1. Building a Revenue and
Channel Culture together

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. 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. Course agenda
 Market segmentation
 Data Collection & Analysis
 Forecasting
 Yield management
 Channel management
 Pricing

5. Market segmentation
What 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. 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. Benefits of accurate market segmentation
 Accurate forecasting
 Optimising market mix
 Developing targeted strategies to attract specific customers
 Effective and targeted pricing strategies

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. Key metrics associated to room revenue
 Occupancy
 Average daily rate
 RevPar

10. Quick calculation
 Revpar / ADR = Occ%
 Revpar / Occ = ADR
 ADR X Occ = Revpar
Which of the above is the most significant measurement for
RM to consider ?

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. 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. Market Penetration Index
Our occ
Formula =
Market occ
Hotel Market
Example Occ 84.1% 77.1%
MPI 1.09

14. Average Rate Index - ARI
Our ADR
Formula = -------------
Market ADR
Hotel Market
Example ADR $71.96 $81.90
ARI 0.879

15. Revenue Generated Index - RGI
Our RevPar
Formula = -----------------
Market RevPar
Hotel Market
Example RevPar $60.55 $63.17
RGI 0.959

16. Monthly Performance Data
My Property: The Grace In Rosebank #133104
Comp Set: Hyatt Regency Johannesburg #111222, InterContinental Johannesburg Sandton
Towers #111489, The Michelangelo Sandton Square #127993, African Pride Melrose Arch
Hotel #137159, Excludes Subject Property
Job 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. 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. RevPos & RevPas
RevPos – Revenue per occupied space (sq m)
RevPas – Revenue per available space (sq m)
Total revenue
RevPos = -------------------
Occupied square meter
Total Revenue
RevPas = -------------------
Available square meter

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 85.68
Jul 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 26.44
Date 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 11.40
Cost per square meter
Date Room Total Cost Square meters Occupied Available % Occ RevPOS RevPAS
July Total 257000 0 9847.3 29335 34% R 26.10 R 8.76
Profit per square meter
Date Room quare meter Occupied Available RevPOS RevPAS
July Total 0 9847 29335 R 7.86 R 2.64

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 times
Total outlet / Nr of available / hrs open = RevPASH
Revenue seats
$13,000 / 100 / 10 = 13

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. Gross operating profit
 GOP – Calculation Increase increase
ADR Occ
Total 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. Forecasting
 Forecasting should drive at least 50% of your actions
Forecasting Revenue Math
Market segmentation
Channel Man
Pricing
Yield Man

24. What is forecasting
Estimate 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. Forecasting
Building blocks to achieve accurate rooms forecast
Opportunity/gaps/peaks Short Term In system No shows
Yield Restrictions Long term Booking Pace Cancellations
Financial performance Historical Data Day of week Budgets
Demand to come Room nights Market seg Patterns/trend
Pricing Average Rate Length of stay Tentative/definite
Overbooking Revenue Uncertainty Groups Wash down
Market conditions Unconstrained Special Events Capacity

26. Forecasting
Organizing the data
Questions & Short term – Long term – Uncertainty – Budget – Market condition
Hypothesis
Data Collection In system – cancellations – No shows – Historical data – Market seg
Room nights – Average Rate – Length of stay – Revenue – Capacity
Data Day of week – Patterns/Trends – Booking Pace – lead time
Organization
Data Analysis Special Events – unconstrained – Group Wash – Tentative/Definite – Demand
Recommendations & Opportunity/Gaps/Peaks – Financial performance
Decisions
Take Action Yield Restrictions – Pricing - Overbooked

27. Forecasting
Organizing Data – continued
How 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. Forecasting
Organising Data – continued
Pace report
100
90
80
70
60
50
40
30
20
10
0

29. Pick-up report

30. Forecasting
Data Analysis
 Short Range Forecasting
 Pick up
 Pace
 Demand
Pick Up – What bookings are in the system now for a future date/period
Pace – What is the current trend or lead-in time
Demand – What is the future demand for accommodation

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. 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. Yield Management
 Definition of yield management
 Yield management techniques
 Impact of yield management
 Displacement of costs and effective negotiations.

34. Yield Management
Definition 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. Yield Management
Revenue cycle
Create demand
Strategic Planning &
Action Reservations request
Forecast demand Yield Management Manage demand
Repeat customers Guest
Retain demand

36. Yield Management
How can we measure yield management
Occupancy % X ADR = RevPar
Volume X Unit price
= Profits

37. Yield Management
How to drive yield
 Automated Revenue Management systems
 Length of stay (LOS)
 Displacement costs analysis
 Overbooking

38. Yield Management
Automated 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. 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. Yield Management
100
rooms
120
100 100
40
30
Mon Tue Wed Thu Fri

41. Yield Management
100
rooms
100
40 70 60
30
Mon Tue Wed Thu Fri

42. Yield Management
LRA ?
What is Last Room Available
If 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 offered
The clients negotiated rate is subject to black out dates as defined by the RFP

43. Yield Management
Displacement 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. 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. 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 the
demand right time based on forecasts.
Repeat customers Guest
Retain demand

46. Channel Distribution

47. Channel Management
Channel 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. Channel
How do customers book
 Direct with the Hotel
 Central Reservations Office
 Global Distribution Systems
 Third Party Intermediaries
 Online Distribution

49. Channel
Direct Bookings
Phone
Hotel
Reservations Fax Customer
department –
E-mail
Brilliant
Walk-in
Who uses direct channel
Transient corporate
Leisure
Groups
Contracted clients
Conference organisers
All market segments
All Local bookings

50. Channel
Central Reservations Offices - Voice
Phone
PACRO
Brilliant 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. Channel
Global Distribution Systems - GDS
Amadeus
Rezview
Pegasus Galileo
Brilliant or Customer
switch Worldspan
Utell Saber
Who uses GDS
Contracted & non contracted companies
Leisure
Consortia
Travel Management companies
Business Travel Agencies

52. Channel
Third Party Intermediaries - TPI
Pegasus WWW
Brilliant Customer
switch
OR
PACRO
or
HACRO
Expedia
Who uses TPI
Orbitz
Priceline
Non contracted companies – once off
Leisure Venere
Transient Lastminute

53. Channel
Online Distribution
Brilliant Customer
WWW
Who uses direct channel
All non contracted customers

54. Channel
Cost per channel
CHANNEL RVNG RCVL RCVL UTELL
Monthly retainer 120.00 150.00
GDS – Rack 13.84 6% 6.66
GDS – Neg 11.84 3% 6.66
Online 5.50
TPI 3.50 +10% 3.55
PACRO 4.00
UTELL – CRO 10%

55. Channel
Key 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. Channel
Adding 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. Pricing
Pricing
 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. 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. Pricing
Pricing 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. 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. Pricing
Questions 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. 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. Pricing
Rate 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 and
Rack 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 based
Best rate. Public rate available unless the hotel is full. Rate No fences and
All bookers All on occupancies and should
available 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 to
Corporate 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 and
BTA 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 and
Negotiated office and a multi- global company office to negotiate rates and DIRECT Sometimes they are
Generally 10-20% off BTA rate LRA
Rates 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 to
Weekend To drive volumes over
high corporate market dependent of property but should discretional Friday and All
rates weekends
segment be between 75 & 85% corporate business. Saturday nights
only
Leisure rates
No Fences if
To incentives the tour Always be aware of leisure
Tour operators resort hotel, if not
Preferred 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 days
Series
Tactical A promotional rate that Drive volumes over distressed Discretional Dependent on low season Must have fences Online Maintain fences and add

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. The End
Well done you have now completed your first
phase Revenue and Channel training
module.