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
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
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
Benefits of accurate market segmentation Accurate forecasting Optimising market mix Developing targeted strategies to attract specific customers Effective and targeted pricing strategies
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 ?
Key metrics associated to room revenue Occupancy Average daily rate RevPar
Quick calculation Revpar / ADR = Occ% Revpar / Occ = ADR ADR X Occ = RevparWhich of the above is the most significant measurement for RM to consider ?
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
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
Market Penetration Index Our occFormula = Market occ Hotel MarketExample Occ 84.1% 77.1% MPI 1.09
Average Rate Index - ARI Our ADRFormula = ------------- Market ADR Hotel MarketExample ADR $71.96 $81.90 ARI 0.879
Revenue Generated Index - RGI Our RevParFormula = ----------------- Market RevPar Hotel MarketExample RevPar $60.55 $63.17 RGI 0.959
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
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
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
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
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
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
Forecasting Forecasting should drive at least 50% of your actions Forecasting Revenue Math Market segmentation Channel Man Pricing Yield Man
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
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
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
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.
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
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
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
Yield Management Definition of yield management Yield management techniques Impact of yield management Displacement of costs and effective negotiations.
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
Yield ManagementHow can we measure yield management Occupancy % X ADR = RevPar Volume X Unit price = Profits
Yield ManagementHow to drive yield Automated Revenue Management systems Length of stay (LOS) Displacement costs analysis Overbooking
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.
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
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
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
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
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
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.
ChannelHow do customers book Direct with the Hotel Central Reservations Office Global Distribution Systems Third Party Intermediaries Online Distribution
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
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
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
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
ChannelOnline Distribution Brilliant Customer WWW Who uses direct channel All non contracted customers
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
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
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
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
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
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
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
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
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
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
The EndWell done you have now completed your first phase Revenue and Channel training module.