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Hospitality Management : Revenue Management
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Hospitality Management : Revenue Management



Florie is traveling from Mexico to Argentina swapping her hotel business skills for a bed along the way.

Florie is traveling from Mexico to Argentina swapping her hotel business skills for a bed along the way.
She is helping hotels with many subjects, and revenue management strategy is one of them.



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Hospitality Management : Revenue Management Presentation Transcript

  • 1. REVENUE MANAGEMENT How to increase your RevPar using Revenue Management principles ? Florie Thielin – July 2014 www.thehospitalitytour.com 1
  • 2. INTRO: WHAT ARE WE TALKING ABOUT ? Revenue Management is the art of selling : • the Right Room, • to the Right Client, • at the Right Moment, • at the Right Price, • on the Right Distribution Channel with the best commission efficiency. Revenue Management means for example: • not selling a room today at a low price to sell it tomorrow at a higher price. • Selling a room at low price today if you do not expect higher demand. Rather than simply posting rates and waiting for them to be sold, start now to be proactive, adopt a dynamic pricing strategy, use revenue management techniques. Patrick Landman, CEO Xotels, www.xotels.com 2
  • 3. INTRO: WHAT ARE WE TALKING ABOUT ? 3 Use a Channel Manager and… Understand your compset Select your OTAs Follow your booking pace Play with rates Play with restrictions Track your performance
  • 4. INTRO: WHY IS IT SO IMPORTANT ? 4  $$ Revenue  RevPar  $ Rates in high season  % occcupancy in low season
  • 5. REVENUE MANAGEMENT: HOW ARE WE GOING TO DO IT ? 1. Start using a Channel Manager • 1.1 What is a Channel Manager ? • 1.2 Why is it essential to use one ? • 1.3 How much does it cost ? • 1.4 Which are the important criteria to filter ? • 1.5 Which OTAs to sell on ? 2. Practice Revenue Management Principles • 2.1 Which are the key data to watch out ? • 2.2 How to set up initial rates ? • 2.3 When to increase or decrease rates ? • 2.4 How often to change rates ? • 2.5 When to add restrictions ? • 2.6 How to deal with wholesalers ? 3. Track your Performance • 3.1 Which are the key performance indicators to follow ? • 3.2 How to build a pertinent dashboard ? 5
  • 7. 1.1 CHANNEL MANAGER: DEFINITION A Channel Manager is : • A online cloud-based technology solution (software based solutions are disappearing) • Allowing to centralize on a unique platform • The daily management of your distribution channels : OTA (Online Travel Agencies). 7
  • 8. 1.2 CHANNEL MANAGER: PURPOSE A Channel Manager allows you : • To gain time and efficiency : no need to log-in in each OTA extranet one by one, and inventories are automatically adjusted. • To increase your sales : you can sell on much more OTA and therefore get more bookings opportunities. • To increase your RevPar : you will now be able to start practicing revenue management practices on a daily basis to push up your Occupancy and ADR. • To increase your direct sales : most of channel managers offer a “booking button” solution to integrate to your own website. • To get a better insight of your distribution strategy : most of channel managers offer statistic graphs and reports. 8
  • 9. 1.3 CHANNEL MANAGER: COST 9 Channel Manager Fix set- up cost Cost / month : 1-20 rooms Com. / booking Taxes 3 OTA 8 OTA Unlimited SiteMinder 99 USD 99 USD Excl. BBliverate 20€/cha nnel 36€ 59€ 72€ Incl. My Allocator no 17 USD Incl. YieldPlanet
  • 10. 1.4 CHANNEL MANAGER: CRITERIA 10 Channel Manager Cost # channels Comments SiteMinder $$$ 200 The worldwide leader with 13 500 hotels using it. BBliverate $$ 150 Good solution for hotel who sell on a few channels. My Allocator $ 30 The best value solution (not connected to Despegar). YieldPlanet
  • 11. 1.4 CHANNEL MANAGER: CRITERIA HotelMinder.com can help you choosing the best channel manager / PMS solution. Contact: ben@hotelminder.com 11 ?
  • 12. 1.5 CHANNEL MANAGER: OTA → OTA are a strong marketing tool. Which OTA to sell on? • Type “booking hotel + destination” on Google sites for different countries. • Make sure to be also selling on OTA where your competitors are already. To get a good overview, you can build a table like this one for example: 12 Channels My Hotel Competitor 1 Competitor 2 Competitor 3 Selling Ranking Selling Ranking Selling Ranking Selling Ranking Own Website yes 1 yes 1 yes 1 yes 1 Booking no n/a yes 2 yes 4 yes 10 Expedia yes 12 yes 1 yes 2 yes 5 Agoda no n/a yes 2 yes 1 no 4
  • 14. 2.1 WATCHING OUT KEY DATA Your External Environment: • Competitors positioning: their rates, level of service, location, OTA, etc… • Clients market segmentation • Seasonality, Events, Bank holidays, School holidays Your Own Hotel Data: • Historical demand: occcupancy and Average Daily Rates (ADR), groups confirmed, • Booking patterns for each market segment: Length of stay (LOS), Lead time, occcupancy per day of the week, Cancellation ratio, Total revenue per client, etc… • Non yieldable market segments: bookings that you have to accept because you signed a contract (Last Room Availability (LRA) corporate contracts, tour operators allotment, etc…) 14
  • 15. 2.2 FIXING INITIAL RATES 1. Build your Calendar: from last year performance and demand forecast 2. Price Segmentation: rooms categories, early booking rate, promotions 3. Pricing Grid: • Evaluate your clients’ needs: price sensitive clients, clients valuing experience and services, what are the services they are ready to pay for? • Build products to target different types of clients with physical and non physical fences. • Work out clear differentiation in between your products with clear description in all your selling channels. 15 Source: www.xotels.com
  • 16. 2.2 FIXING INITIAL RATES 3. Pricing Grid: the following matrix is a non exhaustive example of possible price building with non physical fences: 16 Rate Code Price relation- ship Package Element Lead Time Length of Stay Guarantee policy Cancellation policy Modification allowed BAR Room Only No No No No Yes BARBB BAR +10$ Breakfast No No No No Yes EARLY28 BAR -50$ Room Only 28 days No Credit Card Fully non refundable Only once with 10$ fee and new rate applicable EARLY15 BAR -25$ Room Only 15 days No Credit Card Fully non refundable Only once with 10$ fee and new rate applicable LOS3 BAR -10% 10% off No 3 nights mini Credit Card No charge up to 48h Yes LOS2 BAR -30$ Breakfast & Museum Pass No 2 nights mini Credit Card No charge up to 24h Yes Source: www.xotels.com
  • 17. 2.3 INCREASING AND DECREASING RATES 1. Build up a pick-up report to follow booking pace: • How far in advance do people start to book the hotel? • When does the booking pace increase? • Are we ahead or behind on last years or last months trend? 2. Set up initial low rates: • to be sure that you’ll cover at least operational expenses • by building up a solid occupancy base. 3. Once you’ve got the solid base, start increase rates: • To push-up your ADR (Average Daily Rate), but • Increase rates in baby steps, and • Keep watching out your booking pace and competitors rates. 4. You might decrease rates on last minute (day of arrival, or a few days before): • To get a 100% occupancy. 17 ↘ ↗ ↘
  • 18. 2.4 ACQUIRING A DAILY PRACTICE Review rates: • Everyday for J+10 • Every week for J+30 “Daily Practice Creates Perfection.” Patrick Landman, CEO Xotels, www.xotels.com When practising everyday, people managing revenue will gain a sense for the pace of bookings. Revenue management utilizes intuitive as well as analytical skills; both of these skill sets improve with practice. The mind-set of a good revenue manager or team is focused on producing a good blend of occupancy and average rate. 18
  • 19. 2.5 PLAYING WITH RESTRICTIONS For high demand periods, you can set up: • A Minimum Length of Stay (MLOS): impossible to book only for a one-night-stay at this date, the booking has to be a minimum of X nights. If week-ends are high demand in your hotel, it could be interesting to set up a MLOS of 2 for Saturday nights in order to increase occupancy on Friday and Sunday. • A Closed to Arrival (CTA): no new reservations can be taken for guests arriving on this date, but stay through reservations are still possible. If you have a date for which you already have so many check-in that the operations might get overloaded, it could be interesting to set up a CTA on this date. Restrictions can be excellent tools for experienced yield managers. However, keep in mind that they should be applied with some caution because they do limit demand. Don’t forget on which dates you did set up them, to be able to take them off if needed. 19
  • 20. 2.6 DEALING WITH WHOLESALERS → Who are Wholesalers? Wholesalers sign contracts with hotels in order to get allotments at a discounted rate (generally around 30% of your BARBB rate) that they will then sell to Tour Operators to build up their leisure packages. The main ones are GTA (Gulliver) and TravCo. → What is an Allotment? An Allotment is a minimum number of rooms that the hotel engage to keep available for the wholesaler until a certain release date. → What is a Freesale? When all allotments are sold, the hotel can decide to open freesales, which means to offer more rooms at the same discounted rate to the wholesaler. → How to manage Freesales? Approaching the staying date, if you need to push up your occupancy, but without publicly decreasing your rates, opening freesales can be a solution. 20
  • 22. 3.1 TRACKING KPI: REVPAR The most representative ratio of your hotel performance is your REVPAR : Room Revenue per available Room 22 Occupancy % Average Rate $ RevPar
  • 23. 3.1 TRACKING KPI: OTHER RATIOS Other Ratios that it could be interesting to track: • TREVPAR: Total Revenue per available Room (not only room, but F&B etc…) • GOPPAR: Gross Operating Profit per available rooms • TREVPEC: Total Revenue per Client • REVPAM: Conference and Banqueting Revenue per available Square Meters • REVPASH: Food & Beverage Revenue per available seats and hour You should aim at 5% maximum (+/-) variance for the next month, variance between your forecast and the actual results. 23
  • 24. 3.2 BUILDING YOUR DASHBOARD KPI per month (to be developped) 24
  • 25. TO KEEP IN MIND… There are different levels of Revenue Management practices. It can get quite complex for big resorts. But even a simple use of RM basics can benefit a lot to the smallest property. Ready to start playing and make your revenue growing ?! 25 Florie Thielin www.thehospitalitytour.com