly, rationally and consistently identify the differences between products, both physically and in terms of sale
  62. 62. Pricing African Sun’s Pricing policy 2010 Rate strategy for African Sun Corporate Hotel Leisure/Resort Hotel 100% RACK RACK 100% > 10% Corporate >15%BAR > 20% BTA > 30% Negotiated - corp leisure STO > 30% > 40% Weekend Series/Groups > 35 - 40% Tactical > 35 - 45% Cost per room
  63. 63. PricingRate strategy guidelines. Market Rate Rate description Rate guidelines Definition Fences Channel Risks segments Highest published rate. - Should always be last room Always ensure that this is No fences andRack Acts as a benchmark for 100 % - Full published rate All markets available All rate managed when LRA other rates - occupancies start to fall High BAR – 100% BAR is a flexible rate so The lowest unrestricted Should never be closed out Mid BAR – 80% needs to be managed basedBest rate. Public rate available unless the hotel is full. Rate No fences and All bookers All on occupancies and shouldavailable rate which can vary based on can fluctuate based on LRA Low BAR – 70% never be lower than demand demand. contracted or negotiated rates Standard corporate rate Provides hotel with a rate to with no restrictions. Individual DIRECT offer all corporate clients with No real risks – just needs toCorporate Available to all non- 90 % - commissionable Corporate clients – No fences PACRO low volumes and non- be managed negotiated corporate no contracts GDS contracted business clients. Contracted on an annual These rates are fixed for the bases through RFP,s or Contracted rates with the Min 80 % - 75% All major GDS year and cannot be re- contracted separately based No Fences andBTA rates major BTA,s and consortia, BTA,s PACRO negotiated once contracted on demand. Always liaise LRA consortia. and TMC. DIRECT and the rates must be with head office before respected entering into an agreement These rates are fixed for the Contracted rates between Multi-national year and cannot be re-Corp hotel/African Sun head corporation or Enables the hotels and head GDS negotiated once contracted. Rate can vary based on volume. No fences andNegotiated office and a multi- global company office to negotiate rates and DIRECT Sometimes they are Generally 10-20% off BTA rate LRARates national corporation, eg with managed load these on the GDS PACRO commissionable check IBM. accounts contracts. Fences – Hotel specific with a Demand dependant and can vary Leisure and restricted toWeekend To drive volumes over high corporate market dependent of property but should discretional Friday and Allrates weekends segment be between 75 & 85% corporate business. Saturday nights onlyLeisure rates No Fences if To incentives the tour Always be aware of leisure Tour operators resort hotel, if notPreferred 80 – 70% depending on volume operator to package the hotel PACRO business taking over your Tour operator rates with leisure then bookings business and type of operator for a wider distribution DIRECT peak midweek period, Tue – business restricted to non-Group / through their supply chain Thurs. peak daysSeriesTactical A promotional rate that Drive volumes over distressed Discretional Dependent on low season Must have fences Online Maintain fences and add
  64. 64. Managing Channel & Revenue Research  Understanding the business Analyse  Problem solving & decision making  Innovation Convince  Leading & developing people  Impact & Influence  Adaptability Execute  Planning & organising  Drive for results Measure  Take responsibility  Asses strategy
  65. 65. The EndWell done you have now completed your first phase Revenue and Channel training module.

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